Marketing Ethics: Ford Pinto Essay Example

of the automobile.

Literature Review

Ford introduced the Pinto in the 1971 model year as competition to the small, affordable cars of the period, like the Chevrolet Vega and the AMC Gremlin. The Pinto sold well, but it had safety issues, specifically the fact that its gas tank easily ruptured and caught on fire in rear-end collisions. Although Ford had access to a new design which would decrease the possibility of the Ford Pinto from exploding, the company chose not to implement the design, which would have cost approximately $11 per car, even though it had done an analysis showing that the new design would result in 189 less deaths.

Ford Motor Financial Ratio Analysis

The company defended itself on the grounds that it used the accepted risk/benefit analysis to determine if the monetary costs of making the change were greater than the societal benefit. Based on the numbers Ford used, the cost would have been $137 million versus the $49. 5 million price tag put on the deaths, injuries, and car damages. Ford felt justified not implementing the design change. (1) The main controversy surrounding the Ford Pinto case was The Ford Motor Company’s choices made during the development to compromise safety for efficiency and profit maximization.

More specifically, it was Ford’s decision to use the cost/benefit analysis to make production decisions that translated into lost lives. During the initial production and testing phase, Ford set “limits for 2000” for the Pinto. That meant the car was not to exceed $2000 in cost or 2000 pounds in weight. This set tough limitations on the production team. After the basic design was complete, crash testing had begun. The results of

the crash testing revealed that when struck from the rear at speeds of approximately 30 miles per hour or above, the Pinto’s gas tank ruptured.

The gas tank was positioned according to industry standard at the time, between the rear bumper and the rear axle, but studs protruding from the rear axle would puncture the gas tank. Upon impact, the fuel filler pipe would break, resulting in spilled gasoline. The Pinto basically turned into a death trap. Ford crash tested a total of eleven automobiles and eight resulted in potentially catastrophic situations. The only three that survived had their gas tanks modified prior to testing.

Ford was not in violation of the law in any way and had to make the decision whether to incur a cost to fix the obvious problem internally. There were several options for the fuel system redesign. The option most seriously considered would have cost Ford an additional $11 per vehicle. Under the strict $2000 budget restriction, even this nominal cost seemed large. In addition, Ford had earlier based an advertising campaign on safety, which failed miserably.

Therefore, there was a corporate belief, attributed to Lee Iacocca himself, of “safety doesn’t sell”. Taking an ethical approach to the Ford Pinto case makes accepting the risk/benefit analysis performed by the Ford Motor Company difficult. In making what seems to be the correct decision based on numbers, Ford in essence adopted a policy of allowing a certain number of people to die or be injured even though they could have prevented it. Ford’s decision seems to be a blatant disregard for human life. Ford disregarded the injured individual’s rights and therefore, in making the decision

not to make adjustments to the fuel system, acted unethically.

A corporate strategy of high market share, through being a low-cost supplier and rushing to market, carries ethical risks to the corporation and consumers. The Ford Pinto is an example of a US corporation that engaged in low cost strategy and rush to market, compromising product quality as well as consumer interests in the process. The Ford Pinto was developed and brought to market in 24 months. Ford executives decided not to recall, redesign, or repair the flawed gas tank, and thus Ford suffered long-term, negative consequences.

Ultimately, 27 people were determined to have been killed in rear-end crash explosions involving Pintos. In one of the few cases brought to trial, a California jury awarded a boy who had been severely burned and disfigured a total of $126 million. The driver of the car had died from her injuries a few days after the accident. Even after this case was appealed, and the amount was reduced to $3. 5 million, this was far more than the company had ever counted on paying.

It was a real wake-up call for Ford, whose legal teams went to work to try and settle as many of the pending cases as possible out of court. Ford knows the Pinto is a firetrap, yet it has paid out millions to settle damage suites out of court. With a half million cars rolling off the assembly lines each year, in the 1970’s, Pinto is the biggest-selling subcompact car in America, and the company’s operating profit on the car is fantastic. Finally, in September 1978, Ford issued a recall for 1. 5 million 1971-1976 Pinto

sedans and Runabouts for safety repairs and new models have incorporated a few minor alterations necessary to meet new federal standards.

