...Utilitarian Analysis The Case of the Ford Pinto The Ford Pinto first rolled off the Ford Motor Co. production lines in 1971 and stayed in production in its original state until 1978. The vehicle engineers were tasked to develop the vehicle and put it into production within 25 months, which was nearly half the time in which the average new vehicle is put into production. The Ford engineers were aware that rear-end impact safety tests were pretty standard at the time, but they were not required by the National Highway Traffic Safety Administration at that time. The vehicle was rushed into production anyway to compete with foreign compact cars being developed by the Japanese during that time period. Only after the vehicle was made available to the public was the vehicle tested. The Ford Pinto ended up failing the rear safety test, due to the fact that it was susceptible to fire from rear end collisions. Ford engineers determined that the problem could be resolved by installing a baffle, which protected the gas tank from being punctured during rear-end collisions. The part would have only cost between $6.65 and $11 to be install, but the Ford Motor Co. determined through cost-benefit analysis that the cost of lawsuits would be less than the cost of installing the baffle and decided not to install the baffle. Ford Motor Co. also failed to notify customers of the problem and offer them the option to have the baffle installed. Between 1971 and 1978 the Ford Pinto would...
Words: 1565 - Pages: 7
...Abstract Ford Motors used to be a prominent automobile company in the past. The company is on the verge of bankruptcy because of unexpected/unusual expenses incurred in the form of changes in investment and extinguishment of debt liabilities. The company should devise a policy that curtails the cost of sales, particularly, structural cost. Ford needs vast managerial and structural changes. The company needs to revise its price patterns, designs and make new and attractive products for the ultimate user, mainly, middle-class groups. Ford also needs expansion in Europe and Mexico. Keywords: Ford motors, cost analysis, microeconomics, demand, recommendation Introduction Purpose Microeconomics is that the branch of economic science that analyzes the behavior of individual shoppers and corporations to do and perceive the decision-making method of each business and households. Economics is concerned with the interaction between individual consumers and sellers also because the factors that influence the alternatives created by both consumers and retailers. Especially, economics focuses on patterns of providing and demand and, therefore, the determination of worth and output in individual markets. The aim of this paper is to clarify however economics influences the Ford Motor Company. History Henry Ford was born on June 30th, 1863. Ford saw his first car when he was 12 years old. Henry and his father were riding into Detroit during that time span. At...
Words: 2272 - Pages: 10
...General Motors Co Strategic and Financial Analysis ADVANCED CORPORATE FINANCE April 22, 2012 Authored by: Ana Romero, Roshan Picardo, Carlos Castro, Shikhar Agarwal 0 General Motors Co Strategic and Financial Analysis Executive Summary This report provides an evaluation of strategic and financial evolution of General Motors Company (GM) in the last ten years. Events like the global economic recession lead to a deep restructuring of the firm, filling for bankruptcy and a government bailout. The report provides an analysis of GM’s business model, products, the markets it is competing in, the global automotive and manufacturing industry and it also assess its attractiveness for incumbents and new entrants is also With a brief history of GM we evaluate its reaction to the global recession. We compare their business model before, during and after the recession, comprising the strategic and financial implications of their restructuring plan. We provide results from this restructuring, including improvements in GM’s financial ratios like ROA (from 0.05 in 2010 to 0.07 in 2011) and ROE (from 0.23 in 2010 to 0.25 in 2011). While the recession significantly affected GM, it also affected the rest of the automobile industry, including their American competitor Ford Motors. We compare the main differences between these two important companies and analyze the way they reacted to the recession. We also observe the approach that Ford has taken to recovery, in terms of governance...
Words: 11121 - Pages: 45
...Introduction Ford Motor Company’s success is based upon flexibility, innovation, and the ability to provide affordable vehicles for the masses. Initially the company designed one model car (the Model A), that could be mass produced by an assembly line approach. As a result, the two-cylinder, eight horsepower engine was affordable at the price of $850.00, in 1903. In 2008, the Ford Motor Company established its “One Ford” business model, which was a comprehensive plan to sell numerous models globally. This approach expanded the company’s commercial opportunities from models that were designed with the local market in mind. So, although Ford escaped the bankruptcy and restructuring that befell its American rivals General Motors and Chrysler in 2009, the automaker still found itself needing to change its business model to remain solvent and to respond to changing customer tastes. Therefore, Ford’s business plan included bringing additional models to North America, such as its B-Max crossover, along with developing global engine and transmission technologies. Today, Ford continues to offer a large portfolio of reliable, affordable automobiles at reasonably competitive prices and remains as one of the industry leaders. Background The Ford Motor Company was started in 1903 by Henry Ford in Dearborn, Michigan and made its first sale, a Model A, on July 15, 1903. Some major milestones experienced by the Ford Motor Company happened in 1922 when Edsel Ford urged his father to purchase...
