Ford Pinto Ethics: Cost-Benefit Analysis vs. Human Life

Overview of the Ford Pinto Case

During the 1970s, Ford designed and manufactured an inexpensive passenger vehicle known as the Pinto, which exploded when the vehicle was rear-ended and the gas tank was ruptured. Senior management became aware of this design failure after a number of serious injuries and fatalities occurred. Management then requested a cost-benefit analysis to determine the least expensive way to deal with the problem.

The analysis found that fixing the design problem through a global recall of all Pintos would cost an estimated $137 million. By contrast, the cost of litigation and settlements for deaths and injuries resulting from exploding gas tanks was estimated at $49.5 million. The estimated net savings from not fixing the design problem therefore came to $87.5 million. Ford chose not to implement the design fix — which would have cost $11 per car — even though its own analysis showed the new design would prevent approximately 180 deaths.

Was Ford's Approach to the Safety Decision Proper?

The central question was whether Ford should proceed with the standard design, meeting its production timetable but potentially jeopardizing consumer safety, or delay production of the Pinto to redesign the gas tank and concede another year of subcompact market dominance to foreign competitors.

Ford should have delayed production for several reasons. Even if one accepts the validity of a cost-benefit analysis that places a monetary value on human life, Ford erred by using a figure that was far too low (Birsch and Fielder, 1994). Ford's internal memorandum valued a human life at approximately $200,000 — a figure influenced, in part, by a 1972 National Highway Traffic Safety Administration report that used a value of $200,725, based largely on projected future productivity losses.

Although cost-benefit analysis may be technically legal, jurors have demonstrated a deep-seated aversion to its use in cases involving potential loss of human life (Crocker). Jury awards have greatly exceeded Ford's $200,000-per-life estimate. For example, jurors awarded $4.9 billion to six people burned in an accident involving a 1979 Chevrolet Malibu.

Effective crisis management requires protecting a company's perceptual assets in the same way it protects its tangible, human, and financial assets. In a crisis, a company's primary objective should be to defend the value of those assets. The bad publicity and reputational damage suffered by Ford are difficult to quantify, but the harm was considerable.

Ford's Ethical Responsibilities to Its Customers

There are several ethical reasons why a cost-benefit analysis should not have been used in Ford's decision (Palmiter, 1999). First, it is unethical to determine that people should be allowed to die or suffer serious injury simply because preventing those outcomes would be too costly. Second, some things cannot be measured in dollars — and human life is foremost among them. By making a decision based purely on numbers, Ford allowed people to die or be injured even though prevention was within reach.

From a human rights perspective, Ford was obligated to prioritize individual safety and to make the necessary adjustments to the fuel system. Its failure to do so represents a fundamental breach of the duty of care owed to its customers.