CASE Pinto Fires by Dennis A. Gioia (used with permission)

On August 10, 1978, three teenage girls died horribly in an automobile accident. Driving a 1973 Ford Pinto to their church volleyball practice in Goshen, Indiana, they were struck from behind by a Chevrolet van. The Pinto's fuel tank ruptured and the car exploded in flames. Two passengers, Lynn Marie Ulrich, 16, and her cousin, Donna Ulrich, 18, were trapped inside the inferno and burned to death. After three attempts, Lynn Marie's sister, 18yearold Judy Ann, was dragged out alive from the driver's seat, but died in agony hours later in the hospital.

They were merely the latest in a long list of people to burn to death in accidents involving the Pinto, which Ford had begun selling in 1970. By the time of the accident, the car had been the subject of a great deal of public outcry and debate about its safety, especially its susceptibility to fire in lowspeed rearend collisions. This particular accident, however, resulted in more media attention than any other auto accident in U.S. history. Why? Because it led to an unprecedented court case in which the prosecution brought charges of reckless homicide against the Ford Motor Co.the first time that a corporation had been charged with criminal conduct, and the charge was not negligence but murder. At stake was much more than the maximum penalty of $30,000 in fines. Of immediate concern, a guilty verdict could have affected 40 pending civil cases nationwide and resulted in hundreds of millions of dollars in punitive damage awards. Of perhaps greater concern, however, were larger issues involving corporate social responsibility, ethical decision making by individuals within corporations, and ultimately, the proper conduct of business in the modern era.

How did Ford get into this situation? The chronology begins in early 1968 when the decision was made to battle the foreign competition in the small car market, specifically the Germans, but also the growing threat from the Japanese. This decision came after a hardfought, twoyear internal struggle between thenpresident Semon "Bunkie" Knudsen and Lee Iacocca, who had risen quickly within the company because of his success with the Mustang. Iacocca strongly supported fighting the competition at their own game, while Knudsen argued instead for letting them have the small car market so Ford could concentrate on the more profitable medium and large models. The final decision ultimately was in the hands of thenCEO Henry Ford II, who not only agreed with Iacocca but also promoted him to president after Knudsen's subsequent forced resignation.

Iacocca wanted the Pinto in the showrooms by the 1971 model introductions, which would require the shortest production planning period in automotive history to that time. The typical time span from conception to production of a new car was more than three and a half years; Iacocca, however, wanted to launch the Pinto in just over two years. Under normal conditions, chassis design, styling, product planning, advance engineering, component testing, and so on were all either completed or nearly completed prior to tooling of the production factories. Yet, because tooling had a fixed time frame of about 18 months, some of these other processes were done more or less concurrently. As a consequence, when it was discovered through crash testing that the Pinto's fuel tank often ruptured during a rearend impact, it was too late (in other words, too costly) to do much about it in terms of redesign.

A closer look at the crashtest reports reveals that Ford was aware of the faulty fuel tank design. Eleven Pintos were subjected to rearend collisions with a barrier at average speeds of 31 miles per hour to determine whether any fuel would be lost after impact. All eight of the Pintos equipped with the standard fuel tank failed. The three remaining cars, however, survived the test because special measures had been taken to prevent tank rupture or fuel leakage. These measures included a plastic baffle placed between the axle housing and the gas tank, a steel plate between the tank and the rear bumper, and a rubber lining in the gas tank.

It should be noted that these tests were done under guidelines established by Federal Motor Vehicle Safety Standard 301, which was proposed in 1968 by the National Highway Traffic Safety Administration (NHTSA), but not officially adopted until the 1977 model year. Therefore, at the time of the tests, the Pinto met the required standards. Standard 301 had been strenuously opposed by the auto industry, and specifically Ford Motor Co. In fact, the lobbying efforts were so strong that negotiations continued until 1976, despite studies showing that hundreds of thousands of cars burned every year, taking 3,000 lives annually; the adoption of the standard was projected to reduce the death rate by 40 percent. Upon approval of Standard 301 in 1977, all Pintos were provided with a ruptureproof fuel tank design.

But for the Pinto's 1971 debut, Ford decided to go with its original gas tank design despite the crashtest results. Because the typical Pinto buyer was assumed to be extremely price conscious, Iacocca set an important goal known as "the limits of 2,000": the Pinto could not cost more than $2,000 and could not weigh more than 2,000 pounds. Thus, to be competitive with foreign manufacturers, Ford felt it could not spend any money on improving the gas tank. Besides, during the late 1960s and early 1970s, American consumers demonstrated little concern for safety, so it was not considered good business sense to promote it. Iacocca echoed these sentiments when he said time and time again "safety doesn't sell," a lesson he had learned after a failed attempt to add costly safety features to 1950s Fords.

Ford had experimented with placing the gas tank in different locations, but all alternatives reduced usable trunk space. A design similar to that of the Ford Capri was successful in many crash tests at speeds over 50 miles per hour, but Ford felt that lost trunk space would hurt sales too much. One Ford engineer, when asked about the dangerous gas tank, said, "Safety isn't the issue, trunk space is. You have no idea how stiff the competition is over trunk space. Do you realize that if we put a Capritype tank in the Pinto, you could only get one set of golf clubs in the trunk?"

The last of Ford's reasons for not making adjustments to the fuel tank design, however, was unquestionably the most controversial. After strong lobbying efforts, Ford and the auto industry in general convinced NHTSA regulators that a costbenefit analysis would be an appropriate basis for determining the feasibility of safety design standards. Such an analysis, however, required the assignment of a value for a human life. A prior study had concluded that every time someone died in an auto accident there was an estimated "cost to society" of $200,725 (detailed in Table 2.2: What's Your Life Worth?).27

TABLE 2.2

What's Your Life Worth?

Component 1971 Costs

Future productivity losses

Direct $132,300

Indirect $41,000

Medical costs

Hospital $700

Other $425

Property damage $1,500

Insurance administration $4,700

Legal and court fees $3,000

Employer losses $1,000

Victim's pain and suffering $10,000

Funeral $900

Assets (lost consumption) $5,000

Miscellaneous accident cost $200

Total per fatality $200,725

The chart, from a 1971 study by the National Highway Traffic Safety Administration, is a breakdown of the estimated cost to society every time someone is killed in a car accident. The Ford Motor Company used the $200,725 total figure in its own cost-benefit analysis.

Having this value in hand, Ford calculated the cost of adding an $11 gas tank improvement versus the benefits of the projected 180 lives that would be saved (via an internal memo titled "Fatalities Associated with CrashInduced Fuel Leakage and Fires"). This is presented in Table 2.3: The Cost of Dying in a Pinto.28 As is demonstrated, the costs outweigh the benefits by almost three times. Thus, the cost-benefit analysis indicated that no improvements to the gas tanks were warranted.

Questions:

• Identify the facts of the case.
• Examine the ethical elements of the Pinto decision by Ford executives.
• Synthesize the facts and issues to make a reasoned decision whether to recall the Pinto.

BUSINESS ETHICS COURSE