Transcript PINTO case study

Bus 303
Group N
 "You don't want to talk
about the Pinto," said a
Ford official. "Leave that
one in the cemetery."
 When people talk about
how bad American small
cars created an
opportunity for the
Japanese to come in and
clean house in the 1970s
and '80s, they are
referring to vehicles like
this.
 The Ford Pinto – a small car to compete with foreign car
company competitors
 Pinto – weighed 2000 lbs and cost $2000
 Rushed project led by Lee Iacocca
 Planning took 25 months compared to the industry norm
43 months
 “We are a global, diverse family with a proud
heritage, passionately committed to providing
outstanding products and services that
improve people’s lives.”
 Testing found several safety defects
 @ 25mph+ the gas tank would rupture in an accident
 @ 30mph+ rear endings would cause the gas tank to leak
and the rear of the car to be folded up into the back
seats
 @ 40mph+ the car doors would jam
Behind Rear-Axle Tank
Pros:
 More Luggage space
 Industry standard – felt it was safer
Con:
 Not as safe in rear-end collisions
Over-the-axle-tank
Pro: Performed well in rear-end collisions
Cons:
Long “round-about” filler pipe
Closer to passengers in back seat
Higher center of gravity
Reduced trunk space
 Of 40 tests, 37 resulted in ruptured gas
tanks. The three that succeeded had:
--a plastic baffle between the tank and the
differential bolts
-- a piece of steel between tank and
bumper
-- a rubber “bladder” inside the gas tank
 More crash tests showed that a one-pound,
one-dollar piece of plastic stopped the
puncture of the gas tank.
 The idea was thrown out as extra cost and
extra weight.
 Besides, tooling was already well under way.
If you ran into that Pinto you were following at over 30 miles
per hour, the rear end of the car would buckle like an
accordion, right up to the back seat.
The tube leading to the gas-tank cap would be ripped away
from the tank itself, and gas would immediately begin
sloshing onto the road around the car.
The buckled gas tank would be jammed up against the
differential housing (that big bulge in the middle of your rear
axle), which contains four sharp, protruding bolts likely to
gash holes in the tank and spill still more gas.
Now all you need is a spark from a cigarette, ignition, or
scraping metal, and both cars would be engulfed in flames.
If you gave that Pinto a really good whack—say, at 40 mph—
chances are excellent that its doors would jam and you would
have to stand by and watch its trapped passengers burn to
death.
 Meant to require vehicles to withstand rear-end
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collision of 28 MPH
Henry Ford II lobbied relentlessly against.
Official auto industry line–cars don’t cause accidents;
people and road conditions do.
Tactic: last-minute documents; challenges to test
results; lawsuits; private negotiating.
The standard was delayed for 8 years.
 Component
1971 Costs
 Future Productivity Losses
 Direct
 Indirect
 Medical Costs
 Hospital
 Other
 Total
$132,000
$41,300
$700
$ 425
$1,125
 Property Damage
 Insurance Administration
 Legal and Court
 Employer Losses
 Victim's Pain and Suffering
 Funeral
 Assets (Lost Consumption)
 Miscellaneous
 Total Per Fatality
$ 1,500
$ 4,700
$3,000
$ 1,000
$10,000
$900
$5,000
$200
$200,725
 Cost Analysis
 Sales
 11 million cars, 1.5
 Benefit Analysis
 Savings:
million light trucks
 180 burn deaths, 180
 Unit Cost
serious burn injuries,
 $11 per car, $11 per
2100 burned vehicles
truck
 Unit Cost
 Total Cost
 $200,000 per death,
 12.5 million X $11 =
$67,000 per injury, $700
$137.5 million
per vehicle
 Total Benefit
 (180 X $200,000) + (180 X
$67,000) + (2,100 X $700)
= $49.5 million
 Costs
 Benefit
 Difference
$137.5 Million
- $49.5 Million
$ 88.0 Million
 Richard Grimshaw
 13-year old passenger in “Sandra Gillespie’s” 1971 Pinto
 Struck from behind; exploded; badly burned over 90%
of his body; 20 years reconstructive surgery.
 Awarded $125 million in punitive damages
 $124 million profits made since Ford Pinto’s introduction
