Ford Pinto Case StudyThe Ford Pinto case that was discussed in class is one that has fascinated me for quite some time now. The case deals with Ford Motor Company’s hasty decision to push the hatchback Pinto, ironically codenamed Phoenix, into production to combat the rising popularity of the Volkswagen Beetle in the small-car market [1]. This infamous decision eventually resulted in the Pinto becoming a major blotch on the otherwise virtuous reputation of Ford Motor Company and its management team.
Though the sales of the Ford Pinto piled up in the cars early days, speculation was rife that all was not well with the car [2]. It would soon become apparent that Ford had preferred to focus on their own utility rather than that of their customers, and had made several appalling choices in order to put the Pinto on American roads. The signs of things to come were ominous. The engineers at Ford had done crash tests and had discovered that the car had a tendency to burst into flames when rear-ended at 21 mph, owing to its gas tank rupturing onto the bolts of the axle that was in close proximity. Such a collision resulted in gas being spewed into the passenger compartment and ignited by sparks or hot exhaust [3]. At higher speeds, the chances of the door getting jammed were very high [4]. But since the assembly-line machinery was already in place, the officials at Ford decided to go ahead with the premature production of the car, despite having the capability to make a much safer gas tank with a patent that they actually possessed [4]. For more than eight years after the launch of the Pinto, Ford successfully lobbied against a key government safety standard that would have forced the company to change its fire-prone gas tank [4].
In 1977, Ford finally made a few minor alterations necessary to meet the federal standard that it had managed to hold off for eight years, during which time their internal “cost-benefit analysis” said it wasnt profitable to make the changes sooner [4]. At the helm of the entire Pinto saga was Lee Iacocca, then the Vice President of Ford, who “conceived the project and was its moving force” (“GRIMSHAW v. FORD MOTOR CO.”) [5].
I have been an ardent fan of Lee Iacocca for years now, both for his capacity for innovation as well as his eloquence while describing details of it in his books. The versatility of the work that he did with the rugged Mustang at Ford and then the conservative yet revolutionary Minivan, which revived Chrysler’s dwindling fortunes, speaks volumes of the business acumen that he possesses. Having read Iacocca’s autobiography, where he dedicated a small portion to address the Ford Pinto controversy, I was admittedly biased towards his version of the story, particularly his claim that “there’s absolutely no truth to the charge that we tried to save a few bucks and knowingly made a dangerous car.” (Iacocca and Novak 171-172) [6]. He even
hustled into a talk about his personal experience with the Pinto, and he went on to say that there is no evidence that Chrysler has ever paid any money “to anybody” to save the car. Indeed, the company has even failed in its efforts to prevent any one of its own customers from paying any money, either on behalf of the entire family or for any members of its crew. Indeed, there appears to have been a “false economy” at the company for years, and the fact that neither Novak, nor anyone else, paid for it, only confirmed his belief that there was a “false economy.”
In a piece at the Daily Caller, Iacocca said that “one of the reasons we are talking about this is that if this car was bought or sold to the federal government, they would be making less money and making less from it.” This has been an ongoing story, and one that has been continually being pointed out in the press, but I would now like to briefly explore it a little further. In one of their books, The Scandal and the Profit System, they state that Ford was once paid $90 million in the sale of the Pontiac Pinto.
And in another piece on the matter, they note “…[A] big factor behind Ford’s decision was that it had two major customers that it sold to federal government. One of those was Chrysler, which had built a number of Chrysler-built tractors — which were known as the Pontiac Cinquiks — and had built dozens of vehicles in that role and then spent millions on Chrysler products. That arrangement has continued, in large part, ever since the start of the Great Depression. And this is one of the reasons why Ford built Pinto with three of its first customers, and it was that Chrysler’s share of the total revenue went from $1.6 billion in 1929 to $1.3 billion between 1934 and 1983; and the second was $5.6 billion. Ford also had to pay $100 million to settle a dispute with Chrysler after the end of the Depression, but only $6 million to finance that judgment, $5 million to pay off certain of the remaining debts and to pay the rest, which totaled $3.9 billion.
The Ford story may have just gotten an interesting bit of backstory from one of the most successful companies in automotive history, and that is Ford Motor Company. It had several huge problems in its early years, but over time its success went deeper than that. For one thing…it started with its decision not to build its first Pinto. This made it more expensive for the Ford Company. It had the potential to compete with Volkswagen, Honda, and Suzuki, all of which are now on our list of competitors. Ford couldn’t find a partner that its own company