The Ford Pinto Case

The Ford Pinto Case

Tarre M. Hayes

American Public University

The Ford Pinto

        The idea of the Ford Pinto was thought up in 1968 during a time when Ford was planning to enter the compact vehicle market in order to compete with its Japanese competitors who dominated the small-car sector.  Under president Lee Lacocca the production of the Pinto began in August of 1970.  The Pinto had aggressive objectives: weighing less than 2000 pounds, cost under $2000 and a delivery date that was reduced from 3.5 years to 25 months (Time, 2007).  The decreased production time significantly affected the testing phase of the vehicle. In order to meet the deadline the machines that were to make the car parts were put into production before the pinto’s design was fully tested (Dowie, 1977).  

During the testing process it was found that the fuel tank of the car was easily ruptured and the contents of the tank would empty in 1 minuet.  This defect would cause the car to catch fire.  To correct this issue Ford would have to spend an additional $11 per car to add a barrier between the fuel tank and the rear bumper.  This additional cost and weight did not fit the 2000 limit set by Lacocca (Time, 2007).  When making the decision of adding the additional safety measure Ford used a cost-benefit analysis.  According to the analysis the hazardous tanks would only cause 180 burn deaths, 180 serious burn injuries, and 2,100 burned vehicles each year.  Ford also calculated the cost of each incident it estimated; Ford would have to pay $200,000 per death, $67,000 per injury, and $700 per vehicle, totaling of $49.5 million (The Engineer, 2006).  Executives determined that the cost of saving lives and injuries were higher.  The $11 per car cost to add a barrier would ass up to $137 million per year.  

Ford decided to ignore the safety issue and proceed with production because they felt it would cost less to deal with lawsuits than to allocate additional resources to correct the issue.  Ford chose to do what they felt was best for its bottom line thus ignored the law and driver safety.  The release of the Pinto was successful by 1978 1.5 million pintos had been sold.  Over the 7 years since its release there has been an estimated 500 deaths and hundreds of other injuries related to the poor quality of the Pinto’s fuel tank (Sherefkin, 2003).  The executives at Ford were faced with ethical dilemmas when deciding what was the most important cost savings or the safety of consumers.  

Ethical Dilemma

        When analyzing the Ford Pinto case it appears that the company was more concerned with the extra profit and the ability to establish and secure a spot as a top competitor in the subcompact car market than with preventing their customers from dying or being severely injured in fires (Bazerman & Tenbrunsel, 2011).  The prevailing view used in business decisions is the Stockholder view.  The Stocholder view requires that businesses, specifically publically traded companies have a responsibility to increase profits for its stockholders.  This view also asserts that management of a company is hired as a representative of the shareholders to run the company in a way that is the most beneficial for them.  Under that shareholders view the company has no responsibility to save lives or prevent tragedies unless law requires it or the decision will generate greater profits. Conferring to this view, Ford had an obligation to follow the law, and they did not have any obligation to make the car any safer than laws demanded (Admin, 2016).  There is another theory that argues against the stockholder theory.  The Stakeholder theory states that a company has a responsibility to a wider group of stakeholders, other than just shareholders.  A Stakeholder is defined as any person or group, which can be affected, by the actions of a business (MacEachern, 2008).  The stakeholder theory is an important component of Corporate Social Responsibility (CSR).  CSR is a concept that recognizes the accountabilities of corporations in the world whether they are economic, legal, ethical or philanthropic.  The ethical dilemma presented is if Ford has an obligation to the shareholders or to the stakeholders.