ford pinto case study answers

Business Ethics

Case: the ford pinto.

• 1.1 Benefits
• 1.3 The End

The Ford P​into

From: Moral Issues in Business 8th ed. Shaw & Barry (pp. 83-86)

There was a time when the “made in Japan” label brought a predictable smirk of superiority to the face of most Americans. The quality of most Japanese products usually was as low as their price. In fact, few imports could match their domestic counterparts, the proud products of Yankee know-how. But by the late 1960s, an invasion of foreign-made goods chiseled a few worry lines into the countenance of the U.S. industry. In Detroit, worry was fast fading to panic as the Japanese, not to mention the Germans, began to gobble up more and more of the subcompact auto market.

Never one to take a back seat to the competition, Ford Motor Company decided to meet the threat from abroad head-on. In 1968, Ford executives decided to produce the Pinto. Known inside the company as “Lee’s car,” after Ford president Lee Iacocca, the Pinto was to weigh no more than 2,000 pounds and cost no more than $2,000.

Eager to have its subcompact ready for the 1971 model year, Ford decided to compress the normal drafting-board-to-showroom time of about three-and-a-half years into two. The compressed schedule meant that any design changes typically made before production-line tooling would have to be made during it.

Before producing the Pinto, Ford crash-tested various prototypes, in part to learn whether they met a safety standard proposed by the National Highway Traffic Safety Administration (NHTSA) to reduce fires from traffic collisions. This standard would have required that by 1972 all new autos be able to withstand a rear-end impact of 20mph without fuel loss, and that by 1973 they be able to withstand an impact of 30 mph. The prototypes all failed the 20-mph test. In 1970 Ford crash-tested the Pinto itself, and the result was the same: ruptured gas tanks and dangerous leaks. The only Pintos to pass the test had been modified in some way–for example, with a rubber bladder in the gas tank or a piece of steel between the tank and the rear bumper.

Thus, Ford knew that the Pinto represented a serious fire hazard when struck from the rear, even in low-speed collisions. Ford officials faced a decision. Should they go ahead with the existing design, thereby meeting the production timetable but possibly jeopardizing consumer safety? Or should they delay production of the Pinto by redesigning the gas tank to make it safer and thus concede another year of subcompact dominance to foreign companies? Ford not only pushed ahead with the original design but stuck to it for the next six years.

What explains Ford’s decision? The evidence suggests that Ford relied, at least in part, on cost-benefit reasoning, which is an analysis in monetary terms of the expected costs and benefits of doing something. There were various ways of making the Pinto’s gas tank safer. Although the estimated price of these safety improvements ranged from only $5 to $8 per vehicle, Ford evidently reasoned that the increased cost outweighed the benefits of a new tank design.

How exactly did Ford reach that conclusion? We don’t know for sure, but an internal report, “Fatalities Associated with Crash-Induced Fuel Leakage and Fires,” reveals the cost-benefit reasoning that the company used in cases like this. This report was not written with the pinto in mind; rather, it concerns fuel leakage in rollover accidents (not rear-end collisions), and its computations applied to all Ford vehicles, not just the Pinto. Nevertheless, it illustrates the type of reasoning that was probably used in the Pinto case.

In the “Fatalities” report, Ford engineers estimated the cost of technical improvements that would prevent gas tanks from leaking in rollover accidents to be $11 per vehicle. The authors go on to discuss various estimates of the number of people killed by fires from car rollovers before settling on the relatively low figure of 180 deaths per year. But given that number, how can the value of those individuals’ lives be gauged? Can a dollars-and-cents figure be assigned to a human being? NHTSA thought so. In 1972, it estimated that society loses $200,725 every time a person is killed in an auto accident (adjusted for inflation, today’s figure would, of course, be considerably higher). It broke down the costs as follows:

Putting the NHTSA figures together with other statistical studies, the Ford report arrives at the following overall assessment of costs and benefits:

Thus, the costs of the suggested safety improvements outweigh their benefits, and the “Fatalities” report accordingly recommends against any improvements–a recommendation that Ford followed.

Likewise in the Pinto case, Ford’s management whatever its exact reasoning, decided to stick with the original design and not upgrade the Pinto’s fuel tank, despite the test results reported by its engineers. Here is the aftermath of Ford’s decision:

• Between 1971 and 1978, the Pinto was responsible for a number of fire-related deaths. Ford puts the figure at 23; its critics say the figure is closer to 500. According to the sworn testimony of Ford engineers, 95 percent of the fatalities would have survived if Ford had located the fuel tank over the axle (as it had done on its Capri automobiles).
• NHTSA finally adopted a 30-mph collision standard in 1976. The pinto then acquired a rupture-proof fuel tank. In 1978 Ford was obliged to recall all 1971-76 Pintos for fuel-tank modifications.
• Between 1971 and 1978, approximately fifty lawsuits were brought against Ford in connection with rear-end accidents in the Pinto. In the Richard Grimshaw case, in addition to awarding over $3 million in compensatory damages to the victims of a Pinto crash, the jury awarded a landmark $125 million in punitive damages against Ford. The judge reduced punitive damages to 3.5 million.
• On August 10, 1978, eighteen-year-old Judy Ulrich, her sixteen-year-old sister Lynn, and their eighteen-year-old cousin Donna, in their 1973 Ford Pinto, were struck from the rear by a van near Elkhart, Indiana. The gas tank of the Pinto exploded on impact. In the fire that resulted, the three teenagers were burned to death. Ford was charged with criminal homicide. The judge in the case advised jurors that Ford should be convicted if it had clearly disregarded the harm that might result from its actions, and that disregard represented a substantial deviation from acceptable standards of conduct. On March 13, 1980, the jury found Ford not guilty of criminal homicide.

