Ford Pinto

One of the best-known and infamous cases in corporate ethics and social responsibility involves the Ford [Page 924]Pinto. The case involved the decision by the Ford Motor Company during the 1970s not to recall its Pinto model, despite knowledge of a dangerous fuel tank design flaw and the potential loss of life that would result. It also involved, for the first time, charges that were brought against a corporation not just for negligence but for murder.

In 1976, Ford was the second largest manufacturer of automobiles, with revenues of $30 billion a year and net income of almost $1 billion. Due to concern over competition over subcompact vehicles from Germany and Japan, Ford President Lee Iacocca was determined to manufacture a car at or below £2,000 and for less than $2,000. Whereas normal development and production of an automobile takes more than three and a half years from start to finish, the Pinto was a rush project, beginning in 1968 and taking just over two years to reach the showrooms. As a result, engineering design decisions came after style decisions to a greater degree than normal. The Pinto's style required that the fuel tank be located behind the rear axle, leaving only 9 or 10 inches of “crush space” between the rear bumper and rear axle. In addition, bolt heads were exposed that were capable of puncturing a fuel tank on rear impact.

Crash tests revealed that when the Pinto was struck from behind at even slow speeds the fuel tank could be punctured, causing fuel leakage. Any stray sparks could then ignite the spilling gasoline, causing the car to become engulfed in flames. If the fuel tank design was to be modified however, or a rubber bladder installed, the vehicle could pass the rear impact test. The crash test information was forwarded to the highest levels of Ford management.

Despite being fully aware of this information, the company continued with the production of the Pinto and was able to justify the decision on the basis of several reasons. First, the company met all applicable federal safety standards. Second, the car was comparable in safety with other cars then being produced. Third, in the early 1970s consumers were more concerned with price than safety, leaving little incentive for firms to spend money promoting the safety of their vehicles. Fourth, changing the design would lead to little trunk space, an important selling feature for cars.

The fifth and most controversial reason for sticking with the design was based on a cost-benefit analysis conducted by Ford. An internal study suggested that it would be more cost effective to continue with the same fuel tank design rather than change it. The study indicated the cost to improve the design of all Ford vehicles using the flawed fuel tank to be $137 million ($11 per vehicle × 12.5 million vehicles), which was much greater than the cost to society of just over $49 million. Ford's estimate of the cost to society was based on a 1972 study by the U.S. National Highway Traffic Safety Administration, which estimated the cost of a human life to be approximately $200,000, with the cost of a serious burn injury being approximately $67,000. These amounts included categories such as future productivity losses, medical costs, property damage, legal costs, and employer losses. The amount of $49 million was based on the estimated cost to society of the expected 180 burn deaths (180 × $200,000), 180 serious burn injuries (180 × $67,000), and 2,100 burned vehicles (2,100 × $700).

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