Ford Motor Company Decision Making Analysis Paper Example

Ford Motor Company In the simplest form of utilitarianism, promoting the greatest pleasure for the greatest number of people; is a popular ethical business practice. Sometimes this utilitarian theory is considered a controversial theory of morality especially when linked to the cost-benefit analysis versus the risk-benefit analysis, ultimately eliminating the human quality of making business decisions. Ford Motor Company, Ford Pinto Case, is one of the most debatable utilitarian cases; when discussing business ethics.

In this paper I will analyze Ford Motor Company’s decision making process related to the Ford Pinto; using the utilitarian analysis. Ford Motor Company, which is an American based company, were amongst the leaders of the automotive industry. Their American rivalries General Motors and Chrysler were already enough competition so when the Japanese and German auto makers showed up to the party they were not happy. They didn’t just enter the market however they produced a product that the market wanted and it was high demand.

The new trend was an affordable compact car that consumed less fuel, and Ford didn’t have a car of this caliber amongst their fleet of cars. Ford Motor Company was facing a financial dilemma in the late 1960’s; it was losing customers resulting in profits plummeting mainly because of the new demand in the automotive industry. The Ford Pinto was the car that Ford Motor Company established as a counter measure to the new market demands. The Pinto weighed far less than the standard car making it more fuel efficient; and it cost less than $2000 which made it economically affordable.

This compact car possessed characteristics that consumers wanted, and Ford felt the need to get this product to them as soon as possible. Production time from start to completion usually took 43 months, but in order to meet the market’s high demand the Pinto’s production was cut down to 25 months. Engineers were able to complete the Pinto’s production, abiding by all safety regulations that were in place; making production history. After further testing of these vehicles they came across a design flaw that raised safety concerns.

The design of the car placed the fuel tank such that if the car was hit from the rear at a speed above 20 miles per hour, it would be punctured by a bolt from the bumper and could possibly burst into flames (DeGeorge 298). This left Ford Motor Company in a bad situation, how were they going to address this problem; to fix or not to fix? Ford Motor Company used the cost-benefit analysis to determine how to deal with the design flaw in its newest car model. By inserting a baffle between the bolt and fuel tank would have solved the problem however correcting the defect was an estimated cost of $137 million.

The risk benefit analysis determined that 180 deaths from fires, 180 serious burn injuries, and 2,100 fire damaged cars; estimated cost was $49. 5 million (Strobel). Ford Motor Company Executives decided that they weren’t going to invest in correcting the design defect because the cost-benefit analysis that was conducted outweighed the risk benefit analysis. A confidential company policy memo issued in late 1971, directed that no additional safety features be adopted for the 1973 and later cars until required by law (Strobel).

The results of the analysis proved that not fixing the flaw would be more beneficial to the company’s profit margin than liability cases that would arise against them. Driven by the profit margins that were rapidly falling this was best for the company’s sustainment and future in this industry. Utilizing the “act utilitarian” approach takes each individual action and evaluates its pros and cons. Although Ford made its decision solely based on the cost-benefit analysis versus the risk-benefit analysis; it unheeded several key factors in the risk-benefit analysis.

Ford Motor Executives did not take in account how many victims’ cases would qualify for punitive damages; which is the legal way of punishing people/companies for gross negligence, actively engaging in actions with knowledge of its potential dangers to others. The executives overlooked how many monetary settlements that would have to be paid outside of the courtroom in the initial analysis. They did not contemplate recalling five years worth of Ford Pinto inventory to fix the defect; which cost would be twice as much than the initial savings.

However, the biggest threat of them all was the reputation of the company which was not even brought up in the preliminary assessment; especially if the secret was leaked that they had previous knowledge of the defect and did nothing about it. Thus they did not properly utilize the act utilitarian approach because if they did they would have concluded that it would cause the company more harm than benefit not to correct the Pinto’s deficiency. The Ford Pinto was the product that the

embattled company brought to the public to reenter the competition and the economy received it with open arms, making it a top-seller amongst all other compact cars. From Ford’s point of view they felt as though their actions were ethically justifiable and they utilized the utilitarian analysis to the best of their abilities. However they did not properly execute every step of the utilitarian analysis especially the risk-benefit portion which rejects their decision, making it unethically justifiable.

The fiery crashes which consumed 27 lives and injured 24 others were public knowledge because they ended up in litigation; however it is said to be over 500 burned victims that were injured in Pinto accidents. Preservation of human life is the highest moral preference, and a characteristic that utilitarianism lacks. Despite the theory’s insufficiencies, the utilitarian theory has moral standards. Fulfilling the utilitarianism basic theory, they did the most good for the most people; economically creating an affordable car and saved the company money.

However, the snowball effect of the problems that were caused because of the Ford Pinto’s design flaw, in the end Ford Motor Company lost more. In conclusion since they fulfilled the utilitarian basic principle which should make their decision ethically justifiable; however, the aftermath of their decision proves that their decision wasn’t ethically justifiable. Works Cited De, George Richard T. Business Ethics. 7th ed. Upper Saddle River, NJ: Prentice Hall, 2010. Print. “The Ford Pinto Case. ” Encyclopedia. com. HighBeam Research, 01 Jan. 2001. Web. 9 Nov. 2013. . “Ford Pinto.

