I've watched the Milton Friedman video several times in which he debates a young socialist on the issue of the ethics of Ford producing the Pinto. But, to my knowledge, the forums have not directly discussed this specific issue--one which is constantly brought up as "proof" of why the market will murder its unwitting consumers any chance it gets and cannot be trusted to self-regulate.
How can Ford producing the Pinto be easily justified to those not acquainted with the ideas of the free market?
In the industry there are things called "zero days". These are issues known to the manufacturers before a good is marketed but which aren't addressed for lack of time and/or funds.
Ford knew about the Pinto's propensity for catching fire (and, much more damning, about the well known gearbox issues which caused even more fatalities) but, cynically, did the math and found it was just cheaper to keep on producing the car without alterations and settling the lawsuits as they came than recalling the hundreds of thousands of cars sold to 1977, when the issue came into open knowledge and NHTSA intervened. Following the First Oil Crisis Ford (like other US manufacturers) Ford saw sales of their big gass guzzling V6 and V8 plummet and, with the Japanese becoming more and more threatening, desperately needed the Pinto to stay in production, unchanged, to keep the factory doors open.
While superficially this may sound reasonable, Ford cannot be excused from a business point of view for its behavior.
First, selling a known defective products to customers is a sure way of ensuring they will never buy from you in the future. Just look at the sales of Honda's and Toyota's after the Pinto issues became public knowledge. In the second half of the '80s Ford came so close to going under due to their tarnished image they actually started fitting Yamaha engines and gearboxes to some of their Taurus models and advertising the fact. And as much as I hate saying this (because most people deserve only to be tied to a missile loaded with high explosive and shot at the Moon), the customer is one firm's most valuable asset. Customers need to be kept happy: unless you have a government-sanctioned monopoly they can always go and buy from somebody else. They did so after the Pinto: they bought Honda's and Toyota's in huge numbers. Had Ford depended only on their US operations they would have required a government bailout (like Chrysler) or would have deservedly gone under because customers were dumping their products for the competition's.
Second, Ford had a ready solution for replacing the Pinto: the Europe-only Cortina and Taunus, which were absolutely trouble-free and could be manufactured in the US no problem. Why Ford didn't do this? Easy: old fashioned greed. Manufacturing a Taunus was more expensive than manufacturing a Pinto. US-only models tend to be considerably cheaper to manufacture than Europe-only models and much cheaper than Japan-only models. Why is that? The US market has many peculiarities but one stands up above all others: cars need to be cheap. Offering the Taunus at the same price as the Pinto would have cut into Ford's profits (though they would have still made money on every car sold) and maintaining the same profit margin as in Europe would have meant raising the price too much.
Third, every company needs to have an image. Honda and Toyota, for example, are synonmous with unbelievable reliability and good value for money. Both companies will go to incredible lengths to preserve this image and, if possible, improve it. What image was Ford trying to build with the Pinto? "Yes, we know there's a statistically unpleasant high chance the car will kill you but look how cheap it is!".
Fourth, integrity. Soichiro Honda was well known for telling his employees they had to design vehicles they would want to drive/ride themselves. And being a crazy old man he is well known for having abused engineers and designers both verbally and physically when he discovered some defect which threatened his firm's image and his customers' satisfaction. Obviously the Ford management had a much more laidback attitude or, much more bluntly, they lacked integrity.
Kakugo, you are definitely knowledgeable about the car industry and show it by write large wordy posts about how sucky the US car industry is, all the while never proposing a theory for why or saying how to fix it. I'm sure everyone here agrees - they all suck! What's your point? Are you proposing more regs, more bailouts, more unionisation, more protectionism, more mercantilism - the thing that got us here in the first place?
Technically speaking the US car industry was on a downward slope before the first heavy round of legislation was implemented under Nixon.
In the '50s Honda (still producing just motorcycles) and VolksWagen invested very heavily in technologies which allowed their vehicles to be assembled even by unskilled labor and still maintain a steady high quality. Honda also invested very, very heavily in light alloy injection molding while everybody else was still using sand casting on large scale. Starting with the late '50s-early '60s the Japanese started applying statistics to improve quality control. The idea was nothing new (it had originally been developed by Motorola) but it was the first time it was implemented on such a large scale. By 1968, the year Japan really heated up the so called motorcycle wars and Japanese cars started arriving in Europe, Japan had a definitive qualitative edge over all competitors, even the Germans. Sure, there was no way a Toyota Corona could outaccelerate a Ford Mustang 402 or outturn a Lotus Seven, but it started every morning and didn't require continous (and expensive) maintenance just to stay on the road.
In the meantime what had the US car industry done? Nothing. Pretty much like the British magnates who owned Triumph, Norton and BSA, their US homologues had laughed at the "rice burners from Japan" and continued to produce more of the same and in the same fashion. The US public associated small cars with lightweight sports cars from Britain, and these were not seen as a meanignful threat by the US car industry: these were aimed at a market segment they had no interest in and, if possible, were even more unreliable than their US counterparts.
