There was strong competition for Ford in the American small-car market from Volkswagen and several Japanese companies in the 1960's. To fight the competition, Ford rushed its newest car the Pinto into production in much less time than is usually required to develop a car. The regular time to produce an automobile is 43 months but Ford took 25 months only (Satchi, L., 2005). Although Ford had access to a new design which would decrease the possibility of the Ford Pinto from exploding, the company chose not to implement the design, which would have cost $11 per car, even though it had done an analysis showing that the new design would result in 180 less deaths.
The company defended itself on the grounds that it used the accepted risk-benefit analysis to determine if the monetary costs of making the change were greater than the societal benefit. Based on the numbers Ford used, the cost would have been $137 million versus the $49.5 million price tag put on the deaths, injuries, and car damages, and thus Ford felt justified not implementing the design change (Legget, C., 1999). This was a ground breaking decision because it failed to use the common standard of whether a harm was a result of an action on trespass or harm as a result of an action on the case (Ferguson, A., 2005).
From reading this case, we realize the company did not apply the managing ethics competency in building its goals and structure. Managing ethics competency involves the overall ability to incorporate values and principles that distinguish right from wrong in making decisions and choosing behaviors (Hellriegel, J., 2004). Ford did not approach the question of redesigning the gas tank to make the car safer versus waiting another year allowing the foreign market to dominate subcompact vehicles. Their goal was only to maximize profits.
They did not into account the interests of their share holders and when they did come into consideration, they were analyzed against profits. One has nothing to do with the other. Their goal should not have been a race to make the most affordable subcompact car. Their focus should have been to make a subcompact car that was not only most affordable but also the safest subcompact. They were aware of the dangers associated with the rush production. It would have made a difference if the $11 savings had been passed on to the customers because they would've kept their
reputation and integrity in tact and possibly gain customers who were not considering the vehicle. Any rational customer would not have chosen to save $11 to drive a car at the risk of dying. It is never appropriate to knowingly jeopardize people's lives. That is a criminal act. Their actions were socially irresponsible, ethically and morally wrong. They did not consider their own reputation nor did they consider that they represented America in the industry. As a financial manager at Ford, I am obligated to protect, enhance and promote the profits of the organization and the decisions I make will reflect my social responsibility. First, I would identify the goals of the organization and the steps taken in the past to maintain and create wealth.
I would examine the past profits with the decision to introduce the Pinto to illustrate expected return and or risks in the return. When recognizing the foreign competition as a threat to profits, I will reiterate our customer loyalty, brand status, and integrity versus the questionable quality and not so great reputation of the foreign manufacturers. Knowing the risks of the defects of gas tank, it would have been very clear that the continued production will discredit our standards, jeopardize profits and lead to expensive legal fees. My final decision would be to plan and redesign such a car that would be not only economically viable and competitive but also would maintain our integrity and enhance production and revenue. References:
Anonymous. "The Pinto Disaster" Retrieved Jan 30, 2005 from http://www.satyfreemagazin.org/archives/23/ford_pinto.html
Ferguson, A., Harvey, P. "Pinto Leaves You With Warm Feeling" Retrieved Jan 28, 2005 from http://www.andrewferguson.net/pdf/senior/Grimshaw%20vs.%20Ford.pdf
Hellriegel, D., John, W. Slocum, Jr. "Organizational Behavior". 10th edition. OH: Southwestern College Publishing Company, 2004.
Kravets, David. "Suits fault Ford in deadly crashed". Time Union, 08-20-2001. Leggett, Christopher. "The Ford Pinto Case: The Valuation Of Life As It Applies To The Negligence-Efficiency Argument" Retrieved Jan 30, 2005 from http://www.sprynewmedia.com/clients/wakeforest/Papers/1999/Leggett-pinto.html
Satchi, L., Swanson, L., Thompson, K., Wills, S. "Design Defects of the Ford Pinto Gas Tank" Retrieved Jan 28, 2005 from http://www.fordpinto.com/blowup.htm