MGT 200, § 500 SPRING 2016
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DISCUSSION BOARD ASSIGNMENT NO. 1
Instructions
To receive full credit on this assignment, you must do the following:
1) Read this document;
2) Answer the three questions below by posting them in the Discussion
Board, which can be accessed below these instructions in the folder for
this assignment; and; and
3) Respond to answers posted by two of your classmates by hitting “REPLY”
and state why you agree or disagree with each and every one of their
responses. Answers such as “I agree” or “I disagree” without any further
explanation are insufficient, and you will not receive any credit. You are
strongly encouraged to number each of your replies to your
classmate’s answers. If it is not clear that you answered each
question and you responded to each answer to each of the
questions posted by two of your classmates, you will not receive
full credit.
NOTE: You will not see any of your classmates’ answers until you have posted your
own. When you have correctly completed this assignment, you should have posted only
three times: (1) your answers; (2) responses to “Classmate No. 1”; and (3) responses to
“Classmate No. 2.” Please do not post a separate message for your response to each of
the questions answered by a classmate.
In responding to your classmates’ answers, you should explain in detail why you agree
or disagree. If appropriate, explain what you believe he or she failed to consider in
answering the question(s). Most importantly—be constructive and respectful of other
persons’ opinions. Reasonable men and women can have different opinions about these
issues.
It should be easy for everyone to receive 10 points (5 points for your answers; 2½ points
for each response to your classmates’ answers) on this assignment if you follow these
instructions carefully, offer thoughtful, clear, and intelligent responses to the questions
below, and provide constructive responses to your classmates’ answers.
ALL ANSWERS AND RESPONSES MUST BE POSTED ON BLACKBOARD BY
11:59 P.M. ON WEDNESDAY, FEBRUARY 17, 2016—NO EXCEPTIONS. IF YOU
HAVE ANY QUESTIONS ABOUT THIS ASSIGNMENT, PLEASE CONTACT ME.
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The Ford Pinto Memo:
A Lapse in Ethics or a Calculated Business Decision?
In May 1968, Ford Motor Company began designing and developing a subcompact car,
which it ultimately named the Ford Pinto. Because Ford wanted to gain a large market
share, the entire design and development process was accelerated.
On August 10, 1978, three Indiana teenage girls in a Ford Pinto were killed in a rearend
collision with a van. Two of the passengers were burned to death in the car, and
the other was ejected from the vehicle and later died. During the course of the
investigation, law enforcement discovered drugs and alcohol in the van that rear-ended
the car.
Following an investigation, the prosecutor took the unusual step of pursuing criminal
charges against Ford. The charges related to specific design elements of the vehicle.
The Ford Pinto was unusual because the fuel tank was located behind the rear axle
instead of above it, and the distance between the rear axle and the fuel tank was only
nine inches. The fuel tank was also prone to puncture in a rear-end collision because of
the placement of bolts. Finally, the fuel filler pipe design made it more likely that it
would disconnect from the tank in the event of an accident, which increased the
likelihood of fuel spills.
Even prior to the death of the teenage girls, Ford had been aware of the Ford Pinto
susceptibility to fire in rear-end collisions. In 1973, Ford conducted an internal
analysis of the costs and benefits of retrofitting existing vehicles and altering the design
for the production of new vehicles. In addition, Ford considered the option of doing
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nothing. The cost-benefit analysis was presented to senior management, and the
memorandum outlining the analysis later became public.
The following figures are from that memorandum and compare the two options: (i)
repairing existing vehicles and modifying the design of vehicles to be built; and (ii)
doing nothing.
Expected Cost of Repair/Modification:
Cost per unit: $11.00
Number of units: 12.5 million
Total cost: $137.5 million
Expected Costs of Accident Results (assuming out-of-court
settlements to pay the victims and their families):1
Burn deaths: 180 x $200,000 per person
Serious burn injuries: 180 x $67,000 per person
Burned-out vehicles: 2100 x $700 per vehicle
Total costs: $49.53 million
Final Analysis:
Cost of Repair/Modification: $137.50 million
Less Cost of Accident Results: $ 49.53 million
Difference/Savings: $ 71.47 million
1 The figures for burn deaths and serious burn injuries were not figures developed by
Ford; rather, these figures were based upon the average value of a lost or injured adult
life as determined by the National Highway Traffic Safety Administration. For
example, the $200,000 amount assessed per death was based upon the estimated costs
of the deceased adult’s direct earnings during his or her lifetime, and indirect costs
including hospital and insurance costs, legal and court costs, victim pain and suffering,
funeral costs, and property damage. This approach is still used today in wrongful death
cases to calculate the “value” of a human life.
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Based upon its analysis, Ford decided not to repair existing vehicles or modify the
design for vehicles it was producing. Instead, it elected to pay the victims and their
families, which was estimated to produce a cost savings to the company of over $70
million dollars.
It is unclear exactly how this information was utilized by Ford management, and even
today, controversy remains about how early senior managers became aware of the
problem of crash-induced fires in the Ford Pinto.
Questions
Using the discussion board feature on Blackboard, discuss your answers to the
following questions in detail:
1) Is it ethical for a company, such as Ford, to perform a cost-benefit analysis
when human lives are involved? Why or why not?
2) Assume that the Ford Pinto met all of the safety requirements imposed by
law at the time. Did Ford have a higher obligation because it knew of the
gas tank issues but the general public did not? Why or why not?
3) Fast forward to the year 2016. If a situation like this arose in 2016, would
a company address it in the same way as Ford did in the 1970s? Why or
why not?
YOU ARE STRONGLY ENCOURAGED TO NUMBER YOUR ANSWERS AND
EACH OF YOUR RESPONSES TO YOUR TWO CLASSMATES.