Why did Ford wait so long in making these minimal, inexpensive improvements? One source stated that Ford waited eight years because it’s internal “cost-benefit analysis”, which places a dollar value on human life, said it wasn’t profitable to make the changes sooner.

Unethical Marketing Examples

The following are just a few of the ads that Ford Motor Company used while promoting the Ford Pinto. Knowing now what Ford knew then surrounding the safety issues of the Pinto, the ads seem very unethical. In fact, burning Pintos had become such an embarrassment to Ford that its advertising agency, J. Walter Thompson, dropped a line from the end of a radio spot that read “Pinto leaves you with that warm feeling.

Recommendations & Implications

1. Develop government regulatory codes. Such regulatory codes should include the testing and inspection by a governmental unit, as well as the right to close manufacturing operations, with the right to recall unsafe products. Implication- Fines or jail for managers who use unethical marketing when knowledge of unsafe products is being promoted.
2. Develop marketing standards and industry codes when a product is at high risk for design defect or where products are inherently dangerous. Implication- Punish the wrongdoers and holding marketing executives of companies responsible for injuries caused by their products.
3. Engineering departments having input and insight into marketing strategy along with Marketing departments and Management Implication – Executive levels made aware of safety concerns from the design and engineering standpoint.
4. Warn the public to flaws in the product- A warning, if given, would eliminate secrecy, and
   

would enable customers, at least to some extent, to make their own choice. Implication- This would move the Pinto’s hazards at least part way from the status of “imposed risks” towards the status of “consented-to risks”.

Conclusion

Reflecting on the Pinto incident and Ford’s attempts to control the damages at the risk of its public image, former Ford executive Lee Iacocca made this summation in his book, Talking Straight: “Clamming up is what we did at Ford in the late ‘70’s when we were bombarded with the suites over the Pinto, which was involved in a lot of gas tank fires.

The suits might have bankrupted the company, so we kept our mouths shut for fear of saying anything that just one jury might have construed as an admission of guilt. Winning in court was our top priority; nothing else mattered. And of course, our silence added to all the suspicions people had about us and the car. ” During the analysis process, a Ford engineer stated: “But you miss the point entirely. You see, safety isn’t the issue, trunk space is. You have no idea how stiff the competition is over trunk space.

Do you realize that if we put a Capri-type tank in the Pinto you could only get one set of golf clubs in the trunk? ”  From a performance perspective, Ford’s set targets were met and the desired financial outcomes were realized. However, this case raises questions regarding ethics, risk management and the purpose of using objectives and targets. Having the President of Ford Motor Company being quoted as saying “safety doesn’t sell”, is an ethical violation in itself.

The failure to warn the public regarding

flaws that posed serious risks to their customers played a key role in how the reputation of Ford Motor Company and their business ethics suffered in the Pinto case. “If the Ford Pinto case did not exist, law professors would need to invent it: for the case raises essential issues about both the form and the substance of modern products liability doctrine”. Gary T. Schwartz, 1991

Works Cited

1. Law & Valuation Papers, 1999: The Ford Pinto Case, www. wfu. edu
2. Http://www. wfu. edu/palmitar/Leggelt-pinto. html
3. Journal of International Business Ethics, Vol. 1, No. 1, 2008
4. www. Howstuffworks. com/“The Birth of the Ford Pinto”, 1971-1980 Ford Pinto
5. Google. com/ 1974 Ford Pinto Advertising
6. Google. com. images/ Vintage advertising, 1971 Ford Pinto Ad
7. TheTribuneNews. com/1970Vault ads.
8. Mark Dowie, Pinto Madness, Mother Jones 18 (Sept. /Oct. 1977)
9. Lee Iacocca and Sonny Klenfield, Talking Straight, 1988
10. www. smartkpis. com/performance-managementcase-study. fordpinto
11. Gary T. Schwartz, The Myth of the Ford Pinto Case, Rutgers Law Review 1013 (1991)