For its part, Ford has always denied that the Pinto is unsafe compared with other cars of its type and era. The company also points out that in every model year the Pinto met or surpassed the government’s own standards. But what the company doesn’t say is that successful lobbying by it and its industry associates was responsible for delaying for seven years the adoption of any NHTSA crash standard. Furthermore, Ford’s critics claim that there were more than forty European and Japanese models in the Pinto price and weight range with safer gas-tank position. “Ford made an extremely irresponsible decision,” concludes auto safety expert Byron Bloch, “when they placed such a weak tank in such a ridiculous location in such a soft rear end.”

Has the automobile industry learned a lesson from Ford’s experience with the Pinto? Some observers thought not when, in February 1993, an Atlanta jury held the General Motors Corporation responsible for the death of a Georgia teenager in the fiery crash of one of its pickup trucks. At the trial, General Motors contended in its defense that when a drunk driver struck seventeen-year-old Shannon Moseley’s truck in the side, it was the impact of the high-speed crash that killed Moseley. However, the jury was persuaded that Moseley survived the collision only to be consumed by a fire caused by his truck’s defective fuel-tank design. Finding that the company had known that its “side-saddle” gas tanks which are mounted outside the rails of the truck’s frame, are dangerously prone to rupture, the jury awarded $4.2 million in actual damages and $101 million in punitive damages to Moseley’s parents.

What undoubtedly swayed the jury was the testimony of former GM safety engineer Ronald E. Elwell. Although Elwell had testified in more than fifteen previous cases that the pickups were safe, this time he switched sides and told the jury that the company had known for years that the side-saddle design was defective but had intentionally hidden its knowledge and had not attempted to correct the problem. At the trial, company officials attempted to paint Elwell as a disgruntled employee, but his testimony was supported by videotapes of General Motors’ own crash tests. After the verdict, General Motors said that it still stood behind the safety of its trucks and contended “that a full examination by the National Highway Traffic Safety Administration of the technical issues in this matter will bear out our contention that the 1973-1987 full size pickup trucks do not have a safety related defect.”

Since then, however, the Department of Transportation has determined that GM pickups do pose a fire hazard and that they are more prone than competitors’ pickups to catch fire when struck from the side. Still, GM has rejected requests to recall the pickups and repair them. Meanwhile, the Georgia Court of Appeals has thrown out the jury’s verdict in the Shannon Moseley case on a legal technicality–despite ruling that the evidence submitted in the case showed that GM was aware that the gas tanks were hazardous but did not try to make them safer to save the expenses involved.

Business & Legal Issues: Ford Pinto Case Study

In contemporary business settings, ethics is often perceived primarily along the lines of workplace ethics, negotiations, ethics of management, and cultural diversity. However, this subject has many important areas, and one of them is focused on the relationship between the business and society. These relationships often result in clashes because they normally involve a large variety of very different issues.

Naturally, in a non-perfect world, where unanimity is rarely the case, fulfilling the need of one side always leads to the dissatisfaction of another side. That way, confrontations are never-ending and so are the ethical challenges faced by the contemporary businesses. This paper will focus on the exploration of a well-known business ethics case study known as the Ford Pinto case—a scandalous event that resulted in a multitude of fatalities caused by a major product liability. Namely, the business and legal issues that resulted from the case will be discussed.

To be more precise, the Ford Pinto case will be evaluated from the legal point of view to establish which laws were violated in the process of corporate decision-making that led to the production of the Pinto. Further, the decisions of the Ford staff will be explored from the perspective of Milton Friedman’s philosophy. In addition, the company’s moral responsibilities to the stakeholders (the customers in particular) will be discussed. Finally, an ethical framework that impacted Ford’s executives will be applied to the case.

Ford Pinto Case Overview

Competing against the Japanese car manufacturers, which used to be considered as superior to the American ones in terms of product quality, the leaders of Ford decided to create a new vehicle known as the Ford Pinto. The vehicle was also regarded as “Lee’s car,” which is a reference to the president of Ford at the time, Lee Iacocca (Shaw & Barry, 2014).

The new car was designed to be rather light (no heavier than 2,000 pounds), and its price was assigned as no higher than $2,000 (Shaw & Barry, 2014). Apart from these standards, the manufacturers had to fit into one more frame—that of time. To be more precise, the time they were given to design and produce the Pinto was abnormally short—two and a half years instead of the usual three; that schedule meant that the stages of design adjusting and production line tooling were to overlap (Shaw & Barry, 2014).

Many of the car prototypes were tested for the purpose of meeting the state standards of NHTSA that required the cars to endure rear-end collisions of 20 mph. All of the prototypes (including the Ford Pinto) failed to withstand this level of impact; the results were the loss of fuel and broken gas tanks (Shaw & Barry, 2014).

