“Ford Pinto” Case Study

Executive Summary

Ford Motor Company is a successful and second largest automobile industry worldwide with lots of successful brands. However, it also had an unsuccessful brand, which had listed as world’s worst cars, named as Ford Pinto. There were various problems regarding Ford Pinto, one of them was improper management analysis by Ford Motor. This case analysis, firstly, introduced the management analysis of Pinto, and then there is a brief discussion about Ford Motor and Ford Pinto. Afterwards, there is a management analysis, started with the help of strategic planning with proper establishment of PEST and SWOT analysis to know the internal and external environment. Then, there is an analysis on the roles and responsibilities of management groups of Pinto. In the next part, the decision-making process has developed in context to the culture and ethics of Pinto. The case analysis has concluded with proper findings and recommendations of management analysis of Ford Pinto.

Introduction

Management analysis is an essential element of organizational development. In this case, the management analysis of Ford Pinto is indispensable, as because among lots of successful brands, Ford Pinto has gone in a different way with Ford Motor Company. Ford Pinto is the oldest model of Ford, which had failed to compete within time with other automobile industries. One of the main reasons for being unsuccessful is the ineffective analysis of proper management of Ford Pinto. With proper management analysis, it might have been capable to congregate success and profits from the target markets as previously done by the company. According to management analysis, Ford Pinto at first had to develop strategic planning, managers’ roles and responsibilities, decision-making, ethics and culture to clutch the global market. A successful management analysis would contribute at least half of the total profit for Ford Motor Company, which this case analysis has focused on.

Company Overview

Ford Motor Company is the second leading car manufacturer and multibillion-dollar Company in United States. It is continuing its trends with quality products and services with triumphant operations in 40 countries, through the help of 111 manufacturing plants and 350,000 employees worldwide. Fordstar is the largest interactive distance-training network with 5,000 Ford Motor Company’s Dealer Communication Network, all the way through the world. The earning, in 2008, were $181 billion with the help of Ford, Volvo, Mazda, Mercury, Jaguar, Lincoln, Land Rover, Aston Martin etc brands of Ford Motor Company. The company is getting financial supports and services by Ford Motor Credit Company. To amplify and improve hybrid vehicles for consumers’ demand, Ford Company has planned to deliver technological solutions of fuel in the economy for millions of intercontinental people. It is also committed to deliver fuel efficiencies by introducing new vehicles by hybrid and conventional gasoline models to compete with Toyota and Honda in 2009. For this reason, Ford Motor is imposing electrification strategy for manufacturing next generation hybrid models as an aggressive plan to incarcerate the target market within next four years. As per a vision of the company suggests, Ford is taking advantages of high volume and global vehicles platforms by Ford Products. Ford is also preserving relationship with suppliers, electric utilities, and other stakeholders to make mass-market reality as technical challenges of manufacturing vehicles (Ford motor 2008).

About Ford Pinto

Ford Pinto was a futile brand amid lots of thriving brands of Ford Motors in the automobiles industry, which was the first North American subcompact automobile marketed from 1970. It was most popular in sales with 100,000 units by competing with Volkswagen, Datsun, and Toyota. Along with time and demand, other models of Ford are delighting their places in the market, like Ford Fiesta, Ford Escort, Lincoln Mercury, and Mercury Bobcat in past 10 years. In the rapidly changing automobiles market, Pinto was merely assembling the status of a bad car with the conditions of volatile nature. Ford Pinto was calculating costs of reinforcing itself with $121 million, but had outcomes of $50 million, which affected awfully in Ford’s reputation and images (Time 2009). The figure below shows the monetary outcomes of Ford Pinto from 1970 to 2005:

Management Analysis of Ford Pinto

Ford Pinto was one of the significant products of the Ford Company. In 1970, the company started to market this subcompact prototype to compete with the heavy competition of Volkswagen, Gremlin, Vega, and Datsun. However, the design of the car was too fragile and sensitive that the car cannot survive in the market for long though its look attracted many customers. Many crash tests of the car dictated that the design and the placement of the gasoline tank, was wrong which led to customer dissatisfaction as a whole. However, the management failed to catch the clear message from the tests and introduced the 2000-dollar car without any significant change. As a result, the car failed to attain the management goals and became one of the worst cars in the history.

