Ford Pinto Ford Pinto Case StudyCase Study

PowerPoint initially developed by PowerPoint initially developed by

Luke Casotti, Nick Lafler, & Jeff Lindaman, Fall 2004Luke Casotti, Nick Lafler, & Jeff Lindaman, Fall 2004

• "You don't want to talk about the Pinto," said a Ford official. "Leave that one in the cemetery."

• When people talk about how bad American small cars created an opportunity for the Japanese to come in and clean house in the 1970s and '80s, they are referring to vehicles like this.

Ford Mission StatementFord Mission Statement

• ““We are a global, diverse family with a We are a global, diverse family with a proud heritage, passionately committed proud heritage, passionately committed to providing outstanding products and to providing outstanding products and services that improve people’s lives.”services that improve people’s lives.”

Who is this Guy?Who is this Guy?

LEE IACOCCALEE IACOCCA

1946 - Iacocca started at Ford as a student 1946 - Iacocca started at Ford as a student engineer. engineer.

1956 - a major breakthrough. Sales of Fords were 1956 - a major breakthrough. Sales of Fords were poor, and Iacocca's district, Philadelphia had the poor, and Iacocca's district, Philadelphia had the worst performance of all, but he introduced a worst performance of all, but he introduced a novel idea: A new ’56 Ford for $56 down and $56 novel idea: A new ’56 Ford for $56 down and $56 a month! Within three months Philadelphia's a month! Within three months Philadelphia's figures moved from worst to best. Iacocca was figures moved from worst to best. Iacocca was promoted to district manager of Washington, D.Cpromoted to district manager of Washington, D.C

• President of the Ford Motor Division 1976President of the Ford Motor Division 1976• Oversaw design and introduction of the Mustang, Oversaw design and introduction of the Mustang,

Cougar, and Mark IIICougar, and Mark III• Forced to Leave Ford in 1978 -- conflict with Henry Forced to Leave Ford in 1978 -- conflict with Henry

FordFord

• Picked up by Chrysler CorporationPicked up by Chrysler Corporation• Rebuilt the failing corporationRebuilt the failing corporation• Went before Congress in 1979 asking for Went before Congress in 1979 asking for

moneymoney• Chrysler turnaround in 1980:Chrysler turnaround in 1980:

– K-CarK-Car– MinivanMinivan– Jeep Division at ChryslerJeep Division at Chrysler

• ““I have found that being honest is the best I have found that being honest is the best technique I can use. Right up front, tell people technique I can use. Right up front, tell people what you’re trying to accomplish and what you’re what you’re trying to accomplish and what you’re willing to sacrifice to accomplish it.”willing to sacrifice to accomplish it.”

• Lee was honest and up front about what he wanted Lee was honest and up front about what he wanted from the Ford Pinto, “Lee’s Car”:from the Ford Pinto, “Lee’s Car”:– 2000 lbs for $20002000 lbs for $2000

– Nothing else would compete with Datsun & VWNothing else would compete with Datsun & VW

23 months to roll-out (not 45)23 months to roll-out (not 45)

PRODUCT OBJECTIVES:PRODUCT OBJECTIVES:1. TRUE SUBCOMPACT : 1. TRUE SUBCOMPACT :

Size & Weight Size & Weight 2. LOW COST OF OWNERSHIP 2. LOW COST OF OWNERSHIP

Initial price, Fuel consumption, Reliability Initial price, Fuel consumption, Reliability Serviceability Serviceability

3. CLEAR PRODUCT SUPERIORITY 3. CLEAR PRODUCT SUPERIORITY Appearance, Comfort, Features, Appearance, Comfort, Features, Ride and Handling, PerformanceRide and Handling, Performance

Lee Iacocca was fond of saying, Lee Iacocca was fond of saying, "Safety doesn't sell.""Safety doesn't sell."

Gas Tank ConfigurationsGas Tank Configurations

• Behind Rear-AxleBehind Rear-Axle

• Over-the-Axle TankOver-the-Axle Tank

Gas Tank Cont’d

Behind Rear-Axle Tank

Pros:

More Luggage space

Industry standard – felt it was safer

Con:

Not as safe in rear-end collisions

Gas Tank Cont’d

Over-the-axle-tank

Pro: Performed well in rear-end collisions

Cons:

Long “round-about” filler pipe

Closer to passengers in back seat

Higher center of gravity

Reduced trunk space

Crash Tests

• In a relatively low MPH rear-end collision, the gas tank is easily punctured by bolts on the differential.