Facing this problem, Ford’s leaders had to decide whether to release the existing vehicles with a dangerous flaw and put the consumers at risk or to spend more time redesigning the cars. After cost-benefit reasoning, the choice was made to stick with the flawed Pinto. As a result, the vehicles caused a number of deaths related to rear-end collisions and the ensuing fires; to be more precise, the critics estimated the number of victims of the flawed car design to be around 500 (Shaw & Barry, 2014). About fifty lawsuits were filed against Ford for the accidents involving Pinto cars and collisions, including a charge with the homicide of three teenagers, where Ford was found not guilty (Shaw & Barry, 2014).

The company never agreed with the statement that Pinto cars were unsafe in comparison with the other models; however, the critics maintained that Ford officials’ decision to release the cars was an error due to their easy to rupture gas tanks with an unsafe location in a very soft rear end (Shaw & Barry, 2014). Practically, the cause of the disagreement was the criticism of Ford leaders as responsible for unethical decision-making that put the consumers in danger for the sake of financial benefits.

Three Laws Violated by Ford

The case of the Ford Pinto violated many types of laws; three of them are criminal law, consumer protection law, and tort law. Further, each of these laws is explored in detail in reference to the case of the Ford Pinto.

Criminal Law

As specified by Brickley and Gottesman (2016), a breach of the criminal law is punishable when it involves a combination of two elements: mens rea (guilty mind) and actus reus (guilty action). The guilty mind can be defined as having criminal ideas, and guilty actions are divided into four categories: the acts committed intentionally, negligibly, knowingly, and recklessly (Brickley & Gottesman, 2016).

In the case of the Ford Pinto, the guilty act definitely involved the knowledge of the perpetuators of the danger their decisions represented. Namely, the officials were aware of the flawed design of the cars as well as their inability to match the safety standard established by NHTSA. Besides this, the manufacturers even conducted a cost-benefit analysis and evaluated the potential danger the cars presented to the consumers. This knowledge did not stop them from selling the vehicles. One may conclude that the guilty act was committed knowingly with the presence of guilty mind interested in financial benefits.

Consumer Protection Law

Sometimes the practices of some businesses may result in negative consequences for the consumers; this phenomenon is recognized as an abusive business practice and is addressed by consumer protection law ( Consumer Rights – Consumer Protection Law , 2016). To be more precise, consumer protection laws are designed specifically to hold the manufacturers and sellers responsible for actions that victimize the consumers via the unethical pursuit of profit.

The consumers may become easy targets for such unlawful practices due to their lack of information or the power to bargain ( Consumer Rights – Consumer Protection Law , 2016). In the case of Ford Pinto, the manufacturers failed to inform the consumers about the weaknesses of the vehicle and its potential implications for the people’s safety. As a result, many individuals were harmed and killed.

Tort law is specifically designed to provide protection to the parties that become injured as a result of a harmful act of another party; that way, the loss of the harmed party becomes the liability of the responsible party ( Tort , n. d.). In other words, the damages suffered by the injured party can be paid back by the initiators of harm in monetary form. In the case of the Ford Pinto, the losses of the consumers affected by the fires and explosions of the flawed vehicles were covered by Ford; such losses involve the loss of income due to sick leave or disability and the cost of medical treatment.

Friedman’s Philosophy and Ford’s Staff

The character of the Ford Pinto case in relation to the free market issues was discussed by Milton Friedman in one of his lectures given in the 1970s. Friedman’s take on the case was rather controversial as he pointed out that the problem was not of moral but of economic character ( Milton Friedman on the price of human life , 2011). This is the principle that became the basis of Ford’s analysis of the issue when they realized that the Pinto vehicles had a flaw.

Practically, the Ford’s leaders and analysts rejected the principles of morality and the intuitive feeling of wrong and right and instead treated the financial side of the problem as isolated from all the other components, assuming that is was the rational approach. Friedman’s approach was misused by Ford during their cost-benefit analysis. Friedman disagrees with the calculations they made; however, the basics of the solution and decision-making process practiced by Ford in reference to the Pinto align with Friedman’s philosophy.

For the executives of the company, Friedman’s philosophy may have served as a strong justification of their flawed models and the decision to go through with their release. Dry and emotionless calculation of monetary costs and benefits of selling cars and the loss of human lives taken objectively to find the right solution led to multiple lawsuits and risks for the organization.

Ford’s Moral Responsibilities

Continuing to connect the Friedman’s philosophy with Ford’s decision concerning the release of the Pinto cars, it is crucial to mention that the philosophy emphasizes one important aspect: the need to follow the rules of the game ( Returning to the Pinto Case , 2016). In other words, sticking to the rules of the games referred to Ford’s obligation to avoid the breach of criminal laws and put their customers at risk by means of selling flawed cars.

At the same time, at the moment when the cars were sold, the consumers were not in danger. Basically, the law of time was not breached by Ford as the effects of their decisions were not the reality at the time, and neither were the laws violated in the collisions ( Returning to the Pinto Case , 2016). Also, it is possible to say that the consumers should have learned about the advantages and disadvantages of the cars before purchasing them, making the buyers partially responsible; however, this approach does not remove the fault from the manufacturers ( Returning to the Pinto Case , 2016).

