Problem Statement

1. The preproduction design and testing normally requires about three and a half years and
arrangement of actual production some longer but the Pinto design was starts in 1968 and
production commenced in 1970; they take time only 2 years.
2. Many reports were passed up the chain of command during the design and approval
process. So no one has expressed their own opinion.
3. Ford Motor Co. wants to maximize their profit and want compete their competitors. They
do not work for societys people. So they violate business ethics.
4. They chose cost benefits analysis but cost benefit analysis does not consider any
desirable goods like pleasure, health, lives, satisfaction, and undesirable goods like pain,
sickness, death, unhappy etc.
5. Cost benefit analysis does not consider expected risk.

Answer to the specific question:

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Question no 01:
Was the decision not to install the rubber bladder appropriate? Use the 5-question framework to
support your analysis.
Answer:
The decision was not to install the rubber bladder appropriate because of the following thought:
1.
2.
3.
4.
5.

Neither possible in long term profits.

Probability of occurring accident.
Loss of companys goodwill.
If government taken stapes against company, the company would bear initial fixed cost.
They lose the Market.

Analysis of Stakeholders and Their Interests

Stakeholder

Interest

Legitimacy/

Power to

Urgency

Primary

Rank in

Legal

Affect co.

of claim

or

Importance:

Secondary

1 is highest,

Influence

3 is lowest
Lee Iacocca

Potential
success unless
loss of Market.
Probability of

Yes

Yes

High

Primary

Yes

Yes

High

Primary

Yes

Yes

High

Primary

discovery
estimated at
Robert

50%
The project

Alexander
Harold

was overseen
Vice president

MacDonald

of Car
Engineering

Shareholders

Need for
financial
success in
short run as
well as long
run.
Probability of

Yes

Yes

High

Primary

Yes

Yes

Low

Secondary

discovery
estimated at
50%
Future

They would

Shareholders

want an
accurate
assessment of
profitability to
properly assess
whether or not
to buy into the
company. If
profits
are depressed,
they might not
buy in, so the
increased
future profits
may not be

Government

relevant.
They would
want profits
accurately
stated because
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this would
result
in higher taxes
and fewer
potential

Yes

Yes

High

Primary

Yes

Yes

Low

Secondary

complaints
from other
stakeholders as
well as
customer
Customer

safety
Needs for
better safety
product in low

Media

cost
Play in
Yes

Yes

High

Primary

Competitor

important role
Monitoring
whats coming

No

No

Low

Secondary

Challenges to Proposed Action: 5-Question Approach

Question or challenge
1. Is it profitable?

Response
Ford applied a generic cost/benefit analysis to accidents based on
National Highway Traffic Safety Administration estimates of the
worth of a human life around $200,00 based on productivity
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estimates at that time and its own figures on deaths from car
accidents. The analysis is as follows:
Future productivity losses
Direct: $132,000
Indirect: $41,000
Medical Costs - Hospital: $700; Other: $425
Property Damages: $1,500
Insurance administration: $4,700
Legal and court expenses: $3,000
Employer losses: $1,000
Victim's pain and suffering: $10,000
Funeral: $900
Assets (lost consumption): $5,000
Miscellaneous accident costs:$200
Total cost per fatality $200,725
Benefits
180 burn death, 180 serious burn injuries, 2,100 burned vehicles
Unit cost: $200,000 per death, $67,000 per injury, $700 per vehicle
Total Benefit: (180 x $200,000) + (180 x $67,000) + (2,100 x
$700) = $49.5 mil.
Costs
Sales: 11 million cars, 1.5 million light trucks
Unit cost: $11 per car, $11 per truck
Total cost: 12.5 million x $11 = $137.5 million
On this analysis, installing a rubber bladder is not profitable.

2. Is it legal?

Not in legal. Ford introduced Pinto only for making profit which
is violated Business ethics. Probability of occurring accident was
involved. The life of a person would not possible to measure in
terms of money. Fords cost benefit analysis has omitted desirable
goods like pleasure, health, lives, satisfaction and undesirable
goods like pain, sickness, death, unhappy etc.