As the case states, the core grounds of the failure of the car were the irresponsibility of the management in designing it properly (AECG 2009). The case study thus relates to the study of the management of Ford at that time.

Strategic Planning

The major blunders done by the management of Ford include the designation of a flimsy strategic planning. The management, led by the president Mr. Lacocca along with the other executive members such as Robert Alexander and Harold McDonald was responsible for the crumple of Pinto. UWLAX reported that their strategy was just to minimize the cost of operation, introduce a low cost car than the competitors and to earn good market share. Nonetheless, the management forgot about the basic principles of the strategic planning and following it accordingly. Moreover, their decisions regarding the production and introduction of Ford Pinto did not match with the company’ strategic plan.

According to the annual report 2008 of Ford, the safety of the customers was the major concern of Ford for many years. Except Pinto, all its previous and present models have designed to ensure highest level of safety. One of the key visions of the Ford is to provide safe and non-vulnerable cars, which was completely absent in the designation of tanks of Pinto. As record suggests, the tank placement design caused huge numbers of passenger deaths and burn injuries, which shows the recklessness of the management decisions in matching Pinto’s production strategy with the company vision.

Besides, the management, while planning for the Pinto, ignored many other strategic planning factors like market analysis, industry analysis, and external and internal environment analysis.

External Environmental Factors Forgone by Management

Thompson & Strickland (2008) argued that external environmental factors such as political, economical, social, technological factors govern most of the strategic planning. The external factors forgone by the management have discussed below:

Political Factors: The political factors ignored by the Ford management were the customer functions against the recklessness and the regulatory administrative power of the government. Because of the ignorance of the customer function, Ford pinto was termed as “Firetrap” among the potential customers. Many accidents resulted for the tank burst caused death of the passengers and when these death cases had adjudicated in the court, the judgments were against the functioning of Ford Pinto. Only for the malfunctioning of the Pinto the Indiana Criminal code was revised their law and introduces the “Corporation” as a killer of people. Pinto’s irresponsible attributes had more cleared when Journalist Mark Dowie published the article termed “Pinto Madness”. In case of government regulation, the federal law of safety regulation has amended only for the malfunctioning of the Ford Pinto where the government termed it as the most controversial automobile ever built. The vehicle designed by the Ford was totally ignored the 1966 legislation and designed a weak tank. Ford Pinto’s design also neglected the stiffer government regulations on gasoline tank

Economic Factors: The decision regarding production of Pinto was also not economical. The economical data presented in the case justified that the management was totally ignored the economical aspects as it was not cost effective. The cost associated with the production was about 137 million dollars where the benefits assumed were only 50 million dollars (AECG 2009). Besides the management completely neglected the price sensitivity of the customers and prices the fragile designed car for 2000 dollar.

Social Factors: The management of Ford ignored the social expectations regarding Ford. The customers thought Ford as a symbol of aristocracy, fame, and safety. However, with the reckless design of the car, Ford failed to attain those expectations. National Highway safety and transportation Administration accused Pinto for its drastic social impact. The safety of the people had completely abandoned and the management did no research about the expectation of the potential customers which leads to the conclusion that the management absolutely overlooked the social factors.

Technological Factors: Introduction of new technology was one of the key strengths of Ford, which was totally absent in Pinto. The technology used to give the shape of the car was too poor that any small collision damaged the body of the car vastly. There were almost no safety measures against the fire for which the car had affected by fire easily and without any signals (AECG 2009). Only a few spark can ignited the car into fire and for the technological lacking when it fired, it was flamed until the absolute destruction of the body of the car. There were available advanced technologies introduced in that time in the automobile industry, which has not used in Pinto. The management also omitted the ecological aspects, as the flimsy technological design did not lessen the carbon emission. After firing of the cars also hampers the ecology as the flame triggered by the oil hampered the environment.

