Introduction

The Ford Motor Company issues a Corporate Citizenship Report each year. The first, Connecting with Society, was issued at its annual shareholders’ meeting held in Atlanta, Georgia in May 2000. That report was unique in its recognition that the company face a dilemma because its most profitable products, sports utility vehicles, contribute to environmental problems and may be considered not socially responsible. In spite of these recognized problems the company stated that it intended to continue to manufacture and sell these vehicles. In an interview, Chairman William C. Ford, Jr. cited the Ford Explorer as an example: ‘If we didn’t provide that vehicle, someone else would, and they wouldn’t do it as responsibly as we do.’ He indicated that Ford Motor Company’s approach combined altruism with a foundation for long-term planning. The press noted that Mr Ford had been one of the most enthusiastic supporters of the company’s 1996 decision to introduce the full-size Ford Expedition, an SUV with a high gasoline consumption rate (Bradsher, 2000).
Ford’s report and comments can be viewed in a number of ways: as an exceptionally honest recognition of the conflicting demands placed upon the international corporation by its various stakeholders (society, suppliers, customers, employees, and stockholders); as an admission that corporate interests in this case are in conflict with social responsibility; or as the foundation for building a corporate approach that will attempt to reconcile conflicting demands.
In evaluating the approach taken by Ford, it is useful to briefly review the company’s overall approach to corporate citizenship and key stakeholders before looking at some of the specifics regarding the SUVs and their place in the product line.

Corporate citizenship and key stakeholders

With 114 factories located in 40 countries and selling to markets worldwide, Ford Motor Company operates within a wide variety of ethical, political, and legal systems to which it must adapt. The company’s approach to international corporate citizenship has been influenced substantially by William Ford, who has been active in environmental causes since his school years. When he joined the Ford Motor Company Board of Directors in 1988, colleagues suggested that he drop his contacts with environmentalists. He refused to do so and indicated that he believed he could help build bridges and understanding between the company and environmentalists. In 1997, he chaired a newly established Environmental and Public Policy Committee of the Board of Directors. Since becoming Chairman of the Board of Directors in January 1999 he and Jacques Nasser, the President and CEO of the company, have been working to improve corporate citizenship and social responsibility.
Ford’s Connecting with Society states that good corporate citizens are distinguished by their behavior, and by the social, environmental, and economic impacts of their actions. They should generate sustained profits from products that meet human needs with greater value to society and a smaller environmental impact. The company has established an administrative structure and strategic plans for developing a more comprehensive set of business principles, increasing interaction with all stakeholders, transforming goals into action, and providing transparency and verification of problems and progress.
Specific problem areas have been identified, and the report provides a justification for undertaking additional efforts in the area of social responsibility. In 2001 Mr Nasser reported that quality problems in new and redesigned vehicles launched in Europe and the United States in 2000 had cost the company over $1 billion in profit, and added ‘That will never happen again’ (White and Lundegaard, 2001).
The company is already a leader in many areas of social responsibility. Several years ago it lobbied for higher gasoline taxes in the United States (a position opposite to that taken by other automobile companies).
Such taxes would, of course, encourage fuel conservation by consumers and influence manufacturers to make more fuel-efficient vehicles (as the high taxes in Europe already do). Ford is also increasing the amount of recycled materials in vehicle manufacture, using more than 2 million tons of recycled metals per year. It has indicated that it views the European laws requiring manufacturers to take back vehicles at the end of their lives as an opportunity rather than a threat. It has emphasized the development of new factories and the redesign of existing plants to reduce pollution well below the legal requirements of the countries within which it operates. The company has achieved ISO 14001 environmental management certification for all of its facilities and in 1999 became the first US automobile maker to develop a program requiring certification of all of its suppliers with manufacturing facilities. Ford has offered to support its suppliers in the United Kingdom, Germany, Australia, and the United States with assistance in ISO 14001 training. In Europe, the company works with more than a dozen environmental organizations, environmental investment funds, and other not-for-profit organizations focusing on transportation issues. Since 2000, Ford has designed all of its SUVs and its F-series pickup trucks to meet US standards for Low Emission Vehicles, cutting smog-forming emissions by over 40% compared to government requirements.
In 2000 Ford opened its newest research laboratory, devoted primarily to developing new environmental technologies, in Aachen, Germany. The company works cooperatively with local governments internationally in projects to address environmental concerns.
In its 2000 publication, Connecting with Customers, Ford indicated that its goals are to build shareholder value by putting customers first and enabling employees to develop their potential to the fullest. The company views its primary responsibility as meeting the needs of three major stakeholders: stockholders, customers, and employees.
Ford has also undertaken a number of initiatives with respect to the welfare of its employees. It has made efforts to show that they are economically justified, thus benefiting stockholders as well. In cooperation with part-supplier Visteon and the United Auto Workers, Ford will be opening 30 Family Service Centers in 14 states during the coming years. They will offer round-theclock childcare, classes, and other services to employees.
Jacques Nasser, Ford President, stated: ‘It’s not a low cost, but we’re not wasting a cent.’ He indicated that it would help both the company and the workers. ‘This is an effort to attract talent and retain talent because turnover costs money’ (Pickler, 2000).
Internationally, the company is attempting to help overcome the digital divide between the richer and less-developed countries. Ford indicated that companies and individuals that want to be successful in the 21st century will need to be leaders in using the Internet and related technologies. In 2000 the Chairman of the Board announced that employees worldwide will be provided with a computer, printer, and Internet usage at home for a small monthly fee, $5 in the United States (Ford, 2000).
This effort is tied into the development of employees who will be more valuable in the changing international environment.
The company’s marketing of SUVs is directly related to the interests of shareholders, customers, and employees.
How well it fits, or does not fit, with the company’s environmental objectives is discussed in the following two sections.