3. Is it fair?

It is not fair to the customer. Because installing a rubber bladder in

the gas tank is most needed but only for low cost production they
omitted this portions which involve customer life.

4. Is it right?

It is not right. Many companies go for cost benefit analysis but not
decide to install rubber bladder in the gas tank is not right. No one
is doing this. The new expectation for business is Business +
societys welfare. But pinto production objective was made
competition with other companies.

5. Does it provide the It does not provide the highest net benefit for all. If any accident
highest net benefit for all? have occurred many people would die and serious injuries. Many
of people depend on that people. So it may produce pain, unhappy
etc.

Question no 02:
What faults can you identify in Fords costbenefit analysis?
Answer:
Cost- benefit analysis is based on statistics. Fords cost benefit analysis has omitted some
important critical view in following thought:
1. The life of a person would not possible to measure in terms of money. But Fords cost
benefit analysis is statistical based on estimated the value of accident.
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2. Fords cost benefit analysis only considered burn death and serious burn injures but the
people who are depended on that people, they (Fords Company) have omitted in this
portion.
3. Fords cost benefit analysis has omitted desirable goods like pleasure, health, lives,
satisfaction and undesirable goods like pain, sickness, death, unhappy etc.
4. Any corporation risk associated with outcomes but cost benefit analysis does not consider
expected risk.

Question No 03:
Should Ford have given its Pinto customers the option to have the rubber bladder installed during
production for, say, and $20?
Answer:
Ford would have given an opportunity to its pinto customer the option to have the rubber blander
installed during production for $20. The company would be benefited because the cost for
installing rubber blander each car was $11 but they earn from customer $20. Customers may pay
it because Pintos design was luxurious (in that period); installing rubber blander insures that the
cars would meet a maximum safety standard etc.

Analysis
1. In 1968 in response to strong foreign competition, Ford decided to build a subcompact
car the Pinto on a 222 plan (2,000 pounds, $2,000, in 2 years) which was
decision innovative and competitive.
2. The normal time to produce an automobile is 43 months - Ford took 25 for the Pinto
which not made then efficient solving problem.
3. Many reports were passed up the chain of command during the design and approval
process. So every people would obey chain of command to sign off.
4. In pre-launch tests, Ford discovered that rear end collisions propelled the gas tank onto
the real axle, which had protrusions that ruptured the tank and caused the car to catch fire.
Yet Ford did not modify the Pintos rear axle. Because changes would have cost about
$11 per car. The decision was immoral.
5. Ford applied a generic cost/benefit analysis to accidents based on National Highway
Traffic Safety Administration. Cost benefit analysis has omitted desirable goods like
pleasure, health, lives, satisfaction and undesirable goods like pain, sickness, death,
unhappy etc and they want to measure a life in terms of money. But overall decision was
legal (many company go for Cost benefit analysis) but unethical.

Recommendation
1. For better and low cost production the Ford Company may take longer time for
preproduction and production period.
2. Passed up report would be free from chain of command because every person would have
the legal rights for giving decision.
3. Ford Motor Company could compete other company even the cost for every Pinto raise
$20. But they may provide warranty, luxurious design, potential advertising and some
time offer discount.
4. For long term profit they should install rubber bladder in the gas tank.
5. Company should make as much money as possible while confirming the basic rules and
regulation of the states.

Conclusion
Ford was an established company and it wanted to develop a new model pinto to competition
with Volkswagen and others. When Ford is developed pintos design and testing it has some
fatalities but Ford was ignoring that so violate the legality. Ford was considered only cost benefit
analysis over through money of peoples death and injures but it did not consider the pain, harm
and future benefit. Ford was only looking for their profit not other quantifiable impact of ethical
decision making. It considered only old business tradition not society benefit. We think it must
be followed new expectation for business that was helpful for Ford benefit and also society
welfare and benefit.

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