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Archive for March, 2010

Stop Promoting the Pinto Myth

Monday, March 15th, 2010

In late 1977 the Ford Pinto became infamous as a result of a controversial Mother Jones magazine article by Mark Dowie titled Pinto Madness. Dowie denounced the 1970s Ford Pinto sub-compact as a firebomb vulnerable to fatal explosions caused by rear end collisions. Dowie also claimed that Ford chose economics over human life – but that is an outright lie. Dowie’s so-called facts were debunked 20 years ago by Rutger’s Law Review.

The Pinto Case is cited widely in the academic literature of business management, organisational behaviour, management ethics and related disciplines. My question is why? The facts of the case are well documented in law journals – yet the Pinto myth maintains traction in business schools around the world. One article wrote that if it was untrue then it is the very case that an ethics course would invent. In that light, it is time for the Myth of the Pinto to be pushed aside by the facts of the case.

The Ford Pinto Myth as Espoused by Business School Professors

The case of the Ford Pinto, in the early 1970s, is usually put forward to students as a matter of fact. The young Turk Iacocca, rising on the success of the Ford Mustang, pushed for a sub-compact car to cost no more than $2000 and weigh no more than 2000 pounds. The production schedule of the Pinto was only 25 months, whereas industry standard was 43 months. In crashes over 25 miles per hour the fuel tank always ruptured spilling fuel onto the road, the low fuel tank was situated behind the differential and would get rammed into it on collision causing a spark and then ignition. At the same time, a rear end collision would cause the doors to jam shut and the result was a deadly fireball that incinerated the occupants.

The story gets more sinister when it turns out that the Capri’s tank was higher and therefore did not suffer the same problem. The Pinto’s fuel tank problem went unfixed for several reasons: Iacocca wanted the Pinto in showrooms by 1971; Iacocca would not suffer negative reports so nobody told him this flaw had been identified during testing (safety was not a Ford priority); and, a cost-benefit analysis of loss of lives compensation versus the cost of fixing the Ford Pinto’s fuel tank meant it was cheaper for Ford to ignore the problem and pay off the victims.

The cure would have been a simple $11 per vehicle fire prevention device… and an alternative bladder could have achieved the safety requirement for a mere $5.08 per vehicle. At around this time the academic has their student morally enraged.

The story is BULLSHIT and it is time that academics from the business schools stop spreading it around as the truth.

The Pinto Myth Debunked in Rutger’s Law Review, 1991

Enter another professional body that has well and truly debunked this myth a good 20 years ago – Myth of the Ford Pinto Case is from Rutgerā€™s Law Review, 1991 volume 43:1013. You can download the Myth of the Ford Pinto Case from PointofLaw (link on the right side of their page). You can also read Grimshaw v Ford Motor Company (1981) online.

Read the rest of this entry »

Cold Steel (Book Review)

Wednesday, March 3rd, 2010

Cold Steel

The setting was the global steel industry in the years preceding the Global Financial Crisis. The companies involved were Mittal Steel and the Luxembourg based Arcelor. The combatants were Lakshmi and Aditya Mittal’s vision of a globalised steel industry, a vision of rationalisation and economies of scale; Guy Dolle’s vision of a global steel industry was a European Arcelor focused on the high end of the market. Mittal Steel served mainly the low end of the steel industry in volume; Arcelor served the higher end of the steel industry with quality… and never the twain shall meet.

In the Tim Bouquet and Byron Ousey non-fiction novel Cold Steel: Laksmi Mittal and the multi-billion dollar battle for a global empire the reader is taken behind the scenes on perhaps the largest hostile corporate takeover of all time. It was also the most complex due to the immensity of the two organisation’s respective footholds in various parts of the world, coming under various authoritative bodies and numerous governments. There were the race cards, the backroom handshakes and the inevitable retinue of corporate bankers, spin doctors and strategists. This is the inside story of a hostile corporate takeover through the eyes and perspectives of the significant players.

This book came across my desk as a textbook in the MBA unit BMA799 Strategic Management so I cannot say if this review would ever had occurred without that exposure to a required reading list. However, having read Cold Steel it really read like the thriller it promised in a chess game format – move for move strategies employed by either side. I would highly recommend anybody interested in business to give it a read.

I guess the most disturbing point from my perspective as somebody who is worried that we’re too focused on economy, exploitation and greed is that the world is in fact run this way. More is more is the general philosophy that you have to buy into to agree with either side of this takeover battle… its a globalisation adventure story for potential CEOs and Board members of the future.

My suggestion is read Cold Steel simply to understand how globalisation leaders tick and how governments work, sometimes counter to the ideals of free trade that they espouse externally. Understanding how our resources are being exploited and in what volume because that provides some insight into why we need to keep corporations under control.

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About the Author

Steven Clark Steven Clark - the stand up guy on this site

My name is Steven Clark and I live in the Derwent Valley in Southern Tasmania. I have an MBA (Specialisation) and a Bachelor of Computing from the University of Tasmania. I'm a mazer & a yeast farmer (making beer, fruit wine and mead as by-products of continuous improvement in my farming practices). I'm a photographer, although my film cameras are currently silent. I do not tolerate idiots. I do not tolerate bigotry. I do not tolerate excuses. Let's be clear, if you sit with my enemies you my are my enemy for life.

Blogger. Thinker. Brewer. Drinker. Life partner to the amazing and incredible Megan.

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