Words: 3611 - Pages: 15
...Business Analysis Final Shannon Roundtree MGT 521 Dr. Maxwell Aug 1st, 2011 This is the final business analysis for Ford Motor Company before making the decision to invest in the company. The first section discussed the SWOT analysis, which determined the strengths, weaknesses, opportunities, and threats of the company. The second section discussed the financial health of the company, which determined if Ford is a good company to invest in and how it recovered during the recession. Topics that will be discussed include: • How recent economic trends are influencing the business • Ford strategies for adapting to changing market environments • Tactics Ford has implemented or could implement to achieve their strategic goals • The role human resources management plays in helping the company achieve its business goals How Recent Economic Trends are Influencing Ford Motor Company The recession has been one of the most challenging hardships for the United States. Due to this hardship, people are skeptical to spend large amounts of money. These people do not see a recovery occurring as many others are still unemployed. Banks are currently lending to consumers who have high credit scores, and the penalties for late payments are skyrocketing. Unlike many other companies, Ford has been able to recover and excel among its competition. “The company continues to lobby for transportation and infrastructure funding and has taken an active role in advocacy for government...
Words: 1135 - Pages: 5
... Henry Ford incorporated Ford Motor Company in 1903 at Dearborn, Michigan, USA and is known to have adapted practices that were not popular in those days. The Car Maker is known for their famous “Model T” and the unique innovation of interchangeable parts in moving assembly lines that makes it possible to assemble cars at low cost and high reliability. Ford Motor established an impressive financial track record almost throughout the 20th Century (barring the record loss of $7 billion in 1992) till the Millennium started (Alan Mullally, 2012). Ford motor Company is the second largest automobile company in the world representing a $164 billion multinational empire. Ford is primarily known as a manufacturer of cars and trucks but also operates Ford Motor Credit Company which generates over 3 billion in revenues. Ford also owns The Hertz Corporation which is the largest car rental company in the world. Ford has vehicles under the name of Ford, Lincoln, Mercury, Jaguar, Volvo, Land Rover, Aston Martin, and has a controlling interest in Mazda Motor Corporation. Ford Motor Company incurred a financial loss of about 5.45 billion dollars in 2001 and never really recovered confidently after this slump. It is said that the Ford 2000 initiative of Lord Alex Trotman was the primary reason for financial downturn of Ford Motor Company. The failure of Lord Trotman’s Ford 2000 strategy was primarily due to the vision of centralized...
Words: 3215 - Pages: 13
...Ford's Risk/Benefit Analysis The main controversy surrounding the Ford Pinto case was The Ford Motor Company's choices made during development to compromise safety for efficiency and profit maximization. More specifically, it was Ford's decision to use the cost/benefit analysis detailed in section 11 to make production decisions that translated into lost lives. During the initial production and testing phase, Ford set "limits for 2000" for the Pinto. That meant the car was not to exceed $2000 in cost or 2000 pounds in weight. This set tough limitations on the production team. After the basic design was complete, crash testing was begun. The results of crash testing revealed that when struck from the rear at speeds of 31 miles per hour or above, the Pinto's gas tank ruptured. The tank was positioned according to the industry standard at the time (between the rear bumper and the rear axle), but studs protruding from the rear axle would puncture the gas tank. Upon impact, the fuel filler neck would break, resulting in spilled gasoline. The Pinto basically turned into a death trap. Ford crash tested a total of eleven automobiles and eight resulted in potentially catastrophic situations. The only three that survived had their gas tanks modified prior to testing.55 Ford was not in violation of the law in any way and had to make the decision whether to incur a cost to fix the obvious problem internally. There were several options for fuel system redesign. The option most seriously...
Words: 428 - Pages: 2
...Ford vs Dell Executive Summary FORDs current method of controlling all aspects of the manufacturing is outdated and is limiting the corporation’s annual results. In order to stay competitive and become efficient again, FORD needs to re-evaluate their current supply chain and implement key portions of DELLs vertically integrated supply chain model. A proper implementation will increase information flow between suppliers, departments and dealers resulting in a reduction of redundant inventory and focus towards just in time inventory. All of these factors will further drive up the already US industry leading profit margin per vehicle. In order to accomplish these goals FORD needs to refocus the Purchasing department’s responsibilities, consolidate and develop suppliers that deliver finished high level components and increase the information flow across all points of the supply chain. These steps will help to introduce a more pull-based system. Contents Issue identification 1 Environmental and root cause analysis 2 Alternatives/Options 3 Recommendations 4 Implementation 5 Monitor & Control 6 Issue identification • Current order to delivery (OTD) is more than 60 days. • Management of large supplier network. • Utilization of IT is lacking. • Purchasing isn’t integrated into Product development. • Independent dealership network has resulted in FORDs loss of control over customer service experiences. This network also...