” ENGINEERING. com Library. ENGINEERING. com, Inc, 24 Oct. 2006. Web. 9 Nov. 2013. . Strobel, Lee P. “The Case of the Ford Pinto. ” COMP 601/CAAM 601: Research Ethics Seminar. N. p. , 1980. Web. 9 Nov. 2013. . In the simplest form of utilitarianism, promoting the greatest pleasure for the greatest number of people; is a popular ethical business practice. Sometimes this utilitarian theory is considered a controversial theory of morality especially when linked to the cost-benefit analysis versus the risk-benefit analysis, ultimately eliminating the human quality of making business decisions.

Ford Motor Company, Ford Pinto Case, is one of the most debatable utilitarian cases; when discussing business ethics. In this paper I will analyze Ford Motor Company’s decision making process related to the Ford Pinto; using the utilitarian analysis. Ford Motor Company, which is an American based company, were amongst the leaders of the automotive industry. Their American rivalries General Motors and Chrysler were already enough competition so when the Japanese and German auto makers showed up to the party they were not happy.

They didn’t just enter the market however they produced a product that the market wanted and it was high demand. The new trend was an affordable compact car that consumed less fuel, and Ford didn’t have a car of this caliber amongst their fleet of cars. Ford Motor Company was facing a financial dilemma in the late 1960’s; it was losing customers resulting in profits plummeting mainly because of the new demand in the automotive industry. The Ford Pinto was the car that Ford Motor Company established as a counter measure to the new market demands.

The Pinto weighed far less than the standard car making it more fuel efficient; and it cost less than $2000 which made it economically affordable. This compact car possessed characteristics that consumers wanted, and Ford felt the need to get this product to them as soon as possible. Production time from start to completion usually took 43 months, but in order to meet the market’s high demand the Pinto’s production was cut down to 25 months. Engineers were able to complete the Pinto’s production, abiding by all safety regulations that were in place; making production history.

After further testing of these vehicles they came across a design flaw that raised safety concerns. The design of the car placed the fuel tank such that if the car was hit from the rear at a speed above 20 miles per hour, it would be punctured by a bolt from the bumper and could possibly burst into flames (DeGeorge 298). This left Ford Motor Company in a bad situation, how were they going to address this problem; to fix or not to fix? Ford Motor Company used the cost-benefit analysis to determine how to deal with the design flaw in its newest car model.

By inserting a baffle between the bolt and fuel tank would have solved the problem however correcting the defect was an estimated cost of $137 million. The risk benefit analysis determined that 180 deaths from fires, 180 serious burn injuries, and 2,100 fire damaged cars; estimated cost was $49. 5 million (Strobel). Ford Motor Company Executives decided that they weren’t going to invest in correcting the design defect because the cost-benefit analysis that was conducted outweighed the risk benefit analysis.

A confidential company policy memo issued in late 1971, directed that no additional safety features be adopted for the 1973 and later cars until required by law (Strobel). The results of the analysis proved that not fixing the flaw would be more beneficial to the company’s profit margin than liability cases that would arise against them. Driven by the profit margins that were rapidly falling this was best for the company’s sustainment and future in this industry.

Utilizing the “act utilitarian” approach takes each individual action and evaluates its pros and cons. Although Ford made its decision solely based on the cost-benefit analysis versus the risk-benefit analysis; it unheeded several key factors in the risk-benefit analysis. Ford Motor Executives did not take in account how many victims’ cases would qualify for punitive damages; which is the legal way of punishing people/companies for gross negligence, actively engaging in actions with knowledge of its potential dangers to others.

The executives overlooked how many monetary settlements that would have to be paid outside of the courtroom in the initial analysis. They did not contemplate recalling five years worth of Ford Pinto inventory to fix the defect; which cost would be twice as much than the initial savings. However, the biggest threat of them all was the reputation of the company which was not even brought up in the preliminary assessment; especially if the secret was leaked that they had previous knowledge of the defect and did nothing about it.

Thus they did not properly utilize the act utilitarian approach because if they did they would have concluded that it would cause the company more harm than benefit not to correct the Pinto’s deficiency. The Ford Pinto was the product that the embattled company brought to the public to reenter the competition and the economy received it with open arms, making it a top-seller amongst all other compact cars. From Ford’s point of view they felt as though their actions were ethically justifiable and they utilized the utilitarian analysis to the best of their abilities.

However they did not properly execute every step of the utilitarian analysis especially the risk-benefit portion which rejects their decision, making it unethically justifiable. The fiery crashes which consumed 27 lives and injured 24 others were public knowledge because they ended up in litigation; however it is said to be over 500 burned victims that were injured in Pinto accidents. Preservation of human life is the highest moral preference, and a characteristic that utilitarianism lacks. Despite the theory’s insufficiencies, the utilitarian theory has moral standards.

Fulfilling the utilitarianism basic theory, they did the most good for the most people; economically creating an affordable car and saved the company money. However, the snowball effect of the problems that were caused because of the Ford Pinto’s design flaw, in the end Ford Motor Company lost more. In conclusion since they fulfilled the utilitarian basic principle which should make their decision ethically justifiable; however, the aftermath of their decision roves that their decision wasn’t ethically justifiable.

Works Cited De, George Richard T. Business Ethics. 7th ed. Upper Saddle River, NJ: Prentice Hall, 2010. Print. “The Ford Pinto Case. ” Encyclopedia. com. HighBeam Research, 01 Jan. 2001. Web. 9 Nov. 2013. . “Ford Pinto. ” ENGINEERING. com Library. ENGINEERING. com, Inc, 24 Oct. 2006. Web. 9 Nov. 2013. . Strobel, Lee P. “The Case of the Ford Pinto. ” COMP 601/CAAM 601: Research Ethics Seminar. N. p. , 1980. Web. 9 Nov. 2013. .