The Ford Motor Company

Business and Finance homework help: The Ford Motor Company was founded by Henry Ford, Alexander Y. Malcomsonhis, and ten other smaller shareholders on June 16, 1903 in Dearborn, Michigan. In 1906 Henry Ford seized control of the company. Ford became one of the top automobile producers in the world with the development of the assembly line process in manufacturing. This assembly line process was put to good use with the introduction of the Model T automobile in 1908 which was one of the most popular models of vehicles in the world and was even internationally voted as the most influential vehicle of the twentieth century. Ford rode the success of the Model T until 1927 when they discontinued the model after selling more than fifteen million units.

Ford was also the first auto maker to offer a higher pay for employees. The average pay rate for employees was $2.34 for nine hours of work, until Ford introduced a staggering $5.00 pay for eight hours of work in 1914.

Beginning in February 1942, Ford switched all of production efforts towards World War II and withdrew from producing vehicles for civilians as ordered by President Roosevelt. Ford began assembling jeeps and putting the final touches on tanks, half-tracked armored personnel carriers, armored cars, and other military vehicles destined for the war. Civilian production of vehicles did not resume until July 1945.

The Ford Pinto:

Throughout the years Ford has had many popular vehicle models and also had its fair share of under-performing automobiles. One particular model that has always had a lot of debate is the Pinto. The Pinto was Ford’s answer to European subcompact cars such as the Volkswagen Beetle that had become popular during the Middle East oil embargo in the 1970s. The oil embargo was the response of the Organization of Arab Petroleum Exporting Countries (OAPEC) to the U.S. decision to re-supply the Israeli militaryduring the Yom Kippur War. This drove the price of gasoline through the roof and created a fuel shortage in the United States making the need for a fuel efficient car important.

Ford began marketing the Pinto in September of 1970 as a simple, rear-drive, fuel efficient subcompact car. The purpose of the Pinto was that it would get much better gas mileage than the average American sedan which was popular at the time. Fuel costs were a large factor in the market during this time period due to the embargo which increased gas prices up to $0.50 a gallon. The Pinto was a crude but durable car that was designed to satisfy the demand for subcompacts in the U.S. market. The Pinto sold very well in the early 1970’s and by the time the model was discontinued in 1980 the Pinto had accrued over three million sales for Ford.

The Pinto was going to be Ford’s answer to the great U.S. demand for a durable, high gas mileage, sub-compact car. The Pinto looked great on paper with an estimated twenty to twenty-five miles per gallon highway fuel economy. The 2,000 pound car debuted in the early seventies with an asking price of around $1,850 which made it the cheapest Ford model since the late 1950s. The Pinto sold very well throughout the 1970s but did have some design flaws that proved fatal for some consumers and ultimately for the Pinto itself.

Pinto Models and Statistics

1971 Ford Pinto

Model Weight (lbs.) Price (new) Number built
Sedan 1,949 $1,919 288,606
Runabout 1,933 $2,062 63,796
Total     352,402

1972 Ford Pinto

Sedan 2,061 $1,960 181,002
Runabout 2,099 $2,078 197,920
Station wagon 2,283 2,265 101,483
Total     480,405

1973 Ford Pinto

Sedan 2,115 $2,021 116,146
Runabout 2,145 $2,144 150,603
Station wagon 2,386 $2,343 217,763
Total     484,512

1974 Ford Pinto

Sedan 2,372 $2,527 132,061
Runabout 2,406 $2,676 174,754
Station wagon 2,386 $2,343 237,394
Total     544,209

1975 Ford Pinto

Model Weight (lbs.) Price (new) Number built
Sedan 2,495 $2,769 64,081
Runabout 2,528 $2,984 68,919
Station wagon 2,692 $3,153 90,763
Total     223,763

1976 Ford Pinto

Pony MPG sedan 2,450 $2,895  
MPG sedan 2,452 $3,025  
Sedan V-6 2,590 $3,472 92,264 (all sedans)
Runabout MPG 2,482 $3,200  
Runabout Squire MPG 2,518 $3,505  
Runabout V-6 2,620 $3,647  
Runabout Squire V-6 2,656 $3,952 68,919 (all Runabouts)
MPG Station wagon 2,635 $3,365  
Squire MPG station wagon 2,672 $3,671  
Station wagon V-6 2,773 $3,865  
Squire station wagon V-6 2,810 $4,171 105,328 (all station wagons)
Total     266,511

