Exploding Ford Pinto
In the textbook Business and Society, by Anne T. Lawrence and James Weber, a crisis is defined as any event with the potential to negatively impact the health, reputation, or credibility of an organization. More specifically, a corporate crisis is a significant business disruption that generates extensive news media coverage (423). Ford Motor Company faced a corporate crisis in 1970, shortly after the introduction of its newest vehicle, the Ford Pinto (“Ford Pinto Fuel-Fed Fires” 1).
Lee Iacocca, the President of Ford Motor Company at the time, decided that in order to keep up with the increasing demand for foreign, imported cars, his company needed to create a small vehicle that was very inexpensive. His specifications for the soon to be called Ford Pinto were later known as the “Rule of 2,000.” Iacocca stated that the new car had to weigh less than 2,000 pounds and cost less than $2,000 (Hearit 22-23). Ford’s car designers began building the Pinto, but in order to keep its weight under 2,000 pounds, they positioned the gas tank above the car’s rear axle. This meant that a rear-end collision could rupture the gas tank, causing it to explode (“The Ford Pinto Case” 1).
Iacocca suggested the use of cost-benefit analysis to determine whether or not to fix the gas tank, which would be hazardous to not only the driver and the passengers of the Pinto, but to surrounding vehicles as well. The chart on page three was taken from a Ford inter-office memo dated September 19, 1973. It was published by the popular magazine, Mother Jones, and was used in the prosecution of Ford Motor Company.
This chart shows that it would cost $137.5 million to fix the gas tank in the cars and light trucks, and only $49.5 million to leave the vehicles as they were and pay any law suits that arose from burned vehicles, serious burn injuries, and burn deaths. This analysis suggests that the cost of repairing the vehicles significantly outweighs the benefit of their improved safety features; as a result, the design change was not approved (Viscusi 570). The decision to not make design changes to the vehicles was Ford Motor Company’s biggest mistake. Not only did this analysis represent an extreme lack of social responsibility, but it also demonstrated the company’s lack of ethics; Ford Motor Company had put a price on the value of human life.
The first problems with the Ford Pinto appeared in April of 1974, when several attorneys reported three deaths and four serious injuries resulting from explosions and the resulting fires (“Ford Pinto Fuel-Fed Fires” 1). These reports prompted the Center for Auto Safety to petition the National Highway Traffic Safety Administration to recall Ford Pintos due design defects in the gas tanks that allowed gas seepage and fires in low to moderate speed collisions. According to The Center for Autosafety, the petition reached the NHTSA office, but faded into the background, remaining untouched until 1977 (1).
In 1972, Lilly Gray was driving with Richard Grimshaw when her Ford Pinto suddenly stalled in the middle of a highway. The Pinto was hit from behind by another vehicle, causing the gas tank to rupture and explode. Lilly Gray was killed in the crash, and Richard Grimshaw suffered very severe burns (Viscusi 569). This case did not appear in court until late 1977. In the meantime, Mark Dowie of Mother Jones Magazine published an article exposing the design defects in the Ford Pinto gas tanks and shedding light on a number of internal documents from Ford Motor Company that showed the cost-benefit analysis that had been performed (“Ford Pinto Fuel-Fed Fires” 1). Soon after the publication of the article, Grimshaw was awarded $2.5 million in compensatory damages and also received $3.5 million as a punitive award in court (Viscusi 569). The publication of the article drove the Center for Auto Safety to resubmit its claim against the Ford Pinto. Finally, the NHTSA had tests done on the Ford Pintos created between 1971 and 1976; the tests proved that the gas tanks were unsafe (“Ford Pinto Fuel-Fed Fires” 1). In May of 1978, after an incredible amount of press coverage and a drastic decrease in Ford’s sales, the Department of Transportation announced that the Pinto fuel system was unsafe and called for a recall (“Ford Pinto”).
On June 9, 1978, Ford Motor Company recalled 1.5 million Pintos. Unfortunately, the company’s reputation had already been shattered, and many of its key people in the creation of the Pinto were brought up on criminal charges. Ford Motor Company did absolutely nothing right during this disastrous chain of events. Many experts in the field of crisis management recommend that companies create a crisis management plan in case of an unforeseen crisis (Lawrence, Weber 434). Ford Motor Company had no such plan in place, and therefore, was completely and utterly unprepared for what would happen next.
The way that Ford Motor Company handled the Pinto crisis is a perfect example of what not to do. The crisis could have been avoided very early on in the production of the Pinto. First, Iacocca made a mistake in creating “The Rule of 2,000” because rules are not meant to be broken. Instead of telling his employees that the car absolutely needed to weigh less than 2,000 pounds and cost less than $2,000, Iacocca should have used his “rule” as a goal. That way, if the car designers exceeded the weight limit or cost by a small margin, modifications could have been made and there would not have been any problems.
The second mistake was made when Iacocca neglected common sense and ethics, and allowed his company to use cost-benefit analysis to determine whether or not to make critical safety changes to the vehicles. The safety of a vehicle’s passengers is the most important aspect to consider during its creation; if the vehicle is not safe, changes must be made. This was not the only issue though. The true issue lied within the cost-benefit analysis. The employees who drew up the analysis placed a value on human life. Even more disconcerting is the fact that no one in the company who looked at the analysis criticized it. When all was said and done, the analysis suggested that the most profitable choice would be to not make changes to the vehicles and just sell them as they were.
Ford Motor Company’s final mistake was not recalling the Pinto soon enough. When Ford heard about the first death related to the Pinto, the company should have immediately ordered a recall of all Ford Pintos between the year 1971 and 1976. Instead, Ford did nothing because profits were still steadily increasing from Pinto sales. The recall did not come until the National Highway Traffic Safety Administration’s test results of the Ford Pinto hit the news. The results caused a great deal of negative publicity, which led to a severe drop in Ford Motor Company’s sales (“The Ford Pinto Case” 1). By this time, more than fifty people had been killed in accidents involving a Ford Pinto. It seemed that Ford was more interested in making profits than protecting its customers.
The Ford Pinto crisis serves as a great example of why companies should institute crisis management plans. The idea of these plans is to be prepared for the worst, so that if something occurs, everyone in the company knows what to do. The first step in creating a crisis management plan is establishing an internal communication system; key employees need to be alerted and be ready to address any issues that arise (Lawrence, Weber 434). The next step is to communicate quickly, but accurately; this means that the company should tell the truth about what has happened and how they are going to remedy the situation. The third step is to let the public know what they company is doing about the problem through mediums like the internet. The fourth step is to do the right thing, meaning that the company needs to take responsibility for its actions and work towards a solution to the problem. The final step in a crisis management plan is to follow up and help anyone affected by the crisis.
Ford Motor Company did not follow any of the steps of a crisis management plan. Ford did fix the gas tanks on the cars that had been recalled, but did not willingly give any kind of compensation to those parties affected by the Pinto-related accidents (“The Ford Pinto Case” 2). On August 27, 2009, the Ford Pinto was mentioned on National Public Radio. A drag racer, Mike Willmon, was quoted as saying, “I tore it all down, took the engine – the infamous exploding gas tank is gone” (“Scalding A Quarter-Mile In An Electric Ford Pinto”). More than thirty years after the Pinto crisis occurred, Ford remains infamous because of its management team’s poor decisions and lack of a plan.
What Could Ford Motor Company Have Done Better?