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Grimshaw vs. Ford Motor Company

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Tyler Decker

on 12 September 2013

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Transcript of Grimshaw vs. Ford Motor Company

Grimshaw vs. Ford Motor Company
The main Issue surrounding this case was that of the decision made by the upper management team of Ford to go ahead with the production of an unsafe vehicle, even when they were fully aware of the hazards.
During this case, as well as in other cases, there have been arguments both for, and against the use of such an analysis.
Economic Analysis is a very efficient way to compute the potential economic outcomes of business decisions, and is an accepted method by businesses and the court system alike
I feel that the application of the law in this case was accurate. I feel that Ford should have more closely and heavily weighed the cost of the lives of those that would be lost in using this new vehicle. In today's market, I believe that a business decision that would result in this many deaths and injuries would easily put a company, even as large as Ford, out of business.
This case was answered with what is called the
Statement of Facts
Mrs. Grey & Richard Grimshaw suffered major burns after their new Ford Pinto stalled in highway traffic and was struck from behind by a Ford Galaxie
Mrs. Grey died of congestive heart failure while Grimshaw underwent multiple skin grafts over a 10 year period
Statement of Facts (cont.):
Grimshaw sues Ford for damages due to vehicles unsafe design, and Ford's Negligence and recklessness in keeping the vehicle in production
The result of the court is as follows:
$560,000 Compensatory Damages awarded to the Grey Family
$2.5 Million Compensatory Damages awarded to Matthew Grimshaw
$125 Million in Punitive Damages originally awarded by jury - later reduced to $3.5 Million
Ford performed an economic cost-benefit analysis prior to the release of the Pinto...

Based on that analysis, they determined...
It was determined that the cost to keep the cars in production "as is" incurred the cost shown below:
Savings: 180 burn deaths, 180 serious burn injuries, 2100 burned vehicles

Unit Cost: $200,000 per death, $67,000 per burn injury, $700 per vehicle

Total Benefit: 180($200,000) + 180 ($67,000) + 2100($700) = $49.5 Million Dollars
It was determined that to fix the safety issues with the vehicles, the cost incured by Ford would have been as follows:
Sales: 11 million Cars, 1.5 million light trucks

Unit Cost: $11 per car, $11 per Truck

Total Cost: 11 million($11) + 1.5 million($11) = $137 million
It is also important to note that often times the jury will not have such a subjective view when human lives are put into the equation, as shown in this case.
It is also important to note that it was found that the numbers that Ford used to evaluate the cost - benefit analysis were far greater than they needed to be. This made the cost differences far greater than they may have been in real life. It was estimated that the cost to fix the fuel tank in each vehicle would have actually cost around $5.00 instead of $11.00
Negligence Efficiency Statement
This argument discusses the idea that a company is willing to make an ethically negligent decision in order to make an economically efficient gain.

I hope this gives you a clear understanding of the Grimshaw vs. Ford Motor Company Case and some of the issues with Economic Cost-Benefit Analysis
Full transcript