Words: 410 - Pages: 2
...Case analysis – Ford Pinto a. Brief Summary: In 1970, Lee Iacocca, the president of Ford Motor Co., decided to introduce a new car which is called Pinto. The final product will be produced at or below 2,000 pounds and sell for $2,000 or less. The design of Pinto was started in 1968, but the production was begun at 1970. Moreover, although Pinto project was accepted and approved by Ford’s Product Planning Committee, Many engineers of Ford resign from their supervisors, direct or indirect. There are several problems associated with Pinto that it cannot pass the crash test, and it is easy to burst into flames when rear-ended at 21 miles per hour. However, Ford’s many reports were refused the chain of command to report and repair those problems. Ford can make some remedies, such as mounting the gas tank above the rear axle, and installing a rubber bladder in the gas tank. However, the Cost-Benefit Analysis of Ford showed that the installation of rubber bladders were not cost-effective. In addition, the analysis was a part of lobby effort to against for crash test. b. Analysis of this case (five stakeholders: Ford Motor Co., shareholders of Ford, employees of Ford, customers, and government): 1. Profitable? – In the short-term, the decision is profitable for Ford and its shareholders. The reason is that if it installed the rubber bladder in the gas tank, the installation costs would exceed the death costs. Obviously, the death costs were as same as the benefits of Ford and...
Words: 662 - Pages: 3
...THE FORD PINTO CASE: THE VALUATION OF LIFE AS IT APPLIES TO THE NEGLIGENCE-EFFICIENCY ARGUMENT Christopher Leggett Law & Valuation Professor Palmiter Spring, 1999 Abstract Text of Paper Abstract The cases involving the explosion of Ford Pinto's due to a defective fuel system design led to the debate of many issues, most centering around the use by Ford of a cost-benefit analysis and the ethics surrounding its decision not to upgrade the fuel system based on this analysis. ISSUE Should a risk/benefit analysis be used in situations where a defect in design or manufacturing could lead to death or seriously bodily harm, such as in the Ford Pinto situation? RULE There are arguments both for and against such an analysis. It is an economically efficient method which has been accepted by courts for numerous years, however, juries may not always agree, so companies should take this into account. ANALYSIS Although Ford had access to a new design which would decrease the possibility of the Ford Pinto from exploding, the company chose not to implement the design, which would have cost $11 per car, even though it had done an analysis showing that the new design would result in 180 less deaths. The company defended itself on the grounds that it used the accepted risk/benefit analysis to determine if the monetary costs of making the change were greater than the societal benefit. Based on the numbers Ford used, the cost would have been $137 million versus the $49.5 million...
Words: 9256 - Pages: 38
...Project Part I, Strategic Business Unit Proposal: The Ford Motor Company Strategic Business Unit Proposal: The Ford Motor Company Industry Background The Automotive Industry is one of the most important industries in the economic sector worldwide. Most of the industrialized countries produce their own brand of cars and/or trucks. According to the International Organization of Motor Vehicle Manufacturers statistics, during the year 2010, over 78 million of cars and trucks were produced in over 50 countries worldwide, with China, Japan and the United States as the world top three producers. The Automotive Industry started in Germany with the introduction of the gasoline power internal combustion engine in 1876 by Nikolous Otto (the same type of engine that is used today). In 1885 Karl Benz started the first production of an automobile, a three wheeler that was delivered for the first time in 1886. In Springfield Massachusetts, the Duryea brothers, Charles and Frank, were fascinated with Karls Benz’s idea of a “horseless carriage” and in September 1893, they successfully road tested their automobile on the streets of Springfield. The Duryea Motor Wagon Company became the first automobile production factory in America and by 1896 they had sold a grand total of 13 “horseless carriages” (Wright R.A, 1996). After the Duryea Brothers, many others followed with the most famous being Henry Ford, who established The Ford Motor Co. It was said that at one point America had over...