SUVs and major stakeholders

Ford pioneered the development of the modern sports utility vehicle market. The SUVs were designed to provide those who spent time in the outdoors, whether for work or for recreation, with a vehicle that could function effectively off regular roads and was more comfortable than typical pickup trucks. Eventually, the SUVs appealed to individuals who just wanted a sporty vehicle, as well as to the original target market of those who really needed offroad capabilities.
When Ford introduced its Explorer model in 1990 the vehicle quickly became the most popular SUV in the United States. It also proved popular in Latin America and in the Middle East. Over 3.5 million Explorers were sold and they brought in billions of dollars in profits.
US government regulations classed large SUVs as trucks, allowing them to emit 5.5 times as much smog-causing pollution per mile as automobiles do.
(New rules will require that SUVs meet the same standards as automobiles by 2009.) This allowed companies to put larger engines in the vehicles, adding to their attractiveness to many buyers. The largest US auto makers all worked on developing larger SUVs that they priced so as to return a high level of profit. The major Japanese automobile manufacturers initially lagged behind in developing SUVs, but have caught up in some model types and are continuing to develop new models and expand production capacity in the United States.
European auto makers have similarly been expanding their line of SUVs.
In 1990, only 5% of Ford’s sales were of SUVs. In 2000, SUVs accounted for 20% of its sales, and most of its profits. It has been estimated that Ford earns $10,000 to $15,000 on each Ford Expedition and Lincoln Navigator sold, and as much as $18,000 for each Ford Excursion (Bradsher, 2000).

Safety and environmental issues and viewpoints

Environmentalists and consumer groups have been critical of the SUVs with respect to three factors:

(1) The high level of smog-causing pollution they create;

(2) Their high rate of fuel consumption;

(3) Safety concerns.