Ethical Framework That Applies to the Situation

The utilitarianism is the framework that Ford’s analysts relied on while conducting a cost-benefit analysis of the release of the Pinto cars (Poel & Royakkers, 2011). Practically, the calculated social costs of the potential car accidents were not outweighed by the costs of waiting for the release and making improvements. The utilitarian perspective was based on the evaluation of the costs from the point of view of the consumers and not Ford (Poel & Royakkers, 2011).

At the same time, the costs calculated by Ford can be recognized as arbitrary (for instance, how can one calculate the value of pain?). Also, by making that calculation, the researchers dismissed the fact that the release of the cars would lead to the deaths of people, thus committing an ultimate act of immorality. Ford’s utilitarian-act argument does not work, because it treats utilitarianism as merely a practical approach, rejecting its ethical component that does not allow sacrificing lives and the wellbeing of people for financial rewards.

To sum up, the Ford Pinto case is one of the clearest examples of consumer rights abuse by a manufacturer. The most disturbing aspect of the case is that numbers and calculations were used as the basis for a decision that was supposed to rely on legal and ethical rules. In addition, some of the variables and numbers presented in Ford’s report are arbitrary. Because of this, the release of the defective cars resulted in the deaths of many people and multiple lawsuits for the company.

Brickley, S. D. & Gottesman, B. M. (2016). Business Law Basics .

Consumer Rights – Consumer Protection Law . (2016).

Milton Friedman on the price of human life. (2011).

Poel, I. & Royakkers, L. (2011). Ethics, Technology, and Engineering: An Introduction . New York, NY: John Wiley & Sons

Returning to the Pinto Case. (2016).

Shaw W. H. & Barry, D. (2014). Moral Issues in Business (8th ed.). New York, NY: Cengage Learning. Tort . (n. d.).

• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2022, June 24). Business & Legal Issues: Ford Pinto. https://ivypanda.com/essays/business-ethics-ford-pintos-case/

"Business & Legal Issues: Ford Pinto." IvyPanda , 24 June 2022, ivypanda.com/essays/business-ethics-ford-pintos-case/.

IvyPanda . (2022) 'Business & Legal Issues: Ford Pinto'. 24 June.

IvyPanda . 2022. "Business & Legal Issues: Ford Pinto." June 24, 2022. https://ivypanda.com/essays/business-ethics-ford-pintos-case/.

1. IvyPanda . "Business & Legal Issues: Ford Pinto." June 24, 2022. https://ivypanda.com/essays/business-ethics-ford-pintos-case/.

Bibliography

IvyPanda . "Business & Legal Issues: Ford Pinto." June 24, 2022. https://ivypanda.com/essays/business-ethics-ford-pintos-case/.

• Ford Pinto's Fuel System Redesign and Ethics
• Ford Pinto Litigation and Business Ethics
• Ford Pinto: Measuring Safety
• The Pinto Fires Case
• Ford Pinto Case Study: A Letter to Mr. Copp
• Business Ethics and Taking Sides: Ford Motor Company
• The Ford Pinto Case and Ethical Dilemma
• White-Collar Crime: The Notorious Case of Ford Pinto
• Cost-Benefit Analysis and the Ford Pinto
• The Utilitarian Theory and Its Major Downsides
• Friedman Doctrine and Unethical Business Behavior
• Employee Theft in “Who Stole the Money, and When?”
• Employee Theft, Its Determinants and Impact
• Business Ethics and Its Impact on Internal Relationships
• Social and Ethical Responsibility: Martin Shkreli Scandal

What Made the Pinto Such a Controversial Car

The Pinto became known as the subcompact car that Ford sold while ignoring major safety defects. But was that just a false narrative?

Narrative is powerful. Take the case of the Ford Pinto, the much-maligned subcompact produced by the American manufacturer to compete with the growing foreign car imports in the late 1960s and into the 1970s.

The roots of the Pinto— described by one reporter as “the most controversial car ever built” —go back to 1966, when Lee Iaccoca, then Ford president, ordered the development of a subcompact. This was to be different from the typical bulky American model of the day. Iaccoca wanted this new car to be less than 2,000 pounds and to be sold for less than $2,000. He envisioned it as an American alternative to the popular Japanese and German imports.

The car, introduced in the model year 1971, never sold very well, was plagued by defects, and most tragically, was involved in a series of rear-end collisions which cost the company millions in liability. One California case, based upon an August 1977 accident, assigned $125 million in damages after the death of a teenager. Another highly-publicized criminal case took place in Indiana, where Ford was found not guilty but later paid damages in a civil case.

A 1977 article in Mother Jones  titled “Pinto Madness” blamed the fatalities on a rear end fuel tank design which author Mark Dowie claimed was deliberately developed by Ford to save money at the expense of human lives. Writers Matthew Lee and David Ermann note that the Pinto narrative became well-established. In the popular imagination, the car had unique problems and Ford had decided to sacrifice safety at the altar of corporate profits.

According to Lee and Ermann, however, that story simply isn’t true.

