Exploring Supply Chain Risks vs. Reward. The Ford Pinto Case.

Introduction

Are corporations ethical? Is it profitable to be ethical?

The very nature of capitalism is the survival of the best, before all else. Socialism, by contrast, is the good of the whole, to the detriment of some, and consummate benefit of more. While communism removes all choice from the equation, the ethical guides stemming from these political principles are very different, and they do not easily play together.

This case will explore where and how ethical principles can hold power when everyone is playing by different rules. How North America has evolved to make politics a corporate game with consequences. And will review the birth of corporate social responsibility (CSR), perhaps to find the underlying lesson is sustainability by design, which includes preservation of the consumer as an essential element for corporate longevity.

Analysis

The analysis here includes a discussion of the elements missing from Fords decision to establish the peripheral effects of transparency on corporate social responsibility. For example, what would or could have been done differently if the dangerous trend had been revealed to the public.

To explore the issue from various perspectives, the following analysis will begin by exploring what impact public reaction would have had on the automakers and how would these key stakeholders have been affected if every detail about the cars had been made public knowledge at the outset. In this way we address Ford Motor Co.’s assumption that the North American consumer only wanted more trunk space at a lower cost and had no concern for their own safety.

CONSEQUENTIAL ANALYSIS:

Table 1 (expanded): What if Americans Knew From the Start?

Stakeholders

1. Consumer

Consumers would make informed decisions. Conservative consumers would not buy this car. Those assuming the risk of ownership would be fully aware of the increased cost and have a heightened awareness when the number of fatal incidents started to rise.

Tell-Benefits *Many.

Consumers would not need to defend an expensive purchase or choose between looking smart (reputational) and staying alive (safety). Families with limited purchasing power can make decisions that are right for them without the burden to resell or exchange.

Don’t Tell-Harm *Many.

Lost trust in corporate responsibility and concern for public safety. Loss of faith in regulatory bodies and lawmakers to protect the citizen from family, caregivers, breadwinners and added trauma caused by omission of facts.

Don’t Tell – Benefits *Few

Even consumers who did not experience a defect in the car would experience a negative reaction to the knowledge of the cars tendency to explode in a low-speed impact. can make decisions that are would be fully aware of the increased cost and have a right for them without the corporate greed. Potential financial and incalculable cost of death, such as loss of The claim that ignorance is bliss is a fallacy. For what we do not know can kill us, and in the case of Ford Pinto, burn victims suffered loss of limb and not always life.

2. Shareholder

Tell-Harms *Few

As demonstrated in the case, the cost of making this mistake far outweighed the meager 135M to implement the solution. Shareholders might be painted as shortsighted types, however the negative impacts of killing a child with a known manufacturers defect would be felt by this company for years.

Tell-Benefits *Many

Auto-makers who set high standards for safety and reliability were doing exceedingly well in the North American marketplace. Ford was mistaken when he attempted to undercut the market by beating them out on cost and cutting safety. As he was advised, sticking to Mid and Lg vehicles would have maintained the company’s reputation for quality and value.

Don’t Tell-Harm *Many

Shareholders are like to pull support from an untrustworthy CEO. As described, the reputational damages alone would have created dissonance between Fords supporters and the Company’s Brand. Transparency and Communication are critical at higher levels of management. Ford omitted important information regarding risk from the shareholders.

Don’t Tell – Benefits *Few

Short-term survival of the corporation during a dubious investment in small car manufacturing to hold market share against foreign competitors. A high risk venture at best, the social cost and long-term damage to consumer trust tarnished the allAmerican car manufacturers global reputability and has permanently placed it into a western market.

3. Employees

Tell-Harms *Few to None.

Some employees may have been worried about losing their jobs if sales dropped. If properly informed about the risks, these people could choose to continue to manufacture the cars or seek other employment. Senior Management that knew were not given the support to act in the consumers best interest and removed or silenced.

Tell-Benefits *Many

Given the circumstances, if Ford had made the defects of the fuselage known to all employees the car would not have been made and sold as it was. Thus, actions resulting in the deaths of many would have been avoided and managers who were silenced and lost their jobs would have kept working at Ford.

Don’t Tell-Harm *Many

Omitting facts from the public and from employees caused greater harm and cost people their jobs. Employees manufacturing and selling Ford’s vehicles unknowingly contributed to the deaths of innocents. Employees with limited knowledge of the damages may experience cognitive dissonance and trauma when the consequences of selling unsafe vehicles is revealed to them.

Don’t Tell – Benefits *Few

Employees are asked to work with little or no knowledge as to the outcome or safety consequences from the products they are making. This may remove a sense of autonomy and pride in the work being done. Surely the effect on people when the Pinto cases became well known had a negative impact on the employees, and by not telling, they may have lost faith in the company, distrust in the industry and a loss of interest in their work or workplace.

