In an L.A. Law episode, an automobile manufacturer knowingly built cars that had a significant safety flaw. The company cant afford to delay the introduction of this model as a delay would provide an advantage to the competition, which would result in lost sales. So rather than redesigning the cars (at substantial additional cost), the manufacturer calculated the expected costs of future lawsuits and determined that it would be cheaper to sell an unsafe car and defend itself against future lawsuits than to redesign the car. The company projects to 20 million of these vehicles.

What issues does the financial analysis overlook?

How would your conclusion change from the point of view of the CEO, Board of Directors, or Shareholder?

Assume that it was estimated that the cost of future lawsuits was manageable, but individuals would lose their lives? If 1 of every million could potentially lose their lives, is that an acceptable risk to the company? What about 2 in every 1 million?

You are given the task to determine the course of action for this project. If you decide to move forward and accept the risk, but the company suffers a high level of lawsuits which damages the companies finances, you may loose your position within the company as well as other members of your department. If you decide to try to correct the issue, but the company loses sales because of the delay you suffer the same fate. However, if your decision is correct, then you and department get huge raises and promotions. What is your decision and why?