Thursday, January 18, 2018
Business

GM case has echoes of Ford's infamous Pinto

In the late 1960s, a charismatic vice president at Ford decided to bring out a low-priced car that could be produced for little money while bringing in huge profits. The executive's name was Lee Iacocca, and the Pinto he championed became one of the most infamous models in U.S. automotive history. Why? Because to save money, Ford released a car that could explode in even low-speed rear-end collisions.

I still teach the Pinto case to my law students as an example of how profits sometimes overwhelm principle. Even a savings of a couple of bucks per vehicle becomes significant when multiplied over the course of production.

Recently, another Detroit CEO, Mary Barra, sat before a congressional committee answering withering questions about the Cobalt, a low-cost car produced by GM with a design flaw that the company acknowledges was responsible for more than a dozen deaths. For those of us who teach the Pinto case, the similarities are unsettling.

As with the Pinto, the problem with GM's Cobalt involved a design flaw — in this case, a faulty ignition switch that could shift, under certain circumstances, from the "run" position to the "accessory" position while the car was being driven. This led to a loss of power and a shutdown of the power-steering and air-bag systems. Documents indicate that GM knew of the defect as far back as 2004, but tdid not recall vehicles until this year. By that time, the flaw had been implicated in at least 13 deaths and 31 crashes.

So, has GM pulled a Pinto? You be the judge.

The impetus for Ford's making the Pinto came from Iacocca, who wanted to achieve a 2,000/2,000 car: a vehicle that would weigh less than 2,000 pounds and could be sold for less than $2,000. That was tconsidered a sure bet to make a fortune.

To meet those goals, however, the Pinto was stripped of some basic safety elements. The car was fitted with a flimsy bumper located just inches from the gas tank, which had design flaws of its own. The combination of problems meant the gas tank was likely to rupture and explode in even low-speed collisions. This risk could have been largely abated by an inexpensive gas-tank liner and other simple, non-costly fixes, including some costing as little as a couple of dollars per car.

The company's own crash tests before the Pinto's release made clear that the gas tank was subject to rupture in a rear-end crash at relatively low speeds. But a reluctance to add cost — a production-line fix would have added, by Ford's estimate, about $11 a car — kept the company from addressing the problem in advance. Later, when the scope of the problem was becoming clear, Ford executives calculated that it would be cheaper to pay out damages than to spend the money to protect drivers and passengers.

By the time the Pintos were coming off the line, its chief champion, Iacocca, had been named president of Ford. Later, he headed Chrysler, where he was credited with bringing the company back from the financial brink and was embraced by presidents and the public as an icon of the industry.

Iacocca fared a lot better than some Pinto owners. One case we study in class is that of Grimshaw vs. Ford Motor Co. The case was brought on behalf of Richard Grimshaw, who was 13 and riding in his neighbor's Pinto when it was hit from behind after stalling on a road. The driver suffered severe burns to her entire body, which led to her dying soon thereafter from heart failure. Grimshaw survived but with permanently disfiguring burns to his entire body. The jury appeared as horrified by Ford's disregard of customer safety as it was by the crash itself. It hit Ford with a $122-million punitive award, which the court later reduced to $3.5 million.

According to documents, it appears that GM identified the problem with the Cobalt in the early 2000s but rejected a fix due to a "tooling cost" deemed too high. The families and friends of those who died because of the Cobalt's design flaws — like those who lost loved ones in Pintos — would certainly disagree.

Jonathan Turley is a law professor at George Washington University. He wrote this for the Los Angeles Times.

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