Ford Pinto Recall Case Study PDF

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The assignment entailed discussing the Ford Pinto Recall case study and answering different ethical questions including:
1. Do you think Ford analyzed the problem of redesigning the Pinto fuel tank safety in a reasonable way? Why?
2. The choice to move forward with the projection of 18...

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Running head: Ford Pinto Recall Case Study

Ford Pinto Recall Case Study Celine Ross Colorado State University BUS 220

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Ford Pinto Recall Case Study

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Ford Pinto Recall Case Study

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Do you think Ford analyzed the problem of redesigning the Pinto fuel tank safety in

a reasonable way? Why? Analyzing a business problem is critical, and I disagree Ford Motor Company thoroughly examined the problem related to redesigning their vehicles’ fuel tank reasonably. The car manufactured by the company led to the loss of lives and severe injuries to individuals caused by the fuel tank faulty installation. The company knew the vehicle they manufactured presented severe fire risk when hit from the rear regardless of whether involved in a low-speed collision. The company was faced with the decision of whether to delay the production or redesign the fuel tank. They conducted a cost-benefit analysis that outlined the benefits and costs. Usually, in costbenefit analysis, when benefits exceed costs, the project is viable. The projected cost of improving safety measures for Pinto ranged between $5-$8 per car; however, the company argued that such cost would outweigh benefits (Hester & Adams, 2017, pp.351-365). According to Fatalities Associated with Crash-Induced Fuel Leakages and Fires report, the CBA conducted by Ford did not concern Pinto only, but it primarily concerned fuel leakages in roller-over accidents.

Engineers in the company projected technical improvement costs that would prevent fuel leakages would be $11 per vehicle. Estimates indicated that the number of individuals killed by car fire accidents was approximately 180. NHTSA estimated $200,275 is lost in the society every time there is car accident death. This cost related to funeral costs, hospital bills, medical costs, legal expenses, employers’ losses, and other indirect and direct costs. Ford estimated the value as $200,000, which was used to value human life, and make computations. As a result, CBA

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analysis produced $49.5 million in benefits as compared to $137 million in costs (Hester & Adams, 2017, pp.366-384). Hence, for decision-makers, making redesigning the fuel tank would not be a viable project. Costs outweighed benefits and reports recommended against improvements in Ford. As a result of the management not to improve safety measures, numerous deaths and injury cases were reported, and Ford was sued on several occasions. How Ford analyzed, the whole problem was totally wrong, as human life cannot be valued at $200,000. In addition, no one in their right mind would sacrifice their lives for only $200,000. It was also ethically and morally wrong to value human life in monetary terms, and also putting financial gains above human safety. For such reason, the company lost substantial amounts in lawsuits compensation due to the low value they attached to human life.

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The choice to move forward with the projection of 180 deaths was motivated to

maintain a competitive advantage, which led to a consequence of lowered consumer confidence in Ford Motor Company that demonstrated dollars and profit ahead of safety and lives. Should questions involving the risk of loss of human life be analyzed in a costbenefit analysis? After all, don’t life insurance companies do this all the time in pricing life insurance policies to older versus younger customers? Cost-benefit is an essential technique for many businesses. From a moral point of view, businesses must not use CBA to put dollar value in human lives. The only role CBA plays is proving that safe cars are worth much; however, the $11 needed to make consumers safe were neglected, which is unacceptable. CBA can be enhanced by ensuring businesses undergo various checklists before the analysis can be carried out, and definitely, one of them is not comparing dollar value with human lives (Strother, 2018, pp.166-181). According to Kant, it is wrong and immoral to value human life in monetary terms. Kant proposed that humans should never be

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treated as means but as an end. As a result, Ford Pinto placing a monetary value on people makes individuals means of making profits. Also, Kant argued that actions could be morally right when they can be universalized, but executives in Ford did not want to die in car crashes; hence their decisions could not be universalized.

Insurance companies typically use economics concepts to quantify the benefits of avoiding fatalities. The value of life is considered the value of preventing fatalities and also infers the cost of averting fatalities. Therefore, insurance companies do not calculate the costbenefit analysis of human lives. There are some things people consider to be priceless; for instance, some say they cannot sell their voting rights. Thus, it is a preposterous idea to put a price on someone’s life. For Ford Pinto to tell people their lives were worth $200,275 illustrates this point. However, economists believe everything has a value, which diminishes the strength of this idea. The National Highway Traffic Safety Administration endorsed the $200,275 value on human life adopted by Ford Pinto (Smith, 2016, p.197). We cannot criticize Ford for human value, but using numbers and CBA can be highly criticized.