Crash tests cited by the prosecution in famous cases against Ford both in Indiana and California were not definitive. The concept of crash tests were new at the time, producing data wide open to interpretation. The Pinto, the authors say, compared relatively well with other subcompacts.

Scholar John R. Danley argues that contrary to popular belief, the Pinto was in the middle of fatality rates for cars of its type . On the top of the list at the time was the Volkswagen Beetle. There was also no significant difference in the rate of fatalities caused by rear end collisions, the structural defect for which Ford paid a heavy price.

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One largely unexplored issue was the safety record of subcompacts in general. Drivers and passengers in such cars in the late 1970s, including the Pinto, but also including foreign imports, were twice as likely to die in crashes as those driving larger cars.

Still, prosecutors and journalists painted Ford as a monolith, with centralized decision-making that created clear decisions, making it easy to point the finger at top brass. In reality, according to Lee and Ermann (as well as other organizational researchers), Ford was much like other companies, with competing groups of engineers and marketers and finance people coming together, sometimes not very well, to create products like the Pinto. The Pinto narrative, they say, was largely the result of a post- Watergate journalistic fever, in which conspiracy and moral calculations in organizational wrongdoing were regularly being highlighted by reporters.

“There was no decision to market an unsafe product,” write Lee and Ermann. The reality was more complicated. But the narrative has taken hold, and there are few who now look upon Ford’s entry into the small car market with nostalgia. The Pinto, marketed as the carefree car, proved too much of a headache and was discontinued ten years after its introduction.

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The Ford Pinto Case

A study in applied ethics, business, and technology.

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Table of contents

Ethical Analysis of Case Studies

PART I: THE PINTO CONTROVERSY

Introduction: The Pinto Controversy Douglas Birsch

1. Pinto Madness Mark Dowie

2. Ford Rebuts Pinto Criticism and Says Article is Distorted The National Underwriter

3. The Pinto Documents Lee Patrick Strobel

4. The Pinto Fuel System West's California Reporter

5. Motor Vehicle Safety Standard, Part 571; S 301

6. Investigation Report, Phase I: Alleged Fuel Tank and Filler Neck Damage in Rear-End Collision of Subcompact Passenger Cars

7. Pinto Fires and Personal Ethics: A Script Analysis of Missed Opportunities Dennis A. Gioia

PART II: COST-BENEFIT ANALYSIS

Introduction: Cost-Benefits Analysis

8. Cost-Benefit Analysis: An Ethical Critique Steven Kelman

9. Defending Cost-Benfit Analysis: Replies to Steven Kelman James V. Delong; Robert M. Solow; Gerard Butters, John Calfee, and Pauline Ippolito; Robert A. Nisbet

10. Product Safety, Cost-Benefit Analysis, and the Ford Pinto Case Douglas Birsch

11. Fatalities Associated with Crash-Induced Fuel Leakage and Fires E. S. Grush and C. S. Saunby

PART III: WHISTLE BLOWING

Introduction: Whistle Blowing

12. Ethical Responsibilities of Engineers in Large Organizations: The Pinto Case Richard T. De George

13. Commentary on "Ethical Responsibilities of Engineers in Large Organizations: The Pinto Case" Hart T. Mankin

14. Whistle Blowing, Ethical Obligation, and the Ford Pinto Case Douglas Birsch

PART IV: PRODUCT LIABILITY

Introduction: Product Liability

15. Marketing and Product Liability: A Review and Update Fred W. Morgan

16. Strict Products Liability and Compensatory Justice George G. Brenkert

17. Grimshaw v. Ford Motor Company West's California Reporter

PART V: THE REGULATION OF BUSINESS

Introduction: The Regulation of Business

18. Profits vs. Safety Francis T. Cullen, William J. Maakestad, and Gray Cavender

19. Five Moral Imperatives of Government Regulation Peter Barton Hutt

20. Regulation: A Substitute for Morality Alasdair MacIntyre

21. The Ethics and Politics of Automobile Regulation John H. Fielder

Appendix: Abbreviated Ford Pinto Chronology

Bibliography

Handout: Utilitarianism and Business: Ford Pinto case

December 22, 2010.

Utilitarianism and Business Ethics

Introduction.

Welcome to philosophicalinvestigations – a site dedicated to ethical thinking (rather than one page summaries!!! Though I’m afraid I do add those at exam time – market pressures!). I hope you enjoy this case study which also has a powerpoint that goes with it.  There’s plenty of other useful material on this site – case studies, handouts, powerpoints and summaries, and also I have written a number of books including best-selling revision guides and a useful book on ‘How to Write Philosophy Essays”.

If you’re worried about exams you might at least print out my strengths and weaknesses summaries under each moral theory. I deliberately quote only from my five favourite ethics books, visit our shop  to find out which they are – because you might like to buy one of them to supplement your study.  Of course, it’s important to quote the philosophers themselves in their own words – see my handouts, or for what academics say about them – see the key quotes section under the topic area of each moral theory.  And if you’d like to blog on anything in the news send it to me – I’d be delighted to read it and – if it fulfils the criterion of good ethical thinking (!), post it!!!!!

