A VIEW FROM
In Indiana, in 1978, three teenage girls were on their way to volleyball practice.
They stopped at a petrol station to fill up their Ford Pinto.
As they drove away, their petrol cap fell off so they stopped to retrieve it.
Before they could get out of the Pinto, it was hit by a two-ton van travelling at 50mph.
The petrol tank exploded and the three girls were burnt to death.
The van that hit them was found to contain illegal substances.
So, the family of the three girls sued the van driver, right? Wrong. They sued Ford, the manufacturer of the Pinto. Because the fault that caused the petrol tank to explode was known to Ford and could easily have been fixed, for just $11.
Ford admitted that it knew about the fault and, in fact, it had contributed to previous deaths, but it decided to do nothing about it. So that’s an open and shut case, right? Wrong again. Ford defended its decision to do nothing on the basis of risk/ benefit analysis.
Under American law, if the cost of correcting a fault outweighed the cost of damage to the public, the manufacturer didn’t have to correct it. And so that was Ford’s defence. It produced the following numbers in court as its argument.
The cost of correcting the fault to the petrol tank was $11 per vehicle.
But the fault could be in 11 million cars and 1.5 million trucks, so the overall cost could be $137m.
Whereas Ford calculated the number of deaths would probably be 180, the number of injuries also probably 180, and the numbers of destroyed vehicles 2,100.
Cost per death was estimated at $200,000, cost per injury $ 67,000, and cost per vehicle $700. Which all added up to $ 49.5m. So, the benefit-versus- cost analysis worked out at $137m to fix the fault versus $ 49.5m to ignore it.
Obviously, it made financial sense to let a few people die.
The company was clearly behaving in a prudent, fiscally responsible fashion.
This argument was based on a precedent established by Judge Learned Hands in 1947.
The logic was that a company couldn’t safeguard against every possible eventuality, so a reasonable compromise had to be struck. The judge encapsulated this in his formula: B< PL. Where B = cost of prevention, P = the probability of harm, and L = the cost of that harm.
Like most algorithms, it assumed that numbers were the only reality. But, of course, they aren’t. Ford was found not guilty based on this formula. And if numbers were the only reality, that would be the end of the matter – but it wasn’t.
For us, the learning is that the trial irreparably damaged Ford’s reputation.
Ford was seen as making dangerous, low- quality cars.
The management was seen as callous and uncaring about customers’ lives.
Millions of Pintos had to be recalled to fix the problem, so no money was saved. The chairman of Ford, Lee Iacocca, was fired. And within a year the entire Pinto range was scrapped.
In a final piece of stupidity, six months after their deaths, the mother of the girls received a massmailing letter notifying her of the recall of her Ford Pinto.
To have the $11 safety modification fitted.