Given the current technology, it is morally wrong to sell fault products. Most carmakers are usually concerned more about profits than the safety of consumers. For instance, Ford tried to push their production timelines to deal with market forces. Thus, the did not pay much attention to human safety, as the location of the fuel tank was questionable as it led to a fire. For that reason, the company faced numerous lawsuits leading to product recall (Schoeman, 2015, pp.4041). Consumer’s safety and lives must surpass interests and innovations, as well as monetary gains.

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Because the $137 million costs of the safety improvement outweighed the $49.5

million benefit of the redesign, Ford decided to push ahead with the original design. How would you apply ethical business principles/practices in this problem from a financial executive perspective, calculating realized and expected rates of return and risk? How would you persuade shareholders in making decisions from a financially ethical point of view? The expected rate of returns can be computed using ROI as net benefits/total costs. In this case, expected returns would be $49.5/$137 =36.13%. This value is high for companies to disregard profitability motive. For businesses, the primary motive is to make profits. From a financial perspective, Ford utilized the principle of cost-benefit analysis as well as affordable cars for consumers to rationalize their decision. Ford primarily cared about business profits, and since they care more about their money, their decision lies on under egoism theory. Since they rounded off human life to $200,000, their analysis indicated $137 million costs and $49.5 million benefits, inferring that the company’s implementation of safety enhancements would entirely outweigh the benefits.

For businesses, profits are vital since the company’s dominant view is stockholder’s view. Businesses have a duty to increase profits for stockholders’ benefits and are not obligated to save lives unless required by the law. Ford Motor Company followed the law and were not obligated to make their vehicle any safer than required by the laws. The social responsibility for any business is to stakeholder’s theory. However, when company executives are facing moral dilemmas, their decisions rely on their ethical standards that have a background on philosophy like teleology and deontology. In addition, observing Christianity or Judaism values influence one’s observance to choose between good and evil (Schwartz, 2016, pp.755-760). Deontology encourages correct decisions and obligations, rules, and duties are defined by high power. Acts

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are perceived as morally right or wrong in themselves. Kant’s ideologies infer moral obligations are at all times binding even in business decision making, implying company executives should make the right decisions irrespective of the situation.

Despite finance managers getting orders from their superior, focusing on profit maximization, or avoiding being fired, they should make the right choices always. Teleology focuses on “the greatest good for the greatest number.” Teleology goes with utilitarianism idea, for example, were officials in Ford declined to develop further safety measures. Teleology may inspire company executives to considers profits and costs more than human lives (Schwartz, 2016, pp.761-776). If Ford developed additional safety measures, their vehicles would have been expensive to manufacture. Contrary, excluding safety measures, would lead to profit maximization. Finance executives are required to adhere to ethical business practices governed by respect and concern for others, honesty, law-abiding, fairness, and trustworthiness. The Christianity concept offers insights into ethical and moral business behaviors. First, individuals will always be accountable to God as a result of their acts. In addition, Jesus’s teachings emphasized, “No man can serve two masters; for either he will hate the one and love the other…ye cannot serve God and mammon” (Matthew 6:24, KJV). Also, the Colossians were cautioned by apostle Paul, “And whatsoever ye do, do it heartily, as to the Lord, and not unto men” (2: 23, KJV). If the company personnel in Ford held themselves answerable to God rather than to shareholders or executives, they probably would not have released defective products in the market. Another Christianity principle is the Golden Rule related to business ethics. Jesus’s teachings state, “Therefore all things whatsoever ye would that men should do to you, do ye even so to them” (Matthew 7:12, KJV). Therefore, the company personnel with knowledge regarding

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the dangers of their vehicle would possibly avoid purchasing such vehicles themselves. However, the employees decided to sell to other consumers hence defying the Golden Rule. In this regard, stakeholders should make decisions based on ethical principles, rules of teleology and deontology, and Christianity principles, as discussed above.

References Hester, P. T., & Adams, K. M. (2017). Ford Pinto Case Study. In Systemic Decision Making (pp. 351-384). Springer, Cham. Schoeman, C. (2015). Don’t let the need for speed erode ethics: ethics-time management. HR Future, 2015(Nov 2015), 40-41. Schwartz, M. S. (2016). Ethical decision-making theory: An integrated approach. Journal of Business Ethics, 139(4), 755-776. Smith, B. W. (2016). The Trolley and the Pinto: Cost-benefit analysis in automated driving and other cyber-physical systems. Tex. A&M L. Rev., 4, 197. Strother, S. (2018). When Making Money is More Important Than Saving Lives: Revisiting the Ford Pinto Case. Journal of International & Interdisciplinary Business Research, 5(1), 166-181....