In 1968, Ford decided to produce the Pinto, a car that weighed less than 2,000 pounds and cost less than $2,000. The Pinto promise was to take on the foreign imports, save jobs for Americans, and make profits for the shareholders. In order to realize this promise, they compressed the normal 3.5 year development process into 2 years so that it would be ready to sell in 1971.
The Pinto met every fuel-system standard of any federal, state or local government. The National Highway Traffic Safety Administration (NHTSA) rolled out a new standard in 1972 that all new cars should be able to withstand a rear-end impact of 20 MPH without fuel loss. This standard would increase to 30 MPH one year later in 1973. Ford successfully lobbied to delay this new standard for 7 years. The Pinto prototype failed this crash test standard, except when there was a piece of steel between the fuel tank and the rear bumper (which would cost $11). Another fix was to install a rubber bladder inside the gas tank for $5.08 per car.
The executives’ decision: Go ahead with existing design to meet production timetable, yet jeopardize consumer safety; or, delay production and redesign the gas tank to make it safer, yet concede another year of subcompact dominance to foreign car companies. How did those executives reach their decision for which they were richly rewarded financially? The answer was a cost/benefit analysis (monetary terms of the expected) inserted into an internal report by Ford’s Director of Automotive Safety that was titled, “Fatalities Associated with Crash-Induced Fuel Leakage and Fires.”
Cost: This report stated that the NHTSA estimated in 1972 that society loses $200,725 every time someone is killed in an auto accident. Ford estimated that they expected 180 burn deaths (180x$200K) + 180 serious burn injuries (180x$67K) + 2,100 burned vehicles (2100x$700) = $49.5M
Benefit:11 million cars + 1.5 million light trucks x $11 to upgrade = $137.5M
Thus, the Director recommended against any improvements based on costs outweighing benefits - it would be cheaper to pay out damages than spend the money to protect drivers and passengers. They decided to go ahead with the original design, AND stick to it for the next six years. The Pinto became the biggest-selling subcompact in America, selling 500,000 per year. With this success, they also provided Ford fantastic operating margin.
One high level executive said that if someone were to tell Lee Iacocca, the Ford Executive VP and future CEO about the design flaw, “That person would have been fired. Safety wasn’t a popular subject around Ford in those days. With Lee, it was taboo. Whenever a problem was raised that meant a delay on the Pinto, Lee would chomp on his cigar, look out the window and say ‘Read the product objectives and get back to work.’” (Source: Mother Jones, 1977)
The results of the “go ahead” decision:
Between 1971 and 1978, Ford says there were 23 Pinto fire-related deaths (critics say it is between 500-900). Per Ford engineers, 95% of fatalities would have survived if the fuel tank were moved over the axle like the Capri automobile.
All Pintos were recalled for a fuel-tank modification
Advertising agency, J. Walter Thompson, dropped the radio ad tagline, “Pinto leaves you with that warm feeling.”
Questions to consider:
- Is cost-valuing human life only used by Ford?
- Many say “no,” yet they are the only company careless enough to let the calculation slip into public records.
- Where else do companies trade lives for profit as part of corporate capitalism?
- Commodore Vanderbilt publicly scorned George Washington for his “foolish” air brakes while people died by the hundreds in accidents on Vanderbilt’s railroads.
Why does bottom line trump safety concerns at some companies?