CASE STUDY: The Ford Pinto Consumers tolerate a certain amount of outsourcing of jobs as a trade-off for cheaper clothes, electronics, and other desirable objects. Companies that pay higher wages or use better-quality parts usually have to charge more. This is not always well-received among the buying public. Of course, many consumers don't balk at expensive cups of coffee or higher-priced phones and computers with nice retina sereens. However true that is, the majority tolerate outsourcing if it reduces their own living costs. So there we are: Potholes wherever we turn! Nevertheless, the Pinto case is another classic of Bnisiness Ethies. It merits a careful study. "Learn from the mistakes of those who came before us" should guide us as we make our own way through life, and be something basinesses should take to heart. It's 1971 and the Vietnam War is dragging on. The automotive industry is about to turn over a new leaf. European subcompacts are selling like hoteakes. This is just the eatalyst for Ford Motor Company to move into high gear to ereate a worthy competitor. They had a big hit with their first pony-the Mustang, a classic car if there ever was. So you'd think the next one would be just as successful, given the ready audience. Thus, the Ford Pinto. It should be one of those strokes of genius, but it falls short. Right from the get-go, the car has probtems. But sales are good and initially the problems seem minor. However, two things doom the enterprise: First, it's a rush job. Secondly, a few engineering shorteuts are taken. Both entail risks. The biggest risk - their worst nizhtmare-is the location of the fuel tank. Contrary to the practice of the Europenn carmakers (who place the fael tank over the rear axle), Ford put it behind the rear axle (Jennings, 1993, 218). The way Ford designed it left too little "crush space," In addition, the bumper is significantly lighter (some say "flimsier") than is the norm in other American cars. At no time before or after the Pinto has stch a weak bumper been used on an American car, reports Marianne Moody Jennings. If all this isn't bad enough, the Pinto lacks reinforcing rear sections, making it less crash resistant (Jennings, 218-219). Ford's "Perfect Storm" Basically, Ford created a "perfect storm" with all the problems tied to a vulnerable fuel tank. As a result, the situation escalated. A 1997 report by Mark Dowhe of The Atlantic Monthly is telling. The Pinto prototype was crash tested and the car failed the fuel system integrity test in crashes over 20 miles per hour. Such crashes indicated the Pinto was vulnerable to the fuel tank being driven forward, punctured, and fuel leaking in excess of the minimal standard. Such a leak conid cause the car to burst into flames. Dowie points out that, "Because assembly-line machinery was already tooled when engineers found this defect, top Ford officials decided to manufacture the car anyway-exploding gas tank and all-even though Ford ouened the patent on a mudt safer gas tank." Amazingly enough, Ford sold the Pinto, knowing of the defect. Ford did a cost analysis. Remedies would cost an estimated \$11 per car. The cost of a few cups of coffee and the car could be fixedl However, if 11 million cars and 1.5 million light trucks had to be recalled and repaired, we're talking approximately $137 million (Jennings, 222). At this point, the profit motive won out over safety concerns. "Safety doestit sell," Ford CEO Lee lacoeca reportedly said (Dowie, 1977). That he may have underestimated the consumer seems worth considering- In a move out of the Theatre of the Absurd, Ford modified its advertising. They sought to avoid visions of exploding gas tanks coming to mind. Burning Pintos have become such an embarrassment to Ford that its advertising agency, J. Walter Thompson, dropped a line from the end of a radio spot that read "Pinto leaves you with that warm feelinge" (Dowie, 1977). The Weighting Game: Deaths vs. Repairs In a macabre turn of events, Ford computed the cost for 180 burn deaths, 180 serious burn injuries, and 2,100 burned vehicles. The unit cost estimate was $200,000 per death, $67,000 per injury, and $700 per vehicle- a bargain at $49.15 million (Jennings, p. 222). That's a saving of $87.85 million. Quite a tidy sum! For seven years Ford sold the car, knowing its defects. Yes, seven years. Here's when the wave of self-interest washed over Ford and they lost sight of their duty to protect their customers from injury or death. The rosd taken by the Ethical Egoist may look like the Yellow Brick Road when you start skipping, but turns into quicksand the farther you go. And it certainly did not end well for Ford. It took years to rebuild their repatation. Nor did it end well for their customers, given that many died, others were injured, and millions of others became disillusioned about buying another Ford automobile. Lawsuits followed. Robert Sherefkin (2003) reports that, "A 1979 landmark case, Indiana vs. Ford Motor Co., made the automaker the first US corporation to be indicted and prosecuted [though found "not guilty"] on criminal homicide charges." Given the knowing disrezard for human life, it's not surprising that Ford faced such serious charges. No doubt it was an important, however, painful, lesson for Ford Motor Company to learn. But, if nothing else, Ford is not alones Many businesses cut corners and compromise standards from time to time, at least to some degree. Looking back what ean we see? The problems with the Pinto tarnished Ford's reputation. It takes time to recover from moral failures, as was the case here. And it takes time to rebuild trust. This is as true for corporations as for individuals. Betrayal cuts deep. Whatever savings made in the short term. the long-term cost of paying off deaths rather than repairing the car was both tragie and avoidable. Exercise 1. Assume you're on the jury of Indiana us. Ford Motor Co. in which three teenagers died after their car was struck (it was on the side of the road, after the driving palled over to retrieve the gas cap that had fallen off). 2. Investigate the case (you won't have trouble finding information). 3. Try to assess responsibility ( x percent because of the faulty fuel tank, y percent because of the road conditions, z percent because of the inebriated driver who struck them, etc.). 4. If you were on the jury, would you agree with the "not guilty" verdict? Share your thoughts