4. Family of Victim

Tell-Harms *Great.

The impact of absorbing information that a death was preventable, but the risk was known and consciously entered into, changes the effect and remedial actions of the victim’s family dramatically.

Tell-Benefits *Great

The total impact of telling the public and informing people of the car’s defects will ensure fewer vehicles are unknowingly purchased. Families are less likely to buy a low-cost car previously assumed to be safe for themselves or for new drivers.

Don’t Tell-Harm *Same Result.

Families of the victims were left without recourse and facing hefty financial consequences if they pursued legal action against the automotive giant Ford. Until the case with Grimshaw, no real awards were given that brought justice to any of the survivors.

Don’t Tell – Benefits *None.

Victims suffering detrimental effects caused by Ford’s products are entitled to support and remedy. (see case of Grimshaw vs. Ford Motor Co.) To reconcile loss of a loved one and provide care for themselves alone, families deserve benefit and support. Ford needed to be forthright about the defect to provide suitable remedy.

5. Ford Motor Company

Tell-Harms *Great

Essentially the company becomes one with increased accountability to its shareholders, the public and the consumers. With transparency the corporation must seek feedback and not assume to know the core values of its customers.

Tell-Benefits *Great

Rather than assigning a cost to life corporations must seek to learn what people value and how to deliver service and performance to increase their customers satisfaction. Feedback would need to be established on a pull rather than push loop whereby Ford either makes products based on assumption and sales strategies or seeks to understand and please their customers better than the competition.

Don’t Tell-Harm *Same Result.

Ford faced criticism and negative press, harsh financial penalties and a loss of consumer trust. The brand’s reputation was tarnished and likely only recovered due to a long history of American ingenuity. Ford would experience a “brain drain” as employees with experience quit for speaking up, an incalculable cost to the future of Ford.

Don’t Tell – Benefits *None.

Short-term growth for long-term loss. As seen, the corporation may have been in position to benefit by political gains and lobbyist attempts; however, longevity and continued business could only be assured when the corporation’s will aligned with that of the consumer and safety became a priority. They needed to assume the mantle of duty to protect and provide to the customer in order to make a profit.

DEONTOLOGICAL ANALYSIS

The precedent setting case of Grimshaw v. Ford Motor Co. (1981)

A charge of Reckless Homicide awarded punitive damages of $125 million against Ford Motor Co. for the burning death of a 13-year-old boy. On average, 3,000 incidents per year.

Ford Motors VP, Herbert L. Misch counter-claimed for the New York Times that 875 burning Ford Pintos in one year was an exaggeration, as were the deaths. He stayed true to corporate culture at the time by defending the company and citing false evidence to contradict the claim. (Dearborn, August 30, 1977). Ford Motor Co. was questioned in court regarding duplicates in reporting with alterations to omit damaging proof of their awareness prior to and during the case of Grimshaw v. Ford Motor Co. (1981).

Rather than implement the recall, an estimated cost of $135 million dollars to replace each cars fuselage with a safer tank, a unit cost of approximately $11 per tank, Ford maintained his position that “Safety Doesn’t Sell” (Trevino, (2017)) and used the Social Cost estimate calculated by the National Traffic Safety Administration to justify his decision. To Ford, the total cost of dying would not be sufficiently decreased to warrant an improvement expense to make the change.

The benefits outlined in a memorandum issued by Ford Motor Co. (Trevino, (2017)) included estimated savings of 180 burn deaths, 180 serious burn injuries, 2,100 burned vehicles for a total estimated benefit assigned by the financial cost to treat injuries and replace damaged vehicles. The value excluded critical ethical implications and unstated costs for those affected by each incident.

Troubling Revealations

Ford’s internal cost-benefit analysis reveals a troubling reality, that when corporations reduce human safety to actuarial calculations, they inevitably seek external mechanisms to validate and protect those decisions. This mathematical approach to mortality created a strategic imperative that extended far beyond their manufacturing floors into the corridors of political power.

Having committed to a supply chain production related decision based purely on cost optimization, Ford Motor Co. found themselves compelled to shape the regulatory environment that might otherwise challenge their calculations on the related matter.

Cost and Effect of Political Influence by Corporations

Ford also increased lobbying activities during this time, delaying the adoption of a Traffic Regulation Standard, Federal Motor Vehicle Standard 30, which would make an update to the fuel system mandatory for the Pinto to meet new specifications of roadworthiness and safety (Drutman, 2015). In today’s world, Corporations are estimated to spend approximately $2.6 billion a year on lobbying expenses with the largest of these employing over 100 lobbyists each. In the 1970’s, corporate lobbyists were finding their footing to combat government and avoid increasing cost of regulation, reverse slowing economies and stop the trend of rising wages. (Drutman, 2015).

