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1.) Is what Ford did legal or ethical?
Reading through the article seems to give the impression that Ford failed to be legally responsible with its Ford Pinto hatchback automobile, such as crash test results, management deficiency and other red flags, but what Ford did was legal. Ford based its decision on the cost savings to the company, using the risk-benefit analysis. Basically, the cost of repairing the fuel system of all vehicles manufactured was higher that the possible damage that these vehicles could cause to the public. Ford took advantage of the law and saw the opportunity to go forward with the production of its Pinto car because of the benefits of having it out to the public against stopping/fixing all production. Ironically a fine of selling a defective car in California is $50 for first offence and $100 for a second offence, and under federal law, a “violation of automobile safety standards is $1000 per vehicle up to a maximum of $800,000 for any related series of offenses.” (Impact of Law on the Business Environment) In other words, they were going to make more money than what they could be sued for.
2.) If you were in the position of leading Ford Motor Co., would you have fixed the car? If so, how would you justify such an action to those shareholders who insist that you have a duty to maximize profits—especially if the “fix” would involve a major hit to the corporate “bottom line”? What do you think about Milton Friedman’s comments regarding Ford? (Milton Friedman received a Nobel Memorial Prize in Economic Sciences.)
If I were in the position of leading Ford Motor Co., I would have fixed the cars immediately after getting the results of the testing of the cars. I would have stopped the vehicle before it was available to the public because it would only take a second to realize that the results were showing that Ford was putting the lives of drivers at risk. As a leader of a company, the ultimate goal is to make the company grow and of course, being profitable. But in this case, I would have justified my action to those shareholders who insists that I have a duty to maximize profits is that as a corporation we simply cannot put a price on the life of an individual. Economically, making the move of fixing the defect was going to impact the “bottom line” of the company, but doing the opposite which was to do nothing, was going to be much worse because it would harm the reputation of the company and we could have been perceived as a company not socially responsible. This could give the perception that we are company that only manufactures cars with the intention of making profit regardless of its safety to the public, in the long term the decision of doing nothing was going to significantly impact the future business operations of the company. I was very impressed with his comments especially when he said that people are very cheap when they have to put a price to their lives, and he used the example of people who decide to smoke. But in the case of Ford, I think people would pay the extra $13 for the fuel system protection if they knew that their lives was safer if that piece was added to it.