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 judgement 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 kind of
considerations must be made.