 Judge reduced to $3.5 million
 On January 15, 1980, the Ford Motor Company went on
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trial on charges of reckless homicide in the 1978 death
of three Indiana teenagers who burned to death after
their 1973 Fort Pinto was hit from behind by a van.
Indiana state prosecutors alleged that Ford knew Pinto
gasoline tanks were prone to catch fire during rear-end
collisions but failed to warn the public or fix the
problem out of concern for profits.
The trial marked the first time that an American
corporation was prosecuted on criminal charges—in
this case, reckless homicide.
Ford was acquitted in March; the case was too complex.
The Pinto was discontinued in fall 1980.
 Ford was first urged to recall the Pinto in 1974, by
the nonprofit Center for Auto Safety.
 Late in 1978, Ford recalled all 1971-1976 Pinto
models (1.5 million cars)
 Modifications
 Longer fuel filler neck
 Plastic shields
 Protected from rear differential
 Protected from rear shock absorber
 Ford employees
 Lee Iacocca
 Henry Ford II
 Were they morally responsible to refuse
to produce a car they knew would hurt
the customer?
 Should they have put more effort into
convincing Iacocca that this car was
unsafe?
 Should they follow Iacocca’s commands
regardless of their opinions since he is
their superior in the company
 Is Iacocca responsible for the safety of
his customers?
Safety?
What safety.
 Should he maximize profits for the
company at any costs?
 If safety defects are found after
production, does he have a moral
obligation to inform all his customers?
 Should Iacocca have established a working environment
where his employees did not feel that they would lose
their jobs for disagreeing with him?
 Should Ford have trained his managers and presidents in
safety?
 Does Ford have a responsibility to design a culture that
encourages employees to bring up safety defects?
 Does Ford need to have a new policy that puts the has
safety of their products more important than maximizing
profits?
 Does Ford have a moral responsibility to do what is best for
his shareholders
 Young and ambitious new president
 Foreign competitors entering N.A. market
 No small car to compete with VW Beetle and others
 The demand for results and
profits are the most important
aspect of business
1.
Pay the $11 per vehicle
2. Explore different safety features
3. Restart the project from the planning process
4. Continue with production of the Pinto
Pros
Cons
 Repairs the safety defect
 High cost
 Saves Ford from potential
 Slight delay before launch
lawsuits
 Protects Ford’s reputation
Pros
Cons
 A cheaper alternative could
 Pinto release would be
be found
 Profit margin could be
higher than first
alternative
 Repairs the safety defect
before launch
delayed indefinitely
 Still decreases total profit
Pros
Cons
 Design can be more
 Significant delay of launch
focused on safety
 Most costly alternative
 Improve Ford’s reputation
Pros
Cons
 Releases the Pinto to the
 Selling unsafe products to
customers immediately
customers – could lead to
serious injuries and deaths
 The largest profit margin is
obtained from each Pinto
sale
 High chance of lawsuits
against the company
 If/When injuries occur,
loss of reputation
Explore Other Safety Measures

Repair the Pinto so that it is a cheap, safe car that will
please the customers

Act as a responsible company and not expose
customers to unknown risks

Implement a more cost effective option than adding
the $11 safety addition
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Save lives by not releasing unsafe Pintos
 Ford workers were afraid to talk to Iacocca about the safety
defects
 In Feb. 1978, Ford was sued for $128 million – more then 3
times the amount they had predicted
 May 1978 – Department of Transportation announces
defects with the Ford Pinto – Ford recalls 1.5 million Pintos
 Mar. 1980 – Ford was charged with reckless homicide –
acquitted of charges, however they stopped all Pinto
production