The following figures are drawn from the 1968 memorandum written by and circulated amongst senior management
at the Ford Motor Company concerning cost-benefit analysis of retrofitting the Pinto before sending the car into the marketplace.
Fatalities Associated with Crash-Induced Fuel Leakage and Fires
Expected Costs of producing the Pinto with fuel tank modifications:
* Expected unit sales: 11 million vehicles (includes utility vehicles built on same chassis)
* Modification costs per unit: $11.00
* Total Cost: $121 million
[= 11,000,000 vehicles x $11.00 per unit]
Expected Costs of producing the Pinto without fuel tank modifications:
* Expected accident results (assuming 2100 accidents):
180 burn deaths
180 serious burn injuries
2100 burned out vehicles
* Unit costs of accident results (assuming out of court settlements):
$200,000 per burn death*
$67,000 per serious injury
$700 per burned out vehicle
* Total Costs: $49.53 million
[= (180 deaths x $200k) + (180 injuries x $67k) + (2100 vehicles x $700 per vehicle)]
Thus, the costs for fixing the Pinto was $121 million, while settling cases where injuries occur was only $50 million. With such a difference in costs, Ford decided to manufacture and market the Pinto without fuel tank modifications.
What would you do? Why?
*By the way, the $200k and $67k figures for the average value of a lost or injured adult life is drawn from the NHTSA (National Highway Traffic Safety Administration) calculation of the estimated costs to society of automobile accidents. It is not a low-ball figure fabricated by Ford. (For example, the $200k for death was calculated by adding estimated direct costs of $163k -- such as loss of future earnings, plus $37k of indirect costs -- such as hospital and insurance costs, legal and court costs, victim pain and suffering, funeral costs, and property damage.) This is the calculation typically used by the U.S. Federal government for performing cost-benefit analyses of highway construction projects (e.g. determining how safely we should build our roads and highways). Even today, such figures are commonly used by many state and local, as well as federal, government agencies to weigh costs of various tax-supported programs.