Utilitarianism is a normative, consequentialist, empirical philosophy which links the idea of a good action to one which promotes maximum pleasure or happiness, found by adding up costs and benefits (or pains and pleasures). It has two classic formulations – Bentham’s hedonistic (pleasure-based) act utilitarianism and Mill’s eudaimonistic (happiness-based) rule utilitarianism. In this article we make some preliminary comments on Bentham and Mill before analysing a famous case in 1972 where utilitarian ethics seemed to cause a very immoral outcome – the Ford Pinto case.

Click here for a powerpoint presentation on the same subject containing a YouTube link for a ten minute documentary on this case.

Click here for a brilliant survey of the legal questions surrounding cost/benefit analysis – if you’re thinking of being a lawyer it’s a must read!

Bentham (1748-1832)

• There is one good, pleasure, and one evil, pain. • Human nature is naturally motivated by “two sovereign masters, pleasure and pain”. We are pleasure-seekers (hedonists). Other motives such as duty, respect, are irrelevant. • The empirical calculation could be done with a hedonic calculus which allocates hedons of pleasure to different choices. • Social goals should be fixed by aggregating personal goals in terms of maximising pleasure and minimising pain. • The aim of government is to harmonize conflicting interests by passing laws with appropriate penalties for those who cause pain to others – hence modifying their behaviour.

Bentham became convinced that the British Government was influenced solely by self-interest rather than some idea of the common good. He came to argue for the abolition of the monarchy, universal male suffrage (not just linked to land), and rule by parliament as judge of the common interest.

John Stuart Mill (1806-73)

Mill’s version of utilitarianism was so different from Bentham’s that it almost seems that he rejects it. Mill was concerned to move away from what he once called a “swinish” philosophy based on base pleasures, to something subtler.

• Goodness was based on more than just pleasure, but on the virtue of sympathy for our fellow human beings, a concern for their rights and our duty to promote the common good. • Pleasures were distinguishable between lower bodily pleasures and higher intellectual or spiritual pleasures – and if you wanted to know which was better ask someone who’d experienced both. • Mill was suspicious of universal male suffrage, and advocated education for all as a key to graduating to the happy life. • Mill was keen to see fairer distribution of wealth and income and rejected the extreme form of free market economics. • Mill argues for a weak rule utilitarianism. We maximise happiness by obeying laws and social conventions which experience has shown promote the common good – such as respect for life, personal freedom and private property, or good manners and politeness. However, when two principles or rules come into conflict, such as the choice to lie to save my friend’s reputation, I revert to being an act utilitarian – making my decision based on a balance of outcomes – choosing that action which maximises happiness.

Business applications

Utilitarianism can be used in any business decision that seeks to maximize positive effects (especially morally, but also financially) and minimize negative ones. As with Bentham’s formulation, utilitarianism in business ethics is primarily concerned with outcomes rather than processes. If the outcome leads to the greatest good (or the least harm) for the greatest number of people, then it is assumed the end justifies the means. As Lawrence Hinman observes, the aim is to find “the greatest overall positive consequences for everyone” (Ethics, 136). This can be linked to the idea of cost-benefit analysis, so that “correct moral conduct is determined solely by a cost-benefit analysis of an action’s consequences” (Fieser, p7).

Just as John Stuart Mill objected to the coldest, most basic version of the theory, modern business ethicists point to utilitarianism’s limits for practical choices. For example, Reitz, Wall, and Love argued that utilitarianism isn’t an appropriate tool when outcomes affect a large number of separate parties with different needs or in complex processes whose outcomes and side effects can’t be readily foreseen, e.g., implementing new technology.

Utilitarianism suffers from the difficulty that costs and benefits may not be equally distributed. As Hinman comments “utilitarians must answer the question of whom are these consequences for?” (Ethics, 137). For example, if the UK government fails to regulate carbon emissions, acid rain falls on Sweden. If a tax is then placed on UK business to pay for this, the cost is borne by the UK taxpayer, the benefit is enjoyed by Sweden. There can be broad social costs, for example, of promoting unhealthy eating that are paid for by UK taxpayers in higher bills for health care, whereas the benefit (McDonalds profits) are enjoyed by employees and shareholders.

Such rules as “always pay your taxes” suffer from this problem, that the rich are actually subsidising the poor. Why should they? Mill would argue that we are concerned for others because of a general feeling of sympathy, which as a matter of fact, we all have. But suppose (as a matter of fact) I don’t share this feeling, then the rational utility maximising thing to do is to avoid paying tax as far as possible – move abroad, set up tax shelters, register my company in the lowest tax economy.

In applying utilitarian principles to business ethics, the cost-benefit analysis is most often used – it is a good decision making tool. Companies will attempt to work out how much something is going to cost them before taking action that should, ideally, result in consequences favourable to everyone. That would mean the company could make a profit, while the consumer benefited from their product. Hopefully, products are fit for purpose, safe, and give value for money. No business would attempt a project without evaluation of all relevant factors first, as well as taking other issues or risks into account that might jeopardise success. Ethical business practice, using utilitarianism, would thus consider the good and bad consequence for everyone the action would affect, treat everybody as having equal rights (at least in Mill’s weak rule utilitarianism), with no bias towards self, and would use it as an objective, quantitative way to make a moral decision.

