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 its shareholders in the short-term, so the costs would exceed the benefits. Consequently, the decision was appropriate in the short-term. On the other hand, in the long-term, it is not profitable because the death rate will grow yearly, then the costs of deaths will grow quickly, finally it will exceed the installation costs. Moreover, Ford will also bear other indirect costs, such as