• Was Iacocca told?• "Hell no," replied an engineer who worked on

the Pinto. "That person would have been fired. Safety wasn't a popular subject around Ford. Whenever a problem was raised that meant a delay on the Pinto, Lee would chomp on his cigar, look out the window and say 'Read the product objectives and get back to work.'"

Crash Tests

• Of 40 tests, 37 resulted in ruptured gas tanks. The three that succeeded had:

--a plastic baffle between the tank and the differential bolts

-- a piece of steel between tank and bumper

-- a rubber “bladder” inside the gas tank

• More crash tests showed that a one-pound, one-dollar piece of plastic stopped the puncture of the gas tank.

• The idea was thrown out as extra cost and extra weight.

• Besides, tooling was already well under way.

If you ran into that Pinto you were following at over 30 miles per hour, the rear end of the car would buckle like an accordion, right up to the back seat.

The tube leading to the gas-tank cap would be ripped away from the tank itself, and gas would immediately begin sloshing onto the road around the car.

The buckled gas tank would be jammed up against the differential housing (that big bulge in the middle of your rear axle), which contains four sharp, protruding bolts likely to gash holes in the tank and spill still more gas.

Now all you need is a spark from a cigarette, ignition, or scraping metal, and both cars would be engulfed in flames.

If you gave that Pinto a really good whack—say, at 40 mph—chances are excellent that its doors would jam and you would have to stand by and watch its trapped passengers burn to death.

• In 1972, “Sandra Gillespie” pulled her new Pinto onto a Minneapolis highway’s merge lane. The car stalled.

• She was rear-ended at 28 MPH. The gas tank ruptured; fumes filled the car; a spark ignited; the car exploded in a ball of fire.

• “Sandra” died in agony a few hours later at a hospital emergency room.

• Her 13-year-old passenger underwent many surgeries to repair his face, burnt beyond recognition.

Meanwhile . . . . Federal Motor Vehicle Safety Standard 301

• Meant to require vehicles to withstand rear-end collision of 28 MPH

• Henry Ford II lobbied relentlessly against.• Official auto industry line–cars don’t cause

accidents; people and road conditions do.• Tactic: last-minute documents; challenges

to test results; lawsuits; private negotiating.• The standard was delayed for 8 years.

What was life worth in 1971?The Ford Cost-Benefit Analysis

• ComponentComponent                                                              1971 Costs1971 Costs

• Future Productivity LossesFuture Productivity Losses                                       – Direct                                             $132,000      Direct                                             $132,000      

Indirect                                            $41,300Indirect                                            $41,300– Medical Costs                     Medical Costs                    

• Hospital    $700            Hospital    $700            

• Other       Other        $ 425 $ 425

• TotalTotal $1,125 $1,125

What is life worth in 1971? Cont’d

• Property Damage                                 $ 1,500Property Damage                                 $ 1,500• Insurance Administration                   $ 4,700Insurance Administration                   $ 4,700• Legal and Court                                    $3,000Legal and Court                                    $3,000• Employer Losses                                  $ 1,000Employer Losses                                  $ 1,000• Victim's Pain and Suffering               $10,000Victim's Pain and Suffering               $10,000• Funeral                                                      $900Funeral                                                      $900• Assets (Lost Consumption)                  $5,000Assets (Lost Consumption)                  $5,000• Miscellaneous                                      Miscellaneous                                               

$200 $200               Total Per Fatality    Total Per Fatality    $200,725$200,725

Cost/Benefit Analysis: Recall?

• Benefit AnalysisBenefit Analysis• Savings:Savings:

– 180 burn deaths, 180 180 burn deaths, 180 serious burn injuries, serious burn injuries, 2100 burned vehicles2100 burned vehicles

• Unit CostUnit Cost– $200,000 per death, $200,000 per death,

$67,000 per injury, $700 $67,000 per injury, $700 per vehicleper vehicle

• Total BenefitTotal Benefit– (180 X $200,000) + (180 X (180 X $200,000) + (180 X

$67,000) + (2,100 X $700) $67,000) + (2,100 X $700) = $49.5 million= $49.5 million

• Cost AnalysisCost Analysis• SalesSales

– 11 million cars, 1.5 11 million cars, 1.5 million light trucksmillion light trucks