Internal Issues Ignored by Management

Not only the external issues but also the internal issues of the company had disregarded. The management did not do proper SWOT analysis of the firm. The internal issues forsaken by the management are:

• Strength: the management had not considered the brand value and brand association, which were a major strength for Ford. If they considered the brand value of Ford, they could not design, produce, or market such reckless car. Besides, strength of Ford was relationship with its customers, which has also hampered by the less quality of Pinto. The integrated technology used in other cars of Ford was missing in Pinto.
• Weakness: The major weakness of Ford motor of those days was its losing market share. The management was deciding to produce pinto to regain the market share without considering that he delicate design can worsen its weakness.
• Opportunities: The Ford had the opportunity to become the market leader if they did not hurry for a subcompact car like Pinto. They had forsaken to research and overlook the opportunity to use tank technology in front side. If the vulnerabilities belonging with the tank can be overcome, the Pinto may become a success product for Ford
• Threats: The competitors were major threats for the Pinto. The competitors had better designed cars with more safety measures and advanced technologies. Besides, the threat from the government regulation about the safety measures of the passengers was also a considerable threat. All these factors had ignored by the Ford management.

Because of misreading the strategic planning factors the entire plan regarding the launce of Pinto, the Pinto model has failed to work as a cash cow. The failure of the Pinto not only bound the management to rethink about their strategic plan but also persuaded the management to change their branding techniques.

Roles and Responsibilities of Management

As the case argued, the major features of the failure of the Pinto were not only the design of the car but also the miss functioning of the management. The efficiency of the management was a matter of question as they failed to get the most output from the present inputs. In the case, it has mentioned that the management took the project of Pinto with no considering the cost benefit analysis. Rather they took the project with almost US $ 81 million loss (Lee 1998). Again, the management failed to run the project effectively as the goal of the project has not completely matched with the goal of the company as a whole. The ultimate goal of Ford was to attain the highest market share through attaining the highest customer satisfaction. On the other hand, in the Pinto project the management has ignored the customer satisfaction (safety measures) and only focused the market share (McLaren 2009). Thus, it may not indicate that the management done any right thing nor they kept any correct effort to overcome the dilemmas.

The roles of the management were also not functioned in case of Pinto. The management failed to perform Interpersonal, informational and decisional roles, which are the key roles for a well-functioned management.

• Lack of Interpersonal Role: Pasquarello (2008) stated that the management had not performed any research work about whether the customer needs the car like Pinto or not. They also not communicated with the customer and the other engineers and employees about the production or design of the car. Again, all the engineers responsible for the components had signed off to their supervisors and the other supervisors signed off to the management, which meant that the management failed to lead the operation properly. On the other hand, the management did not do the liaisons with the outsiders. If they did so, they could be able to get appropriate market information. All these have related with the interpersonal role of the management.
• Absence of Informational Role: The flow of information did not function, as the weakness of the design of the car did not communicate with the management by the employees. The chain of command was in a manner that there was no way to direct communication within the management and the lower level of management. For this, the information has not sent accordingly to the management. As the information about the actual scenario did not reach to the top level of management, they did not feel any need to monitor effectively. Thus the management failed to collect, disseminate and use the information and failed to play informational role.
• Non-existence of Decisional Role: Making a good, effective, market oriented and customer friendly choice is the major responsibilities of the management. The decision of designing a poor designed car, which was not a cost effective and customer friendly, was completely wrong. The objectives of a management should be to attain the organizational goals through good decision making, which could not performed by the management of ford in case of Pinto.

Again, the four major functions of the management were completely missing according to the case. The responsibilities of the management are to plan, organize, lead and control the operations but the management of Ford did not comprise these in case of Pinto.

