FORD PINTO CASE
Summary
In 1968, the Ford Motor Company decided to introduce a subcompact car and
produce it domestically; an attempt to gain a large market share, the
automobile was designed and developed to meet the company sales and
distribution schedule. During the first few years sales of the Pinto were
excellent, but thereafter arises the problem of product defects. This is a case
involving the explosion of Ford Pinto's due to a defective fuel system design,
the issue of questionable design and the use by Ford of a cost-benefit analysis
to support their decision not to upgrade the fuel systems or recall the product.
Case Analysis and Reaction to CSR of Ford
In my point of view,
it is much easier to discuss this case by raising issue’s that directly
involves Ford decision making. First, should a risk/benefit analysis be used in
a situation where in a defect in design or manufacturing could lead to death or
seriously harm its consumers? Is it ethical, when it is an economically
efficient method accepted by courts for years? And how Ford value life versus
its forecast on losses and return on equity that leads to their concrete
decision not to recall. What is the corporate social responsibility of Ford to
its consumer, environment, government and laws? Is this CSR manageable?
Based on readings, Ford
legally chooses not to make changes which would have made the Pinto safer, the
issue of recall. Before Pinto is released to public, Ford has an access and has
a back up design which would decrease the possibility of Ford Pinto exploding
but it did not implement the design which would have cost $11 per car, although
their own analysis showed that the new design would result into 180 deaths.
Ford depended itself on the argument that it uses the accepted risk/ benefit
analysis to determine the “monetary costs” of making changes were greater than
social benefits, that includes a large number of consumers. The bottom line is
that Ford used an economic theory to value and manages their corporate social
responsibilities. However, just because it is legal and it is a well accepted
economic theory doesn’t necessarily means that it was ethical. It is hard to
accept or weigh how cost and price can be put on to saving human life. To
understand further the valuation used and how Ford comes up with decision, it
is important to discuss this risk/benefit analysis. What is in this analysis
that prevented Ford to recall its product though they have analysis that they
will be dealing certainly with tremendous risks. Based on calculation and the
result of analysis, the cost would be $137 million versus the $49.5 million
price tag on deaths, injuries and car damages. This would only mean that Ford
decided to value net profit from sales other than public safety, to prevent
great lost, Ford estimated and weighted two essential elements involved in the
formula. This is product liability or expected harm and the cost of precaution,
it is the formula of how it projects the value of losses and weighted economic
solution thru monetary valuation. Should a risk/benefit analysis be used in
this kind of situation? Since Ford is mainly and evidently profit oriented and
the degree of corporate social responsibilities is lower than how they value
the result and impact on their retained income, the economic justification is
correct. But one thing is left without consideration, and it is the things that
can’t be measured. It is the things that remains intangible, and if can be
weighted and valued depends on individual perception. It is life that may not
be equivalent to any monetary valuation regardless of the amount requires and
set by laws. It is seems unethical to determine that people should be allowed
to die or be seriously injured because it will cost too much cost to prevent
it. Second, the risk/benefit analysis did not consider other consequences of
their decision, Ford did not include public reaction that eventually leads to
protest, negative publicity and law suits. The company studied economic and
financial impact but did not evaluate the risk of social distress. I believe
the risk/benefit analysis must only be used if the decision requires weighing
factors that can be measured and social responses will not directly affect the
outcome. And or if death, loss resulting to injury can be measured by laws or
economic theory, there must be ethical consideration applied in a decision
making. The product liability or expected harm is legal in a sense that it
assumes obligation or being responsible on the marketed product, but it doesn’t
mean that it is ethical since the degree of responsibility is not CSR. It does
not integrate every manufacturer social values to society but deliberately made
to exploit life for profit. It is not for common but controversial issue of
economic assumptions. In business, we can weigh the negative outcome of a
decision but never that we can expect a positive response from the consumer,
because it is individual safety and how people value life more than anything.
Ford did evaluate well the cost of precautions but did not consider the social
implications, and it is the response of public whether they are consumer or
directly and indirectly involve in the process. It creates a chain of negative
reaction that eventually leads to debate if the decision of Ford to recall is
the right approach or there are other ways to deal with the problem. It is
legal but unethical, from the start the degree of ethical obligation was not
met by Ford and minimal ethical requirements was compromised by assuming that
the cost of recall is greater than the social benefits.
The corporate social
responsibility of Ford has not something to do with ethics. However in a
conceptual approach, we place ethics as a heart of corporate responsibility
meaning the company purpose, constraints, performance and impact. If the social
and environmental concerns are merely used as means in order to achieve a
single and frequently economic purpose (to make profits) the idea of CSR
becomes self defeating resulting to ethical judgment of the society.
In my opinion, with this
particular case CSR can be managed by Ford, since they have new designs and
alternative ways of to address the problem. The problem that arose in the Ford
Pinto is that human and emotional circumstances behind the numbers which are
not factored in the risk/benefit analysis. It is product liability and
precaution cost, Ford might have been considered the so called ordinary care standard
to which there is a certain degree of care in evaluating a decision. It is a
kind and degree of care which careful and cautious men would use, such as
required by the necessity of the case, and such as is necessary to guard
against probable danger. It is also said that there is a moving standard of
negligence that vary on situations, Ford should have taken some kind of
preventive measure in advance that could have foreseeable prevented the harm.
But the problem is Ford already forecast and assumes future liability from a
defective product. To resolve the problem the balancing" approach to
negligence must be consider, if death and accident has a low probability and
there is a cost associated with it, the company must take precautionary
measures and the levels of risk society could tolerate that somehow prevented
so much negative reaction from a defective product. It will be forever debated
whether it is possible to set a price or value on a life to use in these
calculations and whether this leads to an economically efficient outcome. Ford
adopted a policy of allowing a certain number of people to die or be injured
even though they could have prevented it. The decision seems to be a
deliberately disregard human life. From a human rights perspective, Ford disregarded
the injured individual's rights and therefore, in making the decision not to
make changes or recall, Ford acted unethically. After all the cost
risk/benefits analysis ha its loopholes.
There are some cases where a company must "do the right thing."
While this may seem an argument based on emotion, there seem to be certain
instances where these kinds of considerations must be made.
