Accounting

In the 1980s, Ford Motor Company was taken to court to defend its safety practices concerning the Pinto in the 1970s. Apparently, the Pinto could burst into flames in crashes at 30 miles per hour if hit just right. According to the court records, Ford was aware of the problem and conducted a cost/benefit analysis of fixing the Pintos. Without getting into all the numbers, the benefits Ford considered were savings from the accidents that would not occur and any resulting deaths, burns to people, and burns to vehicles. Ford used governmental numbers for the cost of a person and for a burn injury, and their own estimate of the cost to fix the burned vehicles. The estimates were 180 deaths, 180 burns to people, and 2,100 burned vehicles. The costs considered were the unit costs to fix 11 million cars and 1.5 million light trucks. Needless to say, Ford determined that the costs outweighed the benefits and did not fix the problem. Subsequently, people died and Ford was sued. Discuss Ford’s decision-making processes.

What items did it forget to include in the analysis?

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