• Need of Proper Planning: As the strategic planning analysis stated that the creation of an effective strategic plan has not prepared by the management in case of Pinto, it could indicate that the Planning function did not work for the Ford management. As the production of the subcompact car performed in a rush manner, the management did not get proper time to plan for it, which was an evidence of the malfunctioning of the management.
• Lack of Suitable Organizing: The management was set the goal of to regain the market share for the Pinto, but it has failed to define for whom and in which way to do this. They unobserved the market need and thus failed to define for whom the product is to be designed. Again, it failed to define the right way to offer a product as the lacking of the car.
• Lack of Appropriate Leading: The management failed to lead its subordinates. The engineers commented about the miss functions of the car after several pre tests. However, because of the lacking of leading capacity of the management, the arguments were of no use.
• Need of Right Controlling: The management failed to monitor the function of the car. If they could, they would be able to overcome the lacking of the car design earlier. As they failed to monitor the actual scenario, they could not understand the actual scenario and failed to implement effective strategies.

Decision Making

According to the case, it has assured that, the top-level management of Ford Motor Company did not making proper decisions about planning to implementation of Ford Pinto. As any company has followed a going concern issues, then to being successful in market for 5-10 years is not enough. The Company should follow proper decision-making process to have successful market and to compete with others. The decision making process of managers of Ford Pinto should follow in the way given in below:

Identification of Problems Regarding Ford Pinto

Ford Pinto has failed to make analyzing management to estimate the market scenario, which is being worst day-by-day. According to Dowie, in 1970, the cost of Ford Pinto is about $200,000 for deferred future earnings. The main problem of Ford Pinto was in engineering design of car, as the gas tank was in backside of the car, so many accidents had happened by road accidents. Therefore, the main problem is identifying car safety issues in context of customers’ demand in the automobile market.

One of the major example of an accidents happened with a woman, called Sandra Gillespie was riding with her young boy in Ford Pinto in a highway. Suddenly another car rear-ended hers Ford Pinto very badly, and the gas tank was broken. Then the car turned into a ball of fire with the explosion of gas. Sandra died, but her boy was lived with very badly burned body. Ford Pinto has caught by fire so easily because of design of cars were not in proper manner.

Identification of Decision Making Criteria: Cost Benefit Analysis

Is the engineering design main problem of Ford Pinto? If it is, then the costs of Ford Pinto should analyze in terms of benefits to identify whether the decision making of changing design of it is right or wrong. According to case, Ford Pinto had $49.15 million benefits and $137 million costs (Safety Xchange 2008). From the formula, deaths’ numbers, design change of automobiles, and injuries are being subject to become attributes of cost subjects. The costs benefit analysis of Ford Pinto should also considered fuel tank leakages and fires, which are missing in this case. According to various federal regulatory agencies are determining cost benefit of value of life in following ways:

Table 1: Value of Lives according to Federal Agencies in United States

Therefore, it would possible to save to save 20 lives of people, if the new rule implements, which is costs $100 million. These agencies are considering more costs to save people’s lives. By these ways, the decision-making criteria of Ford Pinto have analyzed.

Allocations of Weights to Criteria of Previous Analysis

From the previous costs benefit analysis, it seen that, Ford Pinto had occurring more costs than its benefits. In first issues, it has discussed that, the main problem of Ford Pinto was design of cars according to engineers’ viewpoint. There should develop some other criteria considering weights, which have given in below:

Table 2: Allocations of Weights according to Different Criteria

Development of Alternative Decisions

According to allocate weights in terms of different criteria, it is seen that, not only design was the main problem of Ford Pinto, but also other criteria was effecting to loose the market of Ford Pinto in a bad way (Dowie (n.d.)). When the weights have get highest priorities, and then these criteria would selected as alternative management decisions of Ford Pinto to capture again the market like before. Therefore, there are three criteria, which could take as alternative decisions:

• Safety Improvements
• Safer Gas Tank
• Expensive Improvements

Analysis of Selected Alternatives

There are three alternative decisions of management has taken, which should analyzed for further development of decision-making process:

• Safety Improvements: Ford Pinto has gas tank under the bumper behind the car, which was six inches. In later models, the bumper has designed for collision of five miles per hour only. Earlier models did not support safety or protections of human or car itself. Therefore, the engineers of Ford Pinto should take seriously the safety concerns of Ford Pinto as like other models of automobiles of Ford Motor. The new improvement design should be focused experimental safety issues, which would save hundreds of life from accidents.
• Safer Gas Tank: The rear end collisions are main cause of accidents of Ford Pinto from the fuel system, which has found by the managers. Therefore, Ford Motor should take steps to improve the gas tank or to replace safer gas tank of Ford Pinto.
• Expensive Improvements: Ford Pinto is a firetrap for human lives, which has caused millions of dollars to settle the damage issues to the court and spending too many dollars to maintain safety standards of government by lobbying. Ford had pay out lots of dollars to maintain these extra costs, so it is better to take expensive improvement in the total design of Ford Pinto as a diversification strategy, and ignoring the minor alterations.

Selection of an Alternative Way

Three alternative issues of decision-making criteria have analyzed in terms of various issues, like capabilities, opportunities, and ways of taking steps. From these three alternative issues, it would be better to take “expensive improvements” as alternative way of decision-making process.

Implementation of Alternative Way

For making the decision effective and committed to the goals of management analysis, it is important to imply the expensive improvements of Ford Pinto as moral change of total design. For this reason, Ford Motor would require high costs of capital to handle the maintenance and changing costs of Ford Pinto. As a result, the decision should pre-test in terms of market reality and people’s demand of Pinto.

Evaluation of Decision’s Effectiveness

If the pre test strategies of Ford Pinto would be successful for expensive improvements of design and model, then the car should marketed into target market. High promotional activities should also need to prove the safety and other accidental issues that previously happened (HSSE 2008). These would ensure the effectiveness of Ford Pinto ensured by management decision-making process.

Ethics

According to corporate legal issues, many accidents of Ford Pinto had been occurring not only for rear end gas tank, but also for also other ethical issues, like stretch of road, driving speed of drivers, and taking alcohol by drivers in the time of driving. There are two specific organizations, who are taking major notifications about the ethical issues of Ford Pinto, discussed in below:

IEEE (Institute of Electrical and Electronic Engineering) Code of Ethics

IEEE is the world’s leading professional organization for advancement of technologies, also considering automobile industries in their concerns (Perlman 2009). They are mainly concern about the technological advancement how affecting the quality of life of people. For these reasons, they are taking Ford Pinto as ethical issues, which should conduct by the management of Pinto and Ford Motor Company, which are:

• Ford Pinto should take responsibilities in the new decision making process in terms of safety and welfare of general people, and ensuring the endanger factors for people and environment.
• Any real or perceived conflicts with other competitors, like Volkswagen with Ford Pinto should exit.
• Pinto should be honest and realistic to claim with the available data.
• It should reject corruption in any forms.
• As taking the decision of expensive improvements, Pinto should maintain technical development for ordinary public.
• To remove the previous bad reputation of Pinto, it should seek, accept, and offer honest reply of criticism to correct errors and acknowledge in proper manner.
• Pinto should fairly treat all people in context of race, religion, gender, disability, age, and national region as their customers.
• Pinto should stop taking malicious actions on injuring ordinary public and their properties, reputations etc.
• Finally, it should implement these codes of ethics to the member of Ford Pinto as professional development of the Ford Motor.