CASE STUDY: Ford Pinto Case, utilitarianism and Cost Benefit Analysis:

This is an extract from a longer article, by Annie Lundy. Read more: http://bizcovering.com/major-companies/applying-utilitarianism-to-business-ethics-the-ford-pinto-case/#ixzz18qFeyQRa

In applied business ethics, within the rule utilitarian theory of Mill, many principles exist which may be used to inform the morality of actions when analysing cost-benefit, or should be, if consequences are to favour more people overall. These include harm, honesty, justice and rights. So no harm should be done to others, people should not be deceived and their rights to life, free expression, and safety should be acknowledged. The argument here is that Ford abandoned these principles, abused the utilitarian theory to suit their needs, stayed within the laws of the time, but behaved unethically. The ‘utilities’ as a consequence, appeared to be money, and they used that to define the value of their needs against the value of human life.

Lacey (580-581) stated that:

“Ford pushed the federal regulators to put some price on auto safety…It was an agency of the U.S. government , the National Highway Traffic Safety Administration (NHTSA) which arrived at this blood-chilling calculation, not the Ford Motor Company. But the way in which Ford took this government figure ($250,725) and used it for its own purposes carried a chill…”

So the Ford Pinto went on sale with dangerous design faults in the position of the fuel tank and nearby bolts, and the tendency for the fuel valve to leak in rollover accidents. Design and production was rushed and cost of the vehicle kept down to sell it at $2000. It sold well, until 1972 when four people died ,the first of many incidents stemming from the Pinto’s flaws, and many more followed, costing Ford millions in compensation. The cost-benefit analysis demonstrated an abuse of utilitarian principles, and the engineers were fully aware of the flaws, yet the company continued to sell the car as it was, without safety modifications. They “weighed the risk of harm and the overall cost of avoiding it.” Leggett, (1999).

The government figure, mentioned earlier, was made up of 12 ‘social components’ that included $10,000 for ‘victim’s pain and suffering’ and was meant to determine the cost to society for each estimated death. Ford decided to estimate 180 deaths, 180 serious burn injuries, 2100 vehicles lost, and calculated $49.5 million overall, a figure that would be a benefit to the company, if they put things right with the car. The estimated cost of doing so came to $137 million, for 11 million vehicles at $11 dollars per tank and $11 per unit for other modifications. So costs outweighed benefits by $87m and the value of human life was quantified as an economic commodity.

It also emerged that some evidence suggested the actual costs to correct matters were over-estimated and would have been nearer to $63.5 million. Though these did not equate to the benefits, there would seem to be a moral duty somewhere for a huge corporation like Ford, to bear the cost of $15 million. That way, utilitarian ethics, normative principles and the most good and positive consequences for most people overall would have resulted. There seems to be some form of justice in the way the benefits dwindled and the costs grew over the years, as lawsuits and penalties took millions of dollars from Ford. The company did nothing illegal in terms of design at that time; they took advantage of the cost-benefit analysis, ignored ethical principles and abused the moral aspects in utilitarianism. As Lacey (577) put it:

“The question is whether Ford and Iacocca [Executive vice president] exhibited all due care for their customers’ safety when balanced in the complex car making equation that involves cost, time, marketability and profit.”

Conclusion:

Utilitarianism, business ethics and the Ford Pinto case present a dilemma, as the theory appears to be one of moral strength and a good guideline for ethical business choice. In relating its consequential content to the Ford Pinto case, it would seem that the application of ethics had been dismissed in favour of profits, reputation and unethical practices. The theory cannot possibly be used to put a value on human life, as Ford attempted to do. The dangers in utilitarianism lie with the potential for abuse, and in abandoning the inherent principles, Ford demonstrated those dangers in action.

The decision not to rectify faults represented a denial of doing no harm, not deceiving others, justice and the rights to life and safety. Nor can the theory measure human suffering or loss, as Ford found, to its cost; it cannot predict consequences accurately or quantify benefits and harms, simply by applying a cost-benefit measure. In considering that the ends justify the means, another aspect of utilitarianism, and determining the pain of actions, volume and not ‘who’ suffers, has significance. In principle, the evaluation of good and bad consequences provides one way of ensuring that companies consider the morality of their actions, which may suggest that utilitarianism can be a positive influence for ethical business practice as long as the true costs can be accurately determined and the right value placed on human life.

Fieser, J. Ethics: Consequentialist Theories Internet Encyclopaedia of Philosophy2006. University of Tennessee at Martin. 24 April 2007 http://www.iep.utm.edu/e/ethics.htm Hinman, L. M. Ethics: A Pluralistic Approach to Moral Theory: Chapter 5: The Ethics of Consequences: Utilitarianism. 3rd Edition. Belmont, CA:Wadsworth: 2003 Lacey, R.   Ford: Book Club Associates by Arrangement with William Heinemann Ltd. 1988 Leggett, C. The Ford Pinto Case: The Valuation of Life as it Applies to theNegligence Efficiency Argument. Law and Valuation Papers, Spring 1999 at Wake Forest University. 24 April 2007 http://www.wfu.edu/~palmitar/Law&Valuation/Papers/1999/Leggett-pinto.html

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Ford Pinto Case Study - ORGL 3322

DAILY INFORMATIONAL ARTICLES ABOUT

Business Matters

• Mar 15, 2021

Business Ethics - Ford Pinto Case Study

This week’s case analysis consists of a big automotive scandal from the 1970s, namely Ford Motor Company’s defectively designed Pinto. The Pinto had a faulty fuel tank, which often caused fires and explosions following even minor accidents. As it later turned out, executives at Ford did know about the problem, but after some analysis, they decided it was more profitable for them to not recall the faulty cars, and instead just settle the eventual lawsuits (regisuniversity.org 2013).