Both the high level of pollutants that SUVs are allowed to generate and their high rate of fuel consumption are being addressed by legislation, as are some safety considerations.
Ford’s basic argument with regard to the development and marketing of SUVs is that customers want them and Ford produces vehicles that are more environmentally friendly and safer than those of their competitors. They have pointed out that all of their SUVs are certified Low Emission Vehicles, and that the Ford Excursion, a vehicle criticized by some environmentalists, produces 43% less contaminants than are allowed by US government standards.
They continue to work both to improve fuel efficiency and reduce pollutants.
Safety is an issue because SUVs are generally designed with greater ground clearance and therefore higher centers of gravity, higher bumpers, and are heavier than automobiles of the same size. In collisions with automobiles, they tend to ride up over the bumpers of the cars and crush them. They have also been involved in a number of accidents in which the SUVs rolled over without being involved with another car. These rollovers may have occurred in some cases because of their off-road uses, in others because of the way they are sometimes driven on roads, and in still others because they are less stable than many automobiles.
It has been claimed that Ford could have made the Explorer safer by redesigning it before taking it to market, though this would have been costly and delayed its introduction by more than a year. This would have allowed other manufacturers to beat it to the market. Further, Ford has pointed out that the overall safety record of the Explorer is better than that of the comparable SUVs and passenger cars from other vehicle manufacturers. The car has a 26% lower rate of rollover fatalities than other SUVs (Levin, 2000). Thus it could be argued that delaying its introduction could have resulted in customers buying less safe vehicles from competitors.
In 2001 the US National Highway Traffic Safety Administration released its first report on the expected tendency for 43 types of vehicles to roll over. It was based on calculations involving the vehicles’ track widths and heights of centers of gravity. Of the 19 SUVs analyzed, 9 received poorer ratings and 2 received better ratings than the 4 Ford models evaluated.
Another view regarding the safety of SUVs was provided by State Farm Insurance Company, the United States’ largest insurer of vehicles. In December 2000, after an analysis of its claim rates, the company changed its pricing policy to give sizable discounts to drivers of SUVs, vans, and luxury cars. Their records indicate that these vehicles are safer. Consumer groups have countered that they may be safer to the occupants of the vehicles, but not to those in cars they may hit (Lazarus, 2000).
Both Ford and General Motors introduced new versions of their key midsize SUVs in 2001, redesigned to provide greater stability. Ford also redesigned the bumpers to reduce the danger of riding up on other vehicles in the event of a collision.
In the Chairman’s Message in Ford’s 2002 Annual Report (published in 2003), William C. Ford, Jr. stated that the company would be producing the cleanest and most fuel-efficient SUV in the world by the end of the year (http://ford.com). In 2004 Ford signed cross-licensing technology agreements with Toyota for the purpose of further development of hybrid vehicles. Ford also plans to sell a limited number of a fuel cell-powered version of the Ford Focus for use in commercial applications (http://ford.com). In 2004 demand for SUVs in the United States continued to be strong, with Toyota enjoying an increasing market share on its entries in the market (Zaun, 2004).
It can be argued that continuing to produce SUVs, and developing new vehicles as new markets emerge or can be created, meets Ford’s goals of building shareholder value and of putting customers first. It provides customers with a larger choice of vehicles from which to choose while also meeting stockholders’ profit objectives. It also provides employees with a higher level of employment than they would otherwise enjoy. It could be further argued that by continuing to improve design, and exceeding government safety and pollution requirements, they are meeting their social responsibility to society.
On the other side, an argument could be made that the company should not make vehicles that pollute the atmosphere or which have potential safety hazards.

Questions
1. Are Ford’s report and comments:

a. an exceptionally honest recognition of the conflicting demands placed upon the international corporation by its various stakeholders (society, customers, employees, and stockholders);

b. an admission that corporate interests may be in conflict with social responsibility; or

c. a foundation for building an approach to research and development that will attempt to reconcile the conflicting demands?
2. Is Ford behaving in a socially responsible manner when it continues to make SUVs? Discuss.
3. Should the government be more aggressive in setting safety standards? Why or why not?
4. Should the governments of the world ban vehicle types that they consider unsafe or not socially responsible? Why or why not?
5. Should Ford oppose or support tighter environmental standards that would apply equally to all vehicle manufacturers? How should Ford react to varying environmental standards in different countries?
6. Is spending corporate funds on nonrequired socially responsible activities an unjustified expenditure, or a recognition that in the long run companies must exercise social responsibility in order to avoid societal or government actions that will damage them? Explain.