1977 Ford Pinto

Pony sedan 2,313 $3,099  
Sedan 2,376 $3,237 48,863 (all sedans)
Runabout 2,412 $3,353 74,237
Station wagon 2,576 $3,548  
Squire station wagon 2,614 $3,891 79,449 (all station wagons)
Total     202,549*

1978 Ford Pinto

Pony sedan 2,321 $3,139  
Sedan 2,400 $3,629 62,317 (all sedans)
Runabout 2,444 $3,744 74,313
Station wagon 2,579 $4,028  
Squire station wagon 2,614 $4,343 52,569 (all station wagons)
Total     188,899

1979 Ford Pinto

Pony sedan 2,329 $3,434  
Sedan 2,396 $3,939 75,789 (all sedans)
Runabout 2,442 $4,055 69,383
Pony station wagon not available $3,899  
Station wagon 2,571 $4,338  
Squire station wagon 2,607 $4,654 53,846 (all station wagons)
Total     199,018

1980 Ford Pinto

Model Weight (lbs.) Price (new) Number built
Pony sedan 2,377 $4,117  
Sedan 2,385 $4,605 84,053 (all sedans)
Runabout 2,426 $4,717 61,842
Pony station wagon 2,545 $4,627  
Station wagon 2,553 $5,004  
Squire station wagon 2,590 $5,320 39,159 (all station wagons)
Total     185,054

Ford Pinto Car Club Online

Problems with the Pinto:

The Pinto began to see troubles with its design in the early 1970s when rear end collisions with the lightweight car were causing the fuel tank to explode causing the car along with its occupants to burn up. One flaw in the Pinto’s design was the location of the fuel tank and the support structure that was used to protect it. The Pinto’s fuel tank was located behind the rear axle of the car instead of above the axle, like many other vehicles. This was designed originally to create more trunk space but ended up causing the fuel tank and the rear bumper to be separated by only nine inches. In the small amount of room between the tank and the bumper there were also bolts positioned to where they could puncture the gas tank upon a rear end collision causing fuel leakage. The fuel line that ran into the tank was often disconnected from the tank in a collision causing gas to spill out onto the ground resulting in fire and often an explosion hazard.

Research shows that the engineers at Ford had knowledge of the design flaw in the testing stages of the Pinto but did not make improvements to the car because it would have been very costly and the original design was deemed legal by the federal court. Ford’s logic also stated that small cars were inherently unsafe anyway so that was a risk the consumers were taking when buying a sub-compact. The issue came up again in the late 1970s when Ford was called out for a risk benefit analysis they had performed on the Pinto. The analysis stated that it would cost more for the company to change the design of the Pinto to make it safer than it would to pay off the lawsuits of those who were injured or killed in explosions caused by the unsafe Pinto. This rational caused an uproar and much debate about the Pinto and the Ford Motor Company’s ethics and business model.

Cost Analysis:

Modified Vehicles

Expected Unit Sales 12.5 Million
Modification costs per unit $11.00
Total Cost to produce vehicles without fire hazard $137.5 million

Lawsuits Paid

Expected Accident Results (assuming 2100 accidents)
Burn Deaths 180
Serious Burn Injuries 180
Unit costs of accident results (assuming out of court settlement)
Burn Deaths $200,000
Serious Injuries $67,000
Burned Out Vehicles $700
Total Costs to Settle Lawsuits $49.5 million

Leggett

Case Study Questions:

1. Please identify and explain three different issues Ford Motor Company is facing in this case.

2. As a consultant, please explain how Ford Motor Company could have avoided the problems they faced with the Pinto?

3. Discuss the ethical issues that arose from Ford’s stance concerning the safety of the Pinto.

4. Please perform a SWOT analysis on Ford during the time of this incident.

5. Identify three changes that you would have suggested as an OD consultant to Ford during, or after production of the Pinto. Explain how would you implement these changes?

6. Analyze the cost/benefit analysis Ford used in their decision making process concerning the safety of the Pinto. Discuss your argument in favor or against Ford’s decision. Make sure you evaluate both sides of the argument when discussing.

7. What is the most important thing Ford must consider for the future?

None Case Questions:

8. What is the difference between an internal and an external consultant?

9. Why are organizations resistant to change?

10. What is the most important element you have learned in this class so far?

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