In the early 1970's when competition from Japan's auto makers was heating up, gas prics were easing, the demands for energy conservation were just around the corner (awaiting the Arab oil boycotts that arrived first in 1973-74), Ford Motor Company with Lee Iacocca as its president, introduced a new line of cars, the Ford Pinto. The Pinto was to cost less than $2,000 and weigh less that 2,000 pounds.
During crash tests which preceded the introduction of the Pinto to the public, it became apparent that the vehicle had a dangerous design flaw. The gas tank was so designed and located that when it was involved in a rear end collision at an impact speed of 20mph or higher, the tank was apt to rupture, causing a fire or explosion. The tank was only five inches forward of the rear sheet metal of the body and only three inches back of the rear axle housing. In not just one, but most of the rear-end crash tests, the axle housing deformed the tank and sharp, protruding bolts punctured the tank. In only 20 mph moving barrier crashes, the rear end crush distance was large--more than eight inches.
Ford's conclusion, following the crash tests, was that the rear end structure of the car was not satisfactory because of several types of damage deformation of the gas tank, leakage and damage to the filler pipe. Suggested changes to repair the defects were not expensive, something in the range of $11 per car. A confidential company policy memo issued in late 1971, directed that no additional safety features be adopted for the 1973 and later cars until required by law.
A cost-benefit analysis prepared by Ford concluded that it was not cost-effecient to add an $11 per car cost in order to correct the flaws. Benefits derived from spending this amount of money were esteimated to be $49.5 million. This estimate assumed that each death which could be avoided would be worth $200,000, that each major burn injury that could be avoided would be worth $67,000 and that an average repair cost of $700 per car involved in a rear end accident would be avoided. It further assumed that there would be 2,100 burned vehicles, 180 serious burn injuries, and 180 burn deaths in making this calculation. When the unit cost was spread out over the number of cars and light trucks which would be affected by the design change, at a cost of $11 per vehicle, the cost was calculated to be $137 million, much greater then the $49.5 million benefit.