What is the biggest mistake that a big company has made?
One story comes to mind. The infamous Ford Pinto release in 1975. The car had a design flaw that caused it to burst into flames in a crash. Ford engineers knew it while the car was still in the assembly line but would collect it even though it wasn’t expensive to do so but would interfere with the planned schedule. They were dying to keep up with the Japanese competition and maintain their US market. They argued that it was cheaper to pay compensation than postpone the launch date resulting in the now famous quote, “It’s cheaper to let them burn”.
Below is the narration from an old article:
When Ford was developing the Pinto, the company needed a low-priced car in a hurry to compete with Volkswagen and Japanese imports. Iacocca, a rising star at Ford due to his success with the Mustang, argued that Volkswagen and the Japanese were going to capture the entire American subcompact market unless Ford produced an alternative to the VW Beetle. As Executive Vice President and later as President of Ford, Iacocca was the driving force behind the program to produce the Pinto.
The Pinto was rushed through production in just twenty-five months so it could be included in Ford’s 1971 line; the normal time span for a new car model was about forty-three months. During the accelerated production schedule, Ford became aware of these serious risks associated with the Pinto’s fuel tank but proceeded with its manufacturing schedule anyway. Company officials also decided to proceed even though Ford owned the patent on a much safer gas tank.
Did anyone go to Iacocca and tell him the gas tank was unsafe? “Hell no,” said an engineer who worked on the Pinto. “That person would have been fired. Safety wasn’t a popular subject around Ford in those days. With Lee it was taboo.” Iacocca used to say, “Safety doesn’t sell.”
Why did the company delay so long in making these minimal and inexpensive improvements? Simply, Ford’s internal “cost-benefit analysis,” which places a dollar value on human life, said it wasn’t profitable to make the changes sooner. Ford’s cost-benefit analysis showed it was cheaper to endure lawsuits and settlements than to remedy the Pinto design.
Ford knew about the risk, yet it paid millions to settle damages suits out of court and spent millions more lobbying against safety standards. Pinto was a best-selling subcompact. By 1977, new Pinto models incorporated a few minor alterations necessary to meet federal standards that Ford had managed to hold off for six years.
The Grimshaw case was just one of more than one hundred lawsuits that were filed because of design flaws in the Pinto that resulted in fuel tank fires. Estimates by Mother Jones attribute between 500 and 900 burn deaths to Pinto crashes. These people would not have been killed or even seriously injured if the car had not burst into flames.
The Grimshaw case sent a message to automakers that if they chose to ignore safety considerations, it would be at their own financial peril. This case helped push the automobile industry away from “safety doesn’t sell” and toward emphasizing new safety features in their marketing.
In 1978, following a damning investigation by the National Highway Traffic Safety Administration, Ford recalled all 1.5 million of its 1971–76 Pintos, as well as 30,000 Mercury Bobcats, for fuel system modification. Later that year, General Motors recalled 320,000 of its 1976 and 1977 Chevettes for similar fuel tank modifications. Burning Pintos had become a public embarrassment to Ford. Its radio spots had included the line: “Pinto leaves you with that warm feeling.” Ford’s advertising agency, J. Walter Thompson, dropped that line.
Source: TortMuseum
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