The infamous Ford Pinto case is one of the most mentioned cases in Business Ethics studies used as an example of cost-benefit analysis. However, the core of the decisions that the head management of Ford Motor Company had to make to resolve the key issues go far beyond the concept of cost-benefit analysis.
The late 1960s were characterized by the increased demand for US-made sub-compact cars because unlike today, the quality of vehicles produced in Japan was very low and could not compete with the quality of cars made in America. Therefore, Ford Motor Company decided to withstand the thread from abroad and enter the market of sub-compacts by introducing Ford Pinto to the public. The results of the crash tests performed by the company showed that the vehicle had some design flaws that were potentially dangerous to drivers. Namely, the location of the gas tank was so inadequate that it caused a rupture, leading to an explosion if the vehicle was moving at a speed of twenty miles per hour or more (“Cars and controversy: The Ford Pinto case,” n.d.). The following tests indicated that the design of the rear part of the vehicle was inefficient and dangerous.
Cost-Benefit Analysis
Ford Motor Company calculated that the average price of repairs per vehicle was $11. However, the cost-benefit analysis showed that it would not be cost-efficient to repair the flaws (the advantage of spending $11 per car was estimated to cost approximately $49.5 million). It was more cost-efficient for Ford to issue the vehicle without repairs since the advantage of not spending money on repairs was estimated to cost approximately $137 million. The estimations of the advantages were conducted through assuming the worth of each death from car explosion ($200,000) and each injury from fire ($67,000), and the average cost of repairs ($700). Unfortunately, the advantage of not repairing the Pinto exceeded the advantage of repairing. The decision of the company was based on this analysis – Pinto entered the market and brought revenue.
The key controversy surrounding the case was the choice of the company to compromise people’s safety to maximize profits. Even though Ford Pinto was a death trap for drivers and passengers, the company did not violate any laws. What is also important to mention is that Ford had previously failed an advertising campaign that was based on safety; thus, the management decided that “safety doesn’t sell” (Gioia, 1992, p. 382).
Negligence-Efficiency Argument
Central Issue
The central issue of the suits filed against Ford Motor Company was associated with the usage of the risk-benefit analysis. Although the bulk of evidence showed that the company’s decision was predominantly based on the risk-benefit analysis, it is worth noting that other concerns supported the issue of Pinto to the market. These concerns were:
- The failed advertisement based on safety;
- The concern of bad publicity associated with the recall of the new vehicle;
- The U.S. law did not require companies to redesign vehicles if concerns of safety were present;
- Placing a gas tank between the bumper and the rear axle was customary to the car industry of that time (Leggett, 1999).
While business custom is not an excuse for companies to avoid liability, the same custom would lead to similar results if combined with the risk-benefit analysis (Griffor, 2016). Two questions arise:
- Should companies use a risk-benefit analysis in all circumstances?
- What is the proper framework to use it in a similar situation? (Leggett, 1999).
Arguments Against Negligence-Efficiency
Ethics
If to analyze the Ford Pinto case from the standpoint of ethics, a rough conclusion can be made that the financially good decision to introduce the vehicle to the market essentially allowed a certain number of people to die or get injured in car explosions. From the perspective of human rights, the company disregarded the rights of injured individuals and decided on not making adjustments to the system, thus acting unethically (Birsch & Fielder, 1994).
Utilitarianism
Utilitarianism is an ethical framework that suggests that the right action is the one that is beneficial in terms of utility. Therefore, it can be asserted that the position taken by Ford was strictly utilitarian because it did not consider the consequences of the final decision. The Pinto case suggested that the company did not take into consideration the full range of harms and benefits with regards to the lives of human beings. On the contrary, the utilitarian view implied that not changing the design of the fuel system exceeded the benefits of changing.
However, the management did not account for the bad publicity the company had to experience after the launch of the vehicle; such reputational damage would have been hard to quantify in the risk-benefit analysis even though the harms and risks were considerable (Leggett, 1999). The utilitarian point of view suggests that the risks were far closer than Ford could expect. This would occur because of the high cost of recalling more than 19 million vehicles due to bad publicity (which was worse than anyone predicted).
Victims Lose
It can be argued that the cost- and risk-benefit economic reasoning was a very skewed framework (Vandall, 1986) since it disregarded the fact that individuals injured in Pinto accidents would be at a significant disadvantage when filing lawsuits. Even though the U.S. law implies that both the defendant and the plaintiff are placed on equal ground within the context of a lawsuit, it was impossible to do so in the case of Ford Pinto. The plaintiff had to prove the presence of negligence, which was a very difficult task. The negligence-efficiency theory disregards plaintiffs that have no resources to bring the lawsuit to trial (Vandall, 1986) as well as those that cannot prove negligence even though it exists. If the negligence-efficiency theory had been applied to the case of Ford Pinto, it would be possible to predict that victims that suffered from the manufacturer’s negligence would lose more than they are going to win (Leggett, 1999).
Is Efficiency immoral?
The majority of critics that conducted an analysis of cost-benefit implementation in cases such as the Ford Pinto see the decision of sacrificing human health for revenue as immoral. This occurred because of the idea that every individual has the right to a safe workplace, and, therefore, has the right to purchase only those products that are safe (Birsch & Fielder, 1994). Critics who subscribe to this philosophy argue that there should be some moral discussions regardless of the possible fiscal impact of either decision.
On the other side of the argument, the proponents of the risk-benefit analysis state that such an ethical argument is irrational because the decisions made are not “either/or” but rather gradations of the possible risks. According to this argument, Ford did not sacrifice all safety measures in their vehicles; it was a question of to what extent the manufacturer had felt that safety features were necessary (Leggett, 1999). Decisions involving the gradation of risks are made everywhere and all the time. For example, highways would have been safer if the speed limit was reduced to 25 miles per hour. However, the times and costs of traveling would be sacrificed to save more lives.
Conclusion
The analysis of the Ford Pinto case can be concluded with the statement that the majority of the public believes that it is unethical for a large corporation to make decisions that would lead to severe consequences such as the loss of human of life or injuries for the sake of reducing costs and increasing profits. While Ford Motor Company did not make a mistake in conducting the risk-benefit analysis to determine in which direction the company would be heading, it did not account for the severity of the consequences the decision would bring.
In terms of ethics, the decision to proceed with the Ford Pinto campaign and start selling it to customers can be considered “right” from the utilitarian standpoint, which suggests that an action is right when it brings a substantial benefit regardless of consequences. To counter this belief, critics of utilitarian ethics will argue that no action should be regarded as good if the integrity of human life is at stake.
References
Birsch, D., & Fielder, J. (1994). The Ford Pinto case: A study in applied ethics, business, and technology. New York, NY: State University of New York Press.
Cars and controversy: The Ford Pinto case. (n.d.). Web.
Gioia, D. (1992). Pinto fires and personal ethics: A script analysis of missed opportunities. Journal of Business Ethics, 11(5), 379-389.
Griffor, E. (2016). Handbook of system safety and security: Cyber risks and risk management, cyber security, threat analysis, functional safety, software systems, and cyber physical systems. Cambridge, MA: Elsevier.
Leggett, C. (1999). The Ford Pinto case: The valuation of life as it applies to the negligence-efficiency argument. Web.
Vandall, F. (1986). Judge Posner’s negligence-efficiency theory: A critique. Web.