Below is a slightly expanded version of my column that ran today in the Los Angeles Times on the growing scandal over the defective ignition switches on the Cobalt and other cars produced by General Motors. Just this weekend, it was reported that CEO Mary Barra received a memorandum on a steering problem with the Saturn Ion on a different problem as early as 2011, but did not order an immediate recall. What is now clear is that the company spent years discussing the defect. Two engineers were recently put on paid leave by the company — a move viewed as too little too late by many, including some who want to see criminal charges. Ironically, I have been teaching the Pinto case in my torts class this week and today I will be teaching my new material on the GM Cobalt as an extension of that material.
Some have charged that GM was aware of this defective design before it lobbied the government for a massive bailout in 2009. The government handed over $49.5 billion to the automaker and the public ultimately ate a $10.5 billion loss when our shares in “Government Motors” were finally sold off in 2013. In addition to billions in losses, the public got cars that could put their lives in danger the moment they turned the ignition key.
In the late 1960s, a charismatic vice president at Ford Motor Co. decided to bring out a low-priced car that could be produced for little money while bringing in huge profits. The executive’s name was Lee Iacocca, and the Ford Pinto he championed became one of the most infamous models in U.S. automotive history. Why? Because to save money, Ford released a car that could explode in even low-speed rear-end collisions.
The Pinto continues to hold an almost parabolical meaning in law schools in showing how profits can overwhelm principle in cost-benefit calculations. Even a savings of a couple of bucks per vehicle can be viewed as a prohibitive cost when multiplied over the course of a production. Ford Pinto showed how such calculations can detach executives from true meaning of the “benefits” on a ledger as measured in humans victims. Deaths and burn injuries are translated into numbers that become a cost of doing business like rejecting plush seating or a better sound system.
The Parable of the Pinto may need to be updated. Almost 50 years after the Ford scandal, another Detroit CEO, Mary Barra, recently sat before a congressional committee answering withering questions about the Cobalt, a low-cost car produced by General Motors with a design flaw that the company acknowledges was responsible for more than a dozen deaths. For those of us who teach the Pinto case, the similarities are unsettling.
As with the Pinto, the problem with GM’s Cobalt involved a design flaw — in this case, a faulty ignition switch that could shift, under certain circumstances, from the “run” position to the “accessory” position while the car was being driven. This led to a loss of power and a shutdown of both the power-steering and air-bag systems. Documents indicate that GM knew of the defect as far back as 2004, but the company did not recall vehicles until February of this year. By that time, the flaw had been implicated in at least 13 deaths and 31 crashes. Some reports put the value of the part needed to fix this problem at as low as 57 cents. That means that the true cost was simply in a retooling or a recall for the company to install the fix.
When GM finally got around to recalling the cars, it told customers not to use heavy key chains with other keys on the ring. However, Barra was recently informed by an attorney that his client Laura Valle was driving her recalled 2007 Chevrolet Cobalt without such a chain. Nevertheless, the ignition suddenly cut off, her steering locked, and she was unable to steer her car.
Pulling a Pinto
The impetus for Ford’s making the Pinto came from Iacocca himself, who wanted to achieve a 2,000/2,000 car: a vehicle that would weigh less than 2,000 pounds and could be sold for less than $2,000. That was the holy grail of the industry, considered a sure bet to make a fortune.
To meet those goals, however, the Pinto was stripped of some basic safety elements. The car was fitted with a chrome strip as a bumper that was virtually decorative instead of a bumper worth $2.60. The design permitted the gas tank to burst at low speed collisions, spray the interior of the car, and explode. This risk could have been largely abated by a standard gas tank liner that would have cost $5.08 per car as well a dozen other possible fixes, including a $1 fix. (While some argued that an acceptable safety fix would have been possible for a few dollars a car, Ford put the design changes at $11 a car).
The company internally understood the defect but refused to spend the $11 per vehicle needed to protect the drivers and passengers. Ford executives sat around and counted casualties like mere entries on a corporate ledger: the value of a human life was put at around $200,000 and burned individuals at about $67,000. Ford estimated the costs and benefits of 180 deaths and 180 serious burns worth $49 million in potential damages. However, the company saw the costs of a design for all of the different models using this defective design as $137 million. The conclusion was clear – sell the car and treat the deaths as a cost of doing business.
By the time the Pintos were coming off the line, its chief champion, Iacocca, had been named president of Ford. Later, he headed Chrysler, where he was credited with bringing the company back from the financial brink and was embraced by presidents and the public as an icon of the industry.
Iacocca fared a lot better than some Pinto owners. Consider Grimshaw vs. Ford Motor Co. The case was brought on behalf of Richard Grimshaw, who was 13 and riding in his neighbor’s Pinto when it was hit from behind after stalling on a road. The driver suffered severe burns to her entire body, which led to her dying shortly thereafter from heart failure. Grimshaw survived but with permanently disfiguring burns to his entire body. The jury appeared as horrified by Ford’s disregard of customer safety as it was by the crash itself. It hit Ford with a $122 million punitive award, which the court later reduced to $3.5 million.
According to documents, it appears that GM identified the problem with the Cobalt in the early 2000s but rejected a fix due to a “tooling cost” deemed too high. It is an all-too-easy and all-too-familiar calculation, take a reported 57 cent fix and multiple it per unit over the course of a huge production run. When multiplied millions of times, a fix costing two quarters and labor can become a prohibitive expense. It is that easy . . . except, of course, for the shattered families left behind.
Jonathan Turley is a law professor at George Washington University where he teaches torts and product liability.