American Company Product Liability


Product Recalls

Week 3 – Discussion Question

  • Liability of American Companies: It is believed that the organization, which provides a product to the final customer, bears the ultimate responsibility for that particular product and its implications. Accordingly, the American companies are liable to a great extent for the products that they have manufactured by, or bought from the foreign companies. In fact, these companies should particularly take the responsibility for any kind of harm caused to the customers after the consumption of product purchased from them (Kotler, 2002). In addition, customers are not concerned with the other organizations that are involved in the development of the product. Thus, the basic liability for the products should lie with the American company in this situation; however the role of the overseas companies also need to be defined in more clear terms. In my view, the nature of such liability should be surely based on strict terms of warranty or negligence concepts, as these measures will lend a legal framework to the issue. However, in addition to these business terms & conditions, the incorporation of legal concepts such as moral values, responsibility and integrity cannot be neglected in such cases that deal with the liability concerns. It is expected from every organization to act in a socially responsible and ethical manner in the course of its business processes.
  • Role of Federal government: The Federal government is required to play a pivotal role in overseeing the products that companies sell to the American consumers. It should monitor the existing procedures and methods developed for maintaining the safety of products exported to the US. This will include the efforts to sustain coordination with overseas manufacturers and their regulating authorities. Simultaneously, the federal government should devise new means to advance proper steps undertaken by producers and the U.S. importers to ensure the safety of imported products. In fact, the government should develop a comprehensive approach towards the safety of imports. This can be enabled by the coordination of security & safety measures for allowing the decision makers to leverage the resources in an effective manner (Protecting American Consumers every step of the way, 2007). Finally, it should also keep a periodic check on the concerned authorities and their practices regarding the safety of imports. On the other hand, it is expected from the consumers that they should collect a reasonable amount of information prior to the purchase of a product. As a part of this information age, the customers are expected to develop a fair understanding about the organizations developing products of their interest. However, the consumers cannot be held responsible for a product that later turns out to be defective as it will be not in accordance with the ethical practices of business.
  • It is believed that every organization accords a high priority to the issues related to consumer safety. Subsequently, these organizations need to adopt uniform liability standards for the products manufactured worldwide. In case the liability standards are different for the American-made and foreign- made goods, it will be difficult to protect the consumers from defective products. As a major proportion of the US consumer goods & toys are manufactured in China, the requirement of similar liability standards will be indispensable. In addition, variation in the liability standards will lead to frequent conflicts and ambiguity arising as a consequence of legal issues. Hence, the liability standards should not be different for American-made vis-à-vis foreign made products in order to prevent any kind of ambiguity.

Week 3 – Question 2

In 1960, Ford faced strong competition in the American small car market from several Japanese companies. To mitigate the threats posed by this intense competition, Ford introduced its new car Pinto in a very short span of time. In general, an automobile is produced in a time –period of 43 months but in case of Pinto, company took 25 months to produce it. In the process of production, Ford engineers discovered a major flaw in the design of car. In fact, the fuel system of Pinto failed in all rear-ends test accidents. As assembly-line machinery was previously tooled when engineers identified this defect, top Ford officials decided to manufacture the car anyhow. In fact, safety was not a top priority for Ford when the development of Pinto was in its initial stages.

This Ford Pinto case describes that Ford Motor Company executives knew the fact but still they decided to produce and market the vehicle even after company crash tests revealed that its gas tank would rupture in rear-end collision at a relatively low speed. This reprehensible decision was derived from cost-benefit analysis, which demonstrated that the filing of few inevitable lawsuits by burn victims or their families would cost less than the eleven dollars per car needed to fix the defective tanks. This case draws a significant amount of attention of many journalist and consumer advocates. At the same time, the National Highway transportation Safety Administration began an investigation for Pinto gas tank (Design Defects of the Ford Pinto Gas Tank, 2008).

Legal Analysis Model for Ford Pinto Case

It was observed that the design of Pinto had some significant defects. The design process of this vehicle was undertaken in a streamlined manner. Interestingly, the duration of this process was about 25 months in response to the average period of 43 months. This was basically done to ensure the availability of this vehicle with the other models of the decade. As per specifications, Pinto was to weigh less than 2000 pounds and cost less than $2000. As a consequence of a relatively short period for design and certain strict constraints, comprises regarding were safety were unavoidable. In addition, the organization failed to utilize the scientific knowledge properly in the design process of Pinto.

At a time when Pinto's design process was in nascent stages, no government safety standards related to fuel leakage in the rear end collisions were in existence. In the later stages, upon the development of government standards Ford designed its processes, accordingly. At the same time, various testing procedures were undertaken to determine Pinto's compliance with these standards (US vs. Ford Pinto, 2008).

Ethical Case Analysis

In the 1970s, some events related to the Ford Pinto automobile pointed up some of the ethical issues associated with technology and safety. In an endeavor to bring into being a stylish but reasonably priced subcompact automobile with a low operating cost, Ford Motor Company management made a questionable decision regarding the positioning of and safety for the fuel tank. A safer gas tank and tank location were technologically feasible, but consumer affordability and style took precedence over safety. Ford engineers were constrained by design and cost limitations and the case therefore explains that manufacturing decisions are often made in the context of marketing strategies.