In 1960 Buick tried to differentiate itself from the rest by introducing a revolutionary light alloy small block 3500cc V8, the 215. However quality control issues and political pressure condemned it to the scrap heap after just one year. By political pressure I mean the steel workers' unions feared the engine may prove so successful that other manufacturers may soon follow Buick's example and hence cut into their business (engines at the time were mostly cast iron), hence they applied pressure through the UAW. The British picked the 215 from the scrap heap for pennies and turned it into one of the most successful engines of all times: the Rover V8.
1969 is usually seen as the high water mark of the US car industry. It was on downward trend in 1971 already when the first piece of safety legislature (bumper crash test) was introduced. The First Oil Crisis (1973) simply hit a nail that's had already been laid.
There are many paralles between the US car industry and the British motorcycle industry. Then why didn't the former followed the faith of the latter? A few reasons. First, the US government effectively helped domestic manufacturers by slapping high tariffs on imports (and later by bailing them out directly). That's why a Honda Civic cost so much more than a Ford Pinto. Second, the US car manufacturers always had a strong credit line, something the British lost in the late '60s. US banks were always ready and willing to lend money to domestic manufacturers for political reasons, not because they believed them to be a good investments. Part of the inflation which defined the '70s went into bailing out GM, Ford and Chrysler indirectly. Last but not least, US car manufacturers have always had an extremely faithful domestic following. British and Italian motorcycle owners jumped on Honda and Kawasaki en masse as soon as they realized their products were so superior. By contrast many, many US car owners kept on "buying American" even when the product offered was so inferior to the competition.
Just wanted to throw in a point about 'The Big Three' were monopoly men long before they railroaded Tucker, working to eliminate the electric rail car in the 20s.
Not sure if the fact that dozens of automakers and engine suppliers went under during the depression and WWII is relevant. Competition never came back until the Japanese waded through Nader's redtape. Not that they're any better. All the major auto companies seem to think they can just lobby their way to prosperity.
Kakugo, again, you wrote a bunch of text that made no point. What is it!!? More government? Less government? What? Oh, and write it one sentence.
It means that government is not the only issue. Bad management and people's personal choices (consciously buying a much inferior product for emotional reasons) carry an extremely significant weight.
(1) the ford pinto was statistically no more dangerous than other cars.
(2) if the co. knew about the deaths that would ensue but deemed them justifiable because it would not be above the norm, then perhaps one might question the safety standards themselves, which make people complacent when they could get more money on the market for improving safety and not just meeting a certain minimum.
SEE: Wikipedia
In a 1991 paper, The Myth of the Ford Pinto Case, for the Rutgers Law Review, Gary T. Schwartz[7] said the case against the Pinto was not clear-cut.[23][24]
According to his study, the number who died in Pinto rear-impact fires was well below the hundreds cited in contemporary news reports and closer to the 27 recorded by a limited National Highway Traffic Safety Administration database. Given the Pinto's production figures (over 2 million built), this was not substantially worse than typical for the time. Schwartz said that the car was no more fire-prone than other cars of the time, that its fatality rates were lower than comparably sized imported automobiles...
Schwartz's study said:
You're clearly too timid to say it. Ok, I'll say it for you: the federal government would do a much better job making cars for us (or at least, fascistly regulating them) because:
What do you think?
@fakename: touché!
How did you get that from Kakugo's posts?
Is there such a thing as involuntary acceptance? To me it seems like an oxymoron per se. Yet it is mentioned in mainstream economics and law to describe "disparity in bargaining power". I suppose this ties back into the idea that there can exist no true monopoly in a free market. But what about a man who needs a medical procedure that is can only be performed by one surgeon? Do you think there exists a so-called disparity in bargaining power?
Kakugo:In the second half of the '80s Ford came so close to going under due to their tarnished image they actually started fitting Yamaha engines and gearboxes to some of their Taurus models and advertising the fact.
I think you have your years a bit off. The Yamaha engine and gear box of which you write was in the V6 Taurus SHO, introduced in 1999. Ford's turn around had already happened years before, in a small way with the new look of the 1983 Thunderbird, and fully with the introduction of the Taurus for the 1986 model year. By 1989, Ford had two of the top three selling cars in the US (Taurus and Escort), and two of the top three selling trucks in the US (F-Series and Ranger, the former the world's best selling vehicle at the time), and was rapidly gaining on GM as the largest auto manufacturer in the world.
The Yamaha-powered SHO was a novelty. In the eleven years the SHO was produced, Yamaha-powered for the first seven of them, just over 106,000 were sold. By 1999, on the other hand, total Taurus sales were over two million.
faber est suae quisque fortunae