Life Versus Money When Companies Weigh Up Consequences
In 1973 the Ford motor company published an innocent-sounding memo titled “Fatalities Associated with Crash Induced Fuel Leakage and Fires”.
The document, which went on to be known infamously as the “Pinto Memo”, used cost-benefit analysis to compare the price of modifications to the Ford Pinto to the societal costs for injuries and deaths related to fires caused by a known design fault.
In the memo Ford estimated the cost of modifying the Pinto’s fuel system to be $137 million across the 12.5 million cars manufactured. If the system was left unmodified Ford estimated there would be an additional 180 burn deaths and 180 serious injuries per year which would cost around $49.5 million. A maths problem — more than $130 million to fix, almost $50 million to pay up.
The Pinto was not recalled.
The ‘Pinto Memo’ was quoted as a key factor in a jury’s 1978 decision to award $125 million in damages against Ford in a case involving the rupture and explosion of a fuel tank during a crash.
Anyone who has seen the movie Fight Club is familiar with this scenario, but many do not realise it was based on a true story.