• Unit CostUnit Cost– $11 per car, $11 per $11 per car, $11 per

trucktruck• Total CostTotal Cost

– 12.5 million X $11 = 12.5 million X $11 = $137.5 million$137.5 million

Cost/Benefit Analysis Cont’dCost/Benefit Analysis Cont’d

• CostsCosts $137.5 Million$137.5 Million

• BenefitsBenefits - - $49.5 Million$49.5 Million

• DifferenceDifference $ 88.0 Million $ 88.0 Million

Grimshaw v. FordGrimshaw v. Ford

• Richard GrimshawRichard Grimshaw– 13-year old passenger in “Sandra Gillespie’s” 1971 13-year old passenger in “Sandra Gillespie’s” 1971

PintoPinto

– Struck from behind; exploded; badly burned over 90% Struck from behind; exploded; badly burned over 90% of his body; 20 years reconstructive surgery.of his body; 20 years reconstructive surgery.

– Awarded $125 million in punitive damagesAwarded $125 million in punitive damages

– $124 million profits made since Ford Pinto’s $124 million profits made since Ford Pinto’s introductionintroduction

– Judge reduced to $3.5 millionJudge reduced to $3.5 million

After Grimshaw v. FordAfter Grimshaw v. Ford

• On January 15, 1980, the Ford Motor Company went on On January 15, 1980, the Ford Motor Company went on trial on charges of reckless homicide in the 1978 death of trial on charges of reckless homicide in the 1978 death of three Indiana teenagers who burned to death after their three Indiana teenagers who burned to death after their 1973 Fort Pinto was hit from behind by a van. 1973 Fort Pinto was hit from behind by a van.

• Indiana state prosecutors alleged that Ford knew Pinto Indiana state prosecutors alleged that Ford knew Pinto gasoline tanks were prone to catch fire during rear-end gasoline tanks were prone to catch fire during rear-end collisions but failed to warn the public or fix the problem collisions but failed to warn the public or fix the problem out of concern for profits. out of concern for profits.

• The trial marked the first time that an American The trial marked the first time that an American corporation was prosecuted on criminal charges—in this corporation was prosecuted on criminal charges—in this case, reckless homicide.case, reckless homicide.

• Ford was acquitted in March; the case was too complex.Ford was acquitted in March; the case was too complex.• The Pinto was discontinued in fall 1980.The Pinto was discontinued in fall 1980.

Pinto recallPinto recall

• Ford was first urged to recall the Pinto in 1974, by Ford was first urged to recall the Pinto in 1974, by the nonprofit Center for Auto Safety.the nonprofit Center for Auto Safety.

• Late in 1978, Ford recalled all 1971-1976 Pinto Late in 1978, Ford recalled all 1971-1976 Pinto models (1.5 million cars) models (1.5 million cars)

• Modifications Modifications – Longer fuel filler neckLonger fuel filler neck

– Plastic shieldsPlastic shields• Protected from rear differentialProtected from rear differential

• Protected from rear shock absorberProtected from rear shock absorber

And just to show you how whacky And just to show you how whacky Americans are about their cars:Americans are about their cars:

• http://www.fordpinto.com/

Resources

• The Ford Pinto Case. www.sprynewmedia.com/clients/wakeforest/papers/1999/Leggett-pinto.html. February 15, 2004.

• Video http://www.motherjones.com/news/feature/1977/09/dowie.html Mark Dowie, "Pinto Madness," Mother Jones, September/October 1977

• Birsch, D. (1994). Introduction: The Pinto Controversy. In D. Birsch & J.H. Fielder (Eds.), The Ford Pinto Case: A Study in Applied Ethics, Business, and Technology (p. 3-14). (1994). State University of New York Press.

• Dowie, M. (1977). Pinto Madness. In D. Birsch & J.H. Fielder (Eds.), The Ford Pinto Case: A Study in Applied Ethics, Business, and Technology (p. 15-36). (1994). State University of New York Press.

• http://en.wikipedia.org/wiki/Lee_Iacocca • www.autosafety.org/article.php?scid=96&did=522• http://www.biogs.com/famous/iacocca.html

THE END

For Consideration:For Consideration:

• Would you want to be the one to tell Would you want to be the one to tell Iococca the Pinto needed a gas-tank fix?Iococca the Pinto needed a gas-tank fix?

• What if he fired you?What if he fired you?• How do you think the employees of Ford How do you think the employees of Ford

felt about their company when the lawsuits felt about their company when the lawsuits began?began?

• What if you were Ford’s recall manager? What if you were Ford’s recall manager? (Dennis Gioia actually was….)(Dennis Gioia actually was….)