On a quantitative measure, the estimated lives to be saved by the regulation would have exceeded 1,200 and reduced the death rate by 40% for incidents of exactly the type this Ford Pinto was causing. (Trevino, (2017))

The rise of Labor Unions and Public Interest Groups had characterized the 1950’s and 1960’s leaving large American Corporations to seek influence in Congress themselves. Now the scales are tilted heavily when measured in dollars, with financing for regulatory lawmakers barely a drop in the bucket if compared to an NGO’s investment in political influence.

Supply Chain Risk Management

The Ford Pinto case illuminates how a single supply chain decision—the placement and protection of a fuel tank—can cascade through every level of corporate strategy and societal impact.

What began as a component specification choice rippled into manufacturing processes, quality control protocols, legal strategies, political lobbying, and ultimately, regulatory policy. This interconnectedness demonstrates that in modern business, no supply chain decision exists in isolation; each choice reverberates through stakeholder relationships, regulatory frameworks, and public trust.

For today’s supply chain professionals, the lesson is clear, that technical decisions carry ethical weight, and ethical decisions demand technical competence. The cost of separating these considerations, as Ford discovered, extends far beyond any spreadsheet calculation.

It is up to the individual to determine, whether it is to their benefit that we empower corporations with making ethical decisions for us, or if government must play a critical role within our society, as well.

Quote by Author.

Public Trust and Corporate Responsibility

Ford carried a distinct arrogance that translated to touting that Americans inherently value low cost above all else. Except he would not have known unless he had asked them. Some arrogance is expected from the inventor that gave men a car instead of a “faster horse,” which is what they would have asked for at the time when automotive history was being made. Ford’s Model T was a true marvel of engineering and the average American found a dream within reach. What once had been reserved for the rich and well-to-do only, became a regular household item overnight, just like the toaster – everyone had a car.

Perhaps it was this genius that enabled the Ford Motor Co. to survive the catastrophic revelation that America’s beloved automotive industry was not all it was cracked up to be. Consumer trust and social responsibility were new to the public’s awareness and this era was categorized by major changes in government’s role for the consumer and corporation’s role in politics. International trends for manufacturing and the drive to lower costs created a swift uptick in globalization heralded in by emerging technologies, improved transportation, and rising consumerism in North America.

Design and Testing of the Pinto Fuel System: Succinctly vs. Concurrently.

By cutting corners to beat production planning timelines Ford had bypassed the procedural norm and began the Tooling Phase during the Design and Testing Phases, specifically to rush the production of the Ford Pinto. At the time, normal timelines for production planning averaged 3.5 years for most automakers. Decisions made by Ford to use unestablished procedures and run both the Tooling and Production Planning concurrently meant that critical problems with the fuel cell’s defects were being uncovered after the design and production had been established.

The time and cost associated with changing were passed over as too expensive and alternative methods for removing the risk were used instead.

It’s unfortunate that more people would likely line up to see the latest blockbuster movie then go to vote (*which is consequential to policy that impacts consumers).

One Method for an Ethical Sound-Check:

The following approach is to adopt a methodical approach in a practical application and to establish whether Virtuous Ethics are present in a specitific business scenario. (Trevino, (2017))

In the example below, each core principle is listed as it is used to guide corporate decision-making in matters of integrity and foundational value-setting of employees, executives, and shareholders, alike. This simplified equation may offer insight into tools that can be used to facilitate business leaders when they must ensure profitability and ethics are practiced simultaneously. Because it is imperitive that support for the longevity of the company, consumer safety, consumer trust, and customer satisfaction are maintained.

Conclusion.

References and Resources:

• Image 1. Based on the Novel by Chuck Palahniuk, S. b. (Writer), & Fincher, D. (Director). (1999). Fight Club [Motion Picture].
• Case Law, California Case Law, Cal. App. 3d, Volume 119, Grimshaw v. Ford Motor Co. (1981), Civ. No. 20095. (Court of Appeals of California, Fourth Appellate District, Division Two May 29, 1981). Retrieved 1981 from JUSTIA US LAW: https://law.justia.com/cases/california/court-of-appeal/3d/119/757.html Dearborn. (August 30, 1977).
• REPORT ON PINTO DEATHS IS CALLED FALSE BY FORD. The New York Times Archives, Page 16. Drutman, L. (2015, April 20). Business: How Corporate Lobbyists Conquered American Democracy. From The Atlantic: https://www.theatlantic.com/business/archive/2015/04/how-corporate-lobbyistsconquered-american-democracy/390822/