An additional instance of a constraint on the engineers was that management actually mandated that the car cost should not be more than $2000 and weigh no more than 2000 pounds. If these limitations were really set in the beginning, the engineers would have been forced in many areas related to safety. In view of these design and cost limitations, it is unfair to hold the engineers morally accountable for the preventable Pinto fire injury and deaths. Other issues illustrated by the ethical case analysis relate to the explanation of safety, proper responsibilities and professional obligations of engineers, the interactions between different parts of organizations, ethical management decision-making and effective government safety policies.

Final Overview

Solution 1 – The Manufacturer:

The Manufacturer: Manufacturers of Pinto should have not followed such kind of economic theory to gain cost advantage. In fact, it is considered to be an unethical practice by the organization to shy away form their responsibility towards the safety of the consumers. The manufacturing process undertaken failed to take into consideration various consequences. These included the negative publicity born by Ford as a result of the lawsuits filed against the company. In fact, the safety of human life needs to be given top priority by all organizations. The risk & benefit analysis also has certain advantages. Such analysis enables the company to minimize risks arising out of large accident costs.

Element-1 The Contract View Theory

This theory suggests some duties for the manufacturers, which can be as follows:

  • Duty to Comply: Product must be reasonably safe for its intended use.
  • Duty of Disclosure: Disclose relevant facts.
  • Duty not to misrepresent: Manufacturer should not mislead the consumer.

The Due Care Theory - This theory explains that a seller has better knowledge and expertise than buyer. Seller has a duty to exercise due care to protect consumers from harm that the seller can reasonably foresee. Seller should protect consumers in terms of design, choice of materials, manufacturing process, quality control, warnings, labels and instructions. Failure by seller to exercise due care is considered to be negligence (Schumann, 2008).

The approach which is most persuasive in the case of Ford Pinto is “The Contract View Theory”, because by applying this theory, manufacturers of Pinto can reconstruct their model with special safety measures. Manufacturer of Pinto should disclose relevant facts about its design so that consumers can be well aware about its uses. In the allocation of duty, the given parameters need to be taken into account:

  • Existing safety standards in which a model Pinto is produced and sold do not meet with the safety standards set by government.
  • A manufacturer should not follow a cost/benefit analysis to determine the addition of safety features.
  • Manufacturer should ensure the safety of a product to prevent the customers from any kind of inconvenience.
  • It is believed that the safety measures should definitely be included so that a manufacturer can meet the predetermined requirements.
  • Manufacturer should frame his goal according to the type of customer he is serving and the durability of product.

Element-2 Ford violated its duty of care by failing to act as a reasonable organization. A reasonable manufacturer of a low-priced economy car should behave in the following manner:

  • At the time of manufacturing and delivery of the product, it should fulfill the existing safety standards decided by government.
  • Manufacturer should undertake a cost/benefit analysis but more importantly he should concentrate on implementing the additional safety measures.
  • Manufacturer of a low-priced economy car should strictly emphasize on the introduction of completely safe products.
  • Safety features like design, choice of materials, manufacturing process, quality control, warnings and instructions should be added to meet this requirement.
  • At all the levels of consumers, manufacturer should aim to achieve his goal.

Element-3: The violation of duties by Ford is the major cause of injury suffered by the parties. These are some facts, which describe that Ford had breached its duties:

  • The National Highway Traffic Safety Administration (NHTSA) was enacted to put into effect the standards created by the “The National Traffic and Motor Vehicle Safety Act” of 1966.
  • The Center for Auto Safety noted a significant number of accident reports involving burn deaths in the Ford Pinto.
  • Ford hurried Pinto into production because of industry competition.
  • In September 1977, NHTSA investigated the Pinto's fuel tank system and ran an engineering analysis of Pinto.
  • In February 1978, a California judge handed down a decision that assessed $125 million in disciplinary damages in opposition to Ford.

Solution 2 - The Consumer:

Element – 1: The duties of a consumer at the time of purchasing a car:

  • If existing safety standards are met at the time the product is produced and sold to the public, he should explicitly agree to assume the risk for any additional damages.
  • A consumer is expected to do an independent cost/benefit analysis of a product prior to making a purchase decision.
  • A consumer who performs a cost/benefit analysis based on its lower price should assume the risk of lessened safety, because the product which is purchased is low priced.
  • Safety features like quality assurance, high quality manufacturing process, warnings and instructions assume great importance for a consumer at the time of purchasing an inexpensive product.

Element–2: With the help of this case of the Ford Pinto, we can conclude that consumer is not failed to act as a reasonable person when he or she demands more safety than they are willing to pay for while purchasing the product. These are some parameters of reasonableness in which a consumer is expected to fit:

  • Goods that they purchase from a trader are of acceptable quality.
  • Goods they purchase from a trader should meet their requirements.
  • Consumers have the ability to redress if the goods and services they bought do not meet their guarantees.
  • Goods they purchase are safe to use.
  • Consumers expect not to be misled or deceived about the goods or services they are buying (Rights and responsibilities of consumers and businesses, 2008).

