At Your Service: Feb. 10, 2010
Toyota’s woes in the land of automobile safety led me to take a look back at the Ford Pinto. Ironically, the Pinto’s unique capacity to burst into flames at the slightest bump to the rear was the game changer that catapulted Toyota to the top of the heap in the 1970s. It seems that those who do not remember history really are condemned to repeat it.
There was a time when you could tell the national origin of a car by its size. Large cars and land yachts were made in America and smaller or sub-compact cars were made on foreign shores. During the 1960s the Volkswagen beetle and several Japanese cars, including Toyotas, began to encroach in serious numbers on the American market.
In 1971, the Ford Motor Company, under the leadership of a new CEO, decided it wanted to take back its market share by adding a sub-compact car to its line. The product objectives for this new car were simple; the Pinto was to be a sub-compact (not to weigh over 2,000 pounds), have a low cost of ownership (initial price of less than $2,000, low fuel consumption and easy serviceability) and exhibit clear product superiority (appearance, comfort, features, ride and handling and performance).
Unfortunately, safety was not among the listed objectives. When, during early crash tests, it was discovered that the placement of an unprotected gas tank next to the bumper of the car constituted a serious safety hazard, the company did a cost-benefit analysis. Ford’s estimates, as reported in Engineering Magazine and testified to before the U.S. Congress went something like this:
Unsafe cars would cause 180 burn deaths, 180 serious burns injuries and 2,100 burned vehicles each year.
The cost to the company for litigated settlements would be $200,000 per death, $67,000 per injury and $700 per vehicle, for a total anticipated benefit of saving $49.5 million.
The cost of changing the design and fixing the cars would be $11 for each of the 11 million cars and 1.5 million light trucks in the Pinto line, for a total anticipated $137 million dollars.
The conclusion: it was cheaper to let customers burn than to repair the poorly designed Pinto.
The company had miscalculated. In 1978, a California jury awarded a record-breaking $128 million in a lawsuit from a single Pinto accident – three times the amount estimated for all potential accidents. Ford became the first American corporation indicted and prosecuted for criminal homicide charges. Even though they were acquitted of the charges, they ceased production of the Pinto and Ford’s reputation in the compact car market was irreparably damaged.
The new CEO, Lee Iacocca, learned a lesson he would never forget – no cost is higher in the manufacture of a car than compromised safety. While there was a time when Iacocca was often quoted as saying, “Safety doesn’t sell,” he learned that safety was part of the unspoken covenant with customers. It is a lesson the Toyota is learning now.
While we are not manufacturing cars, there is a lesson in this for us all. There are minimum standards for the qualities that distinguish our products and services. Whatever those essential qualities, delivering on them is part of the relationship we have with our customers. If they cannot count on us to meet those minimums, they will not turn to us to meet their needs; they will certainly not pay us for whatever it is we offer them.