Corporate scandals are nothing new. If you were
to dig deep enough, you’d probably find