Words: 2347 - Pages: 10
...Review #1: Ford Pinto 1.) FACTS • Ford was aware of gas tank defects on their Pinto model • Ford ignored the safety concerns, positing “safety doesn’t sell” (p. 66) • Ford based their decision off a cost-benefit analysis o Determined the “cost” of trunk alterations outweighed the “cost” of enhanced safety • There were over 40 incidents involving Pinto passengers dying or being severely maimed 2.) ETHICAL ISSUES • Is it morally right to sell a car with known, potentially fatal, defects? 3.) PARTIES • Ford Motor Company • Ford Management • Ford Design Team • Ford Quality Control • Ford Pinto Drivers 4.) CONSEQUENCES • Utilitarian Principle: Ford’s decision should have maximized the benefits and minimized the harm for consumers. • The standard implicit in their decision was that since it was only a minority being injured, and they would reap a significant profit (with a majority of consumers being unaffected) their decision was permissible. • Potential Consequences by party: o Ford Motor Company – potential public backlash/potential legal action/potential monetary penalties/potential loss of credibility with the public o Ford Management – potential loss of profits to rival manufacturers/potential jail time/potential loss of position/potential loss of credibility o Ford Design Team- potential job loss/potential compensation penalties/potential jail time o Ford Quality Control – potential loss of credibility/potential loss of jobs o Ford Pinto Drivers...
Words: 616 - Pages: 3
...------------------------------------------------- General Motors I. Background and Industry General Motors, along with its competitors, are part of the Automotive Manufacturer (Major) industry of the Consumer Goods economic sector. Companies in this industry make passenger cars and light trucks, as well as chassis for those vehicles. Demand is driven by employment and interest rates while the profitability of the individual company depends on manufacturing efficiency, product quality, and affective marketing. Large companies have economies of scale in purchasing and marketing while smaller companies can compete by focusing on specialized markets. The U.S. industry alone is highly concentrated with the top four companies account for about 75 percent of sales. General Motors Company is one of the world’s largest auto manufacturers which designs, manufactures, and markets cars, crossovers, trucks, and automobile parts worldwide. It operates in five segments: GMNA (GM North America), GME (GM Europe), GMIO (GM International Operations), GMSA (GM South America), and GM Financial. Financing activities are primarily conducted by General Motors Financial Company. The company markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Opel, Holden, and Vauxhall brand names, as well as under the Alpheon, Jiefang, Baojun, and Wuling brand names. It also sells cars and trucks to dealers for consumer retail sales, as well as to fleet customers, including daily rental car...
Words: 3429 - Pages: 14
...Ford Value Chain: The graphic above illustrates the major stages of our value chain and identifies key impacts, stakeholders, and examples of value we create at each stage. The value chain assessment was revised and updated for the 2013/2014 report as part of the “materiality analysis” which prioritizes the most significant issues in Ford’s value chain. (Circled in red are the areas in which Ford sees as most significant in adding value) http://corporate.ford.com/microsites/sustainability-report-2013-14/blueprint-value.html (Ford value chain and its impacts) Each link in a value chain consists of a bundle of value activities, performed by a firm to “design, produce, market, deliver and support its product”. ‘Value activities are the discrete building blocks of competitive advantage’. The value chain of the Ford Motor Company is comparable to that of competing manufacturers in the automobile industry. Many years of increased arbitrary demands on suppliers has led to poor supplier relations and so the 100 year-old company is taking a new approach to reinvent its’ value chain. ------------------------------------------------- Porter, M., “Competitive Advantage: Creating and Sustaining Superior Performance”, Free Press, New York, and Collier Macmillan, London, 1985; 2nd edn, Free Press, London and New York, 19 References Automotive Industries. Norman Martin. April, 2005. December 2007. Ford Wages War on Waste. http://findarticles.com/p/articles/mi_m3012/is_6_179/ai_55055336 ...
Words: 1159 - Pages: 5
...Risk Analysis Project Contemporary Auditing By: Diane Lovett Table of Contents Industry Overview………………………………………………………………….2 Corporation: History………………………………………………………………………………5 Mergers and Acquisitions ..……………………………………………………….6 Directors & Executive Officers ..…………………………………………………6 Brief Overview………………………………………………………..……………6 Business Segments…………………………………………………………………7 Competition…………………………………………………………………………9 Governmental Standards………………………………………………………….10 Corporate Governance ...…………………………………………………………11 Legal Proceedings…………………………………………………………………11 Trends & Strategies……………………………………………………………….12 Risks………………………………………………………………………………..13 Risk Factors……………………………………………………………………….15 Analysis of Financial Statements and Ratios…………………………………..16 Conclusion…………………………………………………………………..…….17 Bibliography………………………………………………………………………19 Attachments: A – Income Statement for 5 Years B – Balance Sheet for 5 Years C – Horizontal Analysis of Income Statement D – Horizontal Analysis of Balance Sheet E – Company’s Rations compared to Industry Averages Industry Overview: The automobile industry is comprised of companies that design, manufacture, engineer, assemble, and market automobiles and motorcycles and provide leasing and financial services. Industry performance is closely linked with economic performance. The auto industry represents one of the largest segments of the U.S. economy. The U.S. industry is dominated by the Big Three, General Motors, Ford Motor Company...
Words: 3250 - Pages: 13