Now, not just in light of the Who-How (WH) framework for business ethics, but in general, Ford’s decision to ignore this issue was completely unacceptable. Nobody should design, manufacture, and sell products that they know can cause harm to the customers. In my opinion, this behaviour should have been punished by law as homicide, and the executives who knew about the defective fuel tank and decided not to recall the Pintos should have gone to prison. In the following paragraphs, I will explain why.

Every organization in order to be trustworthy, loved, respected, transparent, and ultimately successful, has to do business ethically. This means that the decisions they make regarding their business conduct have to be, first of all, compliant with local and federal laws, secondly, advantageous for customers and employees, and third (becoming more important nowadays), environmentally friendly. The most widely used guideline for business ethics is the WH framework, which encompasses three factors: whom does the action affect, what is the purpose of the action, and how the ethical decisions are made (Kubasek 2016).

(Photo: Joe Haupt - Flickr)

In Ford’s case, the W in this framework (whom it affects) was the problematic part. The “whom” here refers to customers and shareholders as well, and the interests of these two groups collided. On the one hand, there was the safety of the customers, on the other, there was the opportunity to lose three times less money. The executives went with losing less money, even if that meant the possible death of multiple people. The H in the framework refers to how to make an ethical decision, and there are multiple ways to guide businesses in this issue. The first one is the Golden Rule, which is basically implying to behave with others in a way we would like others to behave with us. Another guide is the television test, which makes people imagine what the public opinion about an issue would be if it was televised, or widely known. And finally, the universalization test is an exercise of imagining what the world would be like if other businesses started doing what we are about to do. Would it be a better or a worse place (Kubasek 2016)?

Referring to the W, Ford saved $90 million, but around 900 people died in vain (tortmuseum.org 2020). None of the ethical guidelines were followed. It is clear that Ford completely disregarded the WH framework when making the decision to not recall the Pintos. They also broke the law by willingly letting people die in order to make more profit and by failing to warn them of the dangers. Their actions also clashed with basic human rights that are not just federal, but global.

The Ford Pinto scandal was of such great measure that Ford was forced to completely discontinue the Pinto line and was also punished to pay what amounts to around $15 million today (tortmuseum.org 2020). An amount I believe is ridiculously low for what they have done. The bigger punishment to them probably was the disastrous public relations setback.

This example, however, is a great lesson on how important business social responsibility is, especially in this digital age. Now way more people have access to news and information than ever before, so any bad news leaked about a company can mean the end of that organization. Almost 50 years passed since the 1970s, and since then the United States passed several bills that protect customers. Global and federal competition is also greater than ever, so if a company wants to be successful, they need to be the best, not just quality-wise, but ethically as well.

Regis University (2013). Ford Pinto: A Pre Law Case-Study in Product Liability - Regis University College for Professional Studies: Faculty Pre Law Blog. (2013, June). http://www.regisuniversity.org/ford-pinto-a-pre-law-case-study-in-product-liability/

Kubasek, N. (2016). Dynamic business law: The essentials 4th edition. https://www.vitalsource.com/products/dynamic-business-law-the-essentials-nancy-kubasek-v9781260159264

Tort Museum of Law (2020). The Ford Pinto. (2020, April). https://www.tortmuseum.org/ford-pinto/

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Journal of International & Interdisciplinary Business Research

Home > Journals > JIIBR > Vol. 5 (2018)

Article Title

When Making Money Is More Important Than Saving Lives: Revisiting The Ford Pinto Case

Stuart Strother , Azusa Pacific University Follow

10.58809/SAJH3330

Despite a long tradition of ethics training in business colleges, managers commonly make unethical business decisions. This paper reports a five-year study of ethical decision making of business students ( n = 192). In an undergraduate microeconomics course, students were presented with financial data from the infamous Ford Pinto case where defective engineering, coupled with unethical management behavior, resulted in a number of fiery fatalities. Facing the decision to repair the cars or pay the estimated costs of lost wrongful death lawsuits, 56.8% of students chose to pay for the deaths. This paper describes the classroom experiment and uses logistic regression to compare the characteristics of the group choosing the correct ethical decision (repair the cars), with the group choosing the incorrect ethical decision (pay for the deaths).

Recommended Citation

Strother, Stuart (2018) "When Making Money Is More Important Than Saving Lives: Revisiting The Ford Pinto Case," Journal of International & Interdisciplinary Business Research : Vol. 5, Article 11. DOI: 10.58809/SAJH3330 Available at: https://scholars.fhsu.edu/jiibr/vol5/iss1/11

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