Pinto Case Study

See case attached and (IN YOUR OWN WORDS) answer the two questions at the bottom of the case.
Do not copy or paste from any source.
In the early 1960s Ford?s market position was being heavily eroded by competition from
domestic and foreign manufactures of subcompacts. Lee Iacocca, then President of Ford, was
determined to regain Ford?s share of the market by having a new subcompact, the Pinto, in
production by 1970. Then Ford engineers crash tested an early model of the Pinto. They found
that when the automobile was struck from the rear at 20 miles per hour, the gas tank regularly
ruptured. Stray sparks could then ignite the spraying gasoline, engulf the car in flames and
possibly burn the trapped occupants.
Nonetheless, Ford management decided for several reasons to go ahead with production
of the Pinto as designed. First, the design met all applicable federal laws and standards then in
effect. Secondly, the Pinto was comparable in safety to other cars being produced by the auto
industry. Third, an internal Ford study indicated that the social costs of improving the design
outweighed the social benefits. According to the study it was estimated that a maximum of 180
deaths might result if the Pinto design were not changed. For purposes of cost/benefit analysis
the Federal government at that time put a value of $200,000 on a human life. Consequently, the
study reasoned, saving 180 lives was worth about a total of $36 million to society. On the other
hand, improving the 11 million Pintos then being planned would cost about $11 per car for a
total investment of $121 million. Since the social cost of $121 million outweighed the social
benefit of $36 million, the study concluded that improving the Pinto design would not be cost-
effective from a societal point of view.
Questions: 1. Identify the relevant issues for decision making. 2. Is Pinto Management?s decision correct under the conditions? Explain.

DEVELOPED ETHICAL ? Driven by carefully Thought out principles
EMERGING ETHICAL ? Seeks a balance between ethics and profit ? Firm has ethical artifacts such as codes an ethics committees
RESPONSIVE ? Seeks out ways to help the local community. ? Recognizes socially responsible behavior in the best economic interest of the film
LEGALISTIC ? Follows the letter of the law. ? What is legal is ethical
AMORAL ? Maximum profitability at all costs ? Owners and managers are key stakeholders
Source: Adopted from the works of Reidenback and Rebia, 1991, p. 2742 Figure 1

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