Element-3: The violation of duty by a consumer in case of Ford Pinto has contributed to the damage suffered by company. If consumer of Ford pinto had followed their duties of reasonable purchase decision by evaluating all its aspects, this damage which is caused must have been prevented. Hence, we can say that consumer reasonableness for purchase decision is very important in any purchase.

Solution 3 – Reflection:

The theory of John Rawls' revolves around two things; firstly, to have an ethical guideline, which will administer a society. In order to follow the guideline, a proper course of action should be taken. Secondly, essential rules of justice should be implemented. As per the Rawls' theory, in the process of distributing goods and benefits, as well as in the actual distribution itself, one compensates for social and economic inequalities. (Harsch, 2006)

The social and economic inequalities should be properly addressed in a way that prevents the organization from entering in a disadvantageous situation. It should be addressed by the proper implementation of strategies focusing on social and economic inequalities. Also, the lacunae between equality and inequality should be lessened while making these strategies. An individual should not sacrifice when going with the process of distribution of goods and services.

The Political Power, if not properly balanced, leads to the establishment of institutions that perpetuate inequality in power. This in turn will uplift the instability in politics. The political instability will affect the market also as the beneficiaries of the market are those possessing wealth and power. The impoverished sections lack in the resources and power to influence the distribution of goods and services. A proper balance should be maintained between the “less advantaged” and “advantaged” section. In addition, the companies should properly segment the market.

The processes which will be followed to provide consumers with an appropriate amount of information about the products that they are buying are as follows:

  • Seller should use its expertise to protect the customers.
  • Seller should inform about all types of potential harms related to product & services to the customer.
  • Seller should inform the customer about the quality assurance of the product.
  • Customer should be provided instruction to use the product.
  • Safety measures should be taken.

The shift from the contract theory to the due care theory of law reflects the acceptance of the principles given by John Rawls. The contract theory is more focused on the consumer's reliability on the product and the relevant facts of the product. In the modern times, the consumer does not have much time to focus on the product, search for its alternatives and select the best one. As a consequence, the consumer relies more on the seller these days. The due care theory suggests that the seller should have information about the product and refrain from misleading the consumer with regard to the facts of the product.

Prior to the launching of a car in the market, a detailed amount of research-work is carried out. The company ensures that the model is as per the recognized design guidelines and safe to use. A proper safety policy should be framed by the company. To balance the needs for safety vis-à-vis the desire for moderately-priced vehicles, the manufacturer should go through a testing procedure of the vehicle. Even test-drive at times is beneficial in this regard. The constraints on safety would not be entertained by any consumer.

Solution 4 – Lessons learned:

In order to gain a competitive advantage over its Japanese rivals, Ford launched its new model Pinto. However, the engineers noticed various faults in the design process of this vehicle. The major flaw was related to the explosion of gas tank, which would lead to burn injuries or burn death of the passengers of the car. Surprisingly, a Pinto failure never really happened. In fact, the technology prevented any kind of disaster. Although the top management had various opportunities to minimize the harm done by Pinto, yet it failed to capitalize on them (Design defects of the Ford Pinto gas tank, 2008).

As in reference to the given current scenario, Ford did not learn any lesson from Pinto case. The management faced the same problem in various models of the company – Use of Firestone tires in Ford explorer, Ford Crown Victoria, 15 passenger van, Ford's truck and Sport utility vehicles (S.U.V). The same problems would not have been repeated had there been some kind of learning from the Pinto case. The organisation should have made certain efforts to rectify the problems related to Pinto. The burn injuries and burn deaths, which the models were facing, should have been amended on a priority basis by Ford (Grimshaw v Ford Motor Company, 2008).

Parameters which are to be drawn between regulation to safety and from consumer's liability/privilege of choosing the amount of risk are as follows:

  • Quality control,
  • High quality design,
  • Safety measurements,
  • Warnings,
  • Instructions for use.

When the goods are purchased and a risk of injury occurs, the manufacturer is held responsible for it, in view of their involvement in the production process. The customers cannot be held responsible for the risk of injury, as the customers are believed to be most crucial entity in the market. In simple terms, the manufacturer cannot transfer their part of risk to the consumers.


Design Defects of the Ford Pinto Gas Tank. (2008). Retrieved July 15, 2008, from

Grimshaw vs. Ford Motor Company. (2008). Retrieved July 15, 2008, from

Harsch, E. (2006). Combating inequality in Africa. Retrieved July 15, 2008, from

Kotler, P. (2002). Marketing Management. New Delhi: Prentice Hall of India Private Ltd.

Protecting American Consumers every step of the way. (2007). Retrieved July 15, 2008, from

Rights and responsibilities of consumers and businesses. (2008). Retrieved July 15, 2008, from

Schumann, P.L. (2008). Product safety, consumer protection, & deceptive marketing. Retrieved July 15, 2008, from

US vs Ford Pinto. (2008). Retrieved July 15, 2008, from

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