NSPE (National Society of Professional Engineers) Code of Ethics

Engineers are very important employees for Ford Pinto to maintain honesty and integrity with high standards in their services. If the engineers of Pinto were making a perfect design, then various lives could save. NSPE is another organization, to develop code of ethics for engineers to fulfill the professional duties to hold the standards of professions of them in terms of following issues, which are:

• The engineers of Pinto should hold safety and welfare of people.
• They should also perform their services in proficiency areas.
• The public statements should develop in objective and truthful manner by Ford Pinto;
• Engineers should act as employer or client to be agents and trustees in competitive market.
• They should avoid unreliable act;
• They should also develop themselves as honorable, responsible, ethical, and lawful to maintain the usefulness of their professions;

Culture

Cultural aspects of Ford Pinto are a sociological context of large segment in western society with various standards by modernists and traditionalists. There are many people in the United States and rest of the world are considering their values, lifestyles and other cultural concepts to using and accepting Ford Pinto. The lack of awareness of Pinto in culture, by lots of accidents and taking human lives, it is loosing its strong force in the society of automobile users. As the world is changing rapidly, the group of target customers must be aware with the new positive concepts and cultural aspects of Pinto, which is now considering safety issues of users at first.

From previous analysis, it has seen that, the production and marketing of Pinto is gathering lots of scandal in terms of unsuccessful design of cars. This viewpoint of customers should change by proper explanation of car design in expensive improvements of Pinto. Ford can also limit its dealers with visible modification of Pinto to maintain costs in cultural context.

Findings

From the management analysis, it can say that, Ford Pinto had various problems in terms of management. Ford was gaining losses from 1977 to 2009 in world automobile industries. From the strategic planning, it has focused that, Pinto was ignoring market conditions with lack of research work in pre test analysis of it. The engineers were also designed it in a wrong way with rear end fuel tank, which was caused lots of accidents and taken human lives in United States and worldwide. It was also overlooking competitors, like Volkswagen, Toyota etc. These problems are focusing with help of PEST and SWOT analysis. On the other hand, the group of managers of Ford Pinto was also ignoring and lacking to fulfill their roles and responsibilities in proper manner. According to decision making, the alternative decisions of expensive improvements of moral design and structure of Ford Pinto. The ethical concern is also focusing on company and on it’s’ engineers to maintain their roles and responsibilities in terms of ethical issues, which is helpful for people and environment considering standards and governmental context. Cultural aspects are focusing on the proper maintenance of cultural viewpoint of target customers, and removing scandals to improve their reputation again in the automobile industries and being as successful as Ford Motor itself.

Recommendations

After management analysis and findings of Ford Pinto, it can state that, it is gathering lots of scandals and bad reputation in the automobile users. In the decision making process has discussed that Pinto should take expensive improvements in terms of design and safety issues. Therefore, it can recommend that it should change their moral view to customers of market. It is not easy to say, according to this analysis report, the costs of Pinto is more than benefits. As Pinto was committed accidents almost every year, so it is also expensive to maintain costs of court for legal and ethical context. To promote Pinto in new way, it is also need to develop high promotional activities in United States and Excellent automobile markets. The bad reputation has to remove by ensuring customers and market about safety and human lives concerns. The pre-test analysis is must to check the market reality and capability of customers to take the Pinto again.

Conclusion

Ford Motor is second largest automobile company in worldwide market with lots of successful and profitable brands. Unfortunately, Ford Pinto was an unsuccessful brand of Ford Motor Company with the failure of corporate management malpractice in automobile industries and overlooking environment and customers. The safety concerns were the main hazardous parts of Pinto to fail in achieving target market within high competitive rivalry among market. In addition, the human life should be more concerned in the market research of pre test analysis of Ford Pinto. Therefore, according to this case analysis, Ford Pinto should take expensive improvements in terms of market reality and target market’s demand of it. As it is a required lot of capital to take this strategically movement in the market, Ford Motor should take pre market analysis in terms of safety and customers’ acceptance issues in the market. High promotional issues also need to remove bad concern of Pinto to customers and ensure the market about the total improvements of Pinto in automobile users in United States and also worldwide.

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