Student

Number: 1002247990

In submitting this work for grading, I confirm:

That the work is original, and due credit is

given to others where appropriate

Acceptance and acknowledgement that

assignments found to be plagiarized in any

way will be subject to sanctions under the

Universitys Code of Behaviour on Academic

Matters.

Please pay attention to the course outline for

specific formatting requirements set by

instructors.

Assignment

Title: Reaction paper on Ford Pinto

Course Code: RSM - 1160

Course Title: Business Ethics

Section #: 1 2 3 4

5

AM PM

Assignments are to be submitted using student

ID numbers only; do not include your name.

Please note that assignments that include

names or that do not have the box below

checked will not be graded.

Professor

Name: Richard Powers

Please check the box and record your student

number below to indicate that you have read

and abide by the statements above.

1002247990

Ford, a brand that revolutionized the automotive industry, launched a sub-compact car

called Ford Pinto in 1971 to compete with the Japanese and German automotive companies.

This project was spearheaded by Lee Iacocca, the man who also spearheaded the

development of one of the worlds most successful cars, Ford Mustang. Ford came up with a

plan to launch Pinto in a period of two years, which was less than the time normally required

for a design board idea to reach the showroom. Through crashing testing the prototypes of

Pinto, Ford came to learn that Pinto fails to comply with an upcoming safety standard

proposed by NHTSA to reduce fire from traffic collisions. As per the standard, it was required

that all cars produced by 1972 must withstand a rear end impact of 20 mph without any fuel

loss and by 1973, they should withstand a rear end impact of 30 mph. In the event of a rear

end impact of 20 mph, the fuel tank of Pinto used to get ruptured and cause dangerous fuel

leaks. Ford soon devised a solution to install a rubber bladder in the gas tank to avoid leaks

and got the final model pass the test. However, Ford did not implement the solution in the

production ready model to keep the cost low and avoid any kind of delay in launching the

vehicle. Fords decision of not implementing the solution was based on a cost - benefit analysis

which showed them that the additional cost involved in implementing the solution was higher

than the total compensation amount to be paid out in any kind of damage or loss of life. Ford

continued with the flawed design for six years until the 30 mph rear end collision standard was

adopted and it had to include a rapture proof fuel tank.

The question that arises here is that whether Fords decision to move ahead with the flawed

design to avoid the loss of market share and financial loss ethical? I think the decision taken

by Ford just based on a cost-benefit analysis is totally unethical. Their decision of not

implementing the necessary changes has jeopardized the passenger safety for their monetary

gains. Also, I dont agree with their approach in the cost-benefit analysis. You cant let people

lose life or get injured for your financial gain. And, it is impossible to measure and quote a value

for a human life. To analyze this case, I would first build a model and identify all the possible

elements. In this case, I find Ford and Lee Iacocca to be the active agents since they had the

right to make the choice and customers, shareholders, investors and employees to be the

passive agents since they have been affected by the consequences of the choice made by

the active agents. Ford made the choice not to implement the recommended modifications

in the final model and move ahead with a flawed design and put the lives of their valued

customers in danger. They made this choice even when they had an option to either redesign

the rear end of Pinto or install a bladder in the tank. They decided not to pursue any of the

alternatives because it costed them additional expenses and delayed launch. They kept their

consumers safety and the reputation of their brand at stake. They valued the financial gain

in acquiring the market share over consumer safety. The outcome of their choice is that the

customers lost their loved ones and they lost the reputation and trust their customers had in

them. They made this choice even after being aware of its outcome. It is quite clear that Lee

Iacocca and Ford as a whole, are responsible and accountable for the outcome of their

choice.

I also find that Ford made a utilitarian approach to take the decision. They calculated

the additional cost they had to bear and compared it to the compensation amount they

would need to pay to the victims, which turned out to be a lot lesser than the additional cost

for safety. Since Pinto was being developed for cost conscious customers, the additional

safety cost if passed on to the customers would impact their sales as it would increase the

price of the car and if they decide to bear it, it would reduce their profit margin. So they saw

the benefit in not implementing the recommended changes to make sure they keep the price

lower than their competitors and sell more. But this approach is not at all justifiable when there

is loss of lives and reputation. Utilitarian approach also rest on two important principles,

consequentialism and end-statism. I think, they did not consider these principles while applying

utilitarianrism. They did not think of the consequences of this cost-benefit analysis and what

would be the end state. Further, if we apply the contractarianism to analyze Fords decision,

we can see that they had a contract of delivering quality and safe product to their customers.

They did not consider about the promise they made to their customers while taking the

decision.

Lets do an ethical analysis of their decision using Graham Tuckers five box frame work.

Was this decision profitable? Yes. Ford saw the profitable business opportunity in the growing

market of compact cars and thereby wanted to grab the market share at the earliest by

launching Pinto before more players enter into the market. They were infact successful. But

What they did was legal? No. Pinto in the beginning failed to comply with the safety standards

and was later on made to comply the standards through several modifications. But then did

they launch a safety standard complying Pinto? No. Their act was illegal. Was it a fair decision

to launch a flawed vehicle? No. Pinto posed a serious fire hazard to its customers. Ford was

totally unfair towards its customers. Was Ford right? No. Ford was not right. It had an obligation

to protect its customers. It could not keep the promise of delivering a safe product to its

customers.

Even though what Ford did was unethical, but they had options to correct their action.

Ford could have announced about the fire hazard and initiated a recall of the vehicles for

free repair. This not just would have increased the brand value of Ford but could have also

driven the future sales. Along with that this action could have saved so many lives which were

lost otherwise. We can also look at a similar case to understand this better. Soon after Tata

launched the famous Nano car, cases were reported about the car catching fire on its own.

Tata did not wait for more accidents to happen, it immediately launched a nation-wide recall

and started the investigation for the fire reasons. When Tata discovered that it was due to

some quality issues, it undertook free repairs and also declared the reason of the fire to its

customers publicly on their website. It not just increased the trust in the brand but also avoided

loss of lives and other damages. Similarly in the Takata airbag case, Takata asked all the

automotive manufacturers to whom they supplied their airbag systems to do a recall for the

vehicles fitted with their systems. When they realized that their investigation was taking time, it

understood its responsibility and decided to install the airbag systems of their competitor

companies on their expenses so that the safety of the customers doesnt get compromised.

This decision has certainly strengthened Takatas business ties with its clients and helped the

customers of their clients to restore trust and faith in the brands.

It is clear that Ford had options to ethically deal with situation still they decided to go

unethical for financial gain. But they ended making losses and damage to self.

References

http://www.forbes.com/2010/05/20/forbes-india-wheels-of-fire-tata-moters.html

http://www.bbc.com/news/world-south-asia-11726992

http://users.wfu.edu/palmitar/Law&Valuation/Papers/1999/Leggett-pinto.html

https://hbr.org/2011/04/ethical-breakdowns

http://entertainment.verizon.com/news/read/category/Asia%20News/article/the_associated_press-

takata_ceo_air_bag_defect_still_under_investigatio-ap

http://www.consumerreports.org/cro/news/2014/10/everything-you-need-to-know-about-the-takata-air-

bag-recall/index.htm#details

https://quizlet.com/24219244/ethics-ch-4-flash-cards/

http://users.wfu.edu/palmitar/Law&Valuation/Papers/1999/Leggett-pinto.html

https://ckienzle.wordpress.com/2013/03/12/act-utilitarianism-applied-to-the-ford-pinto-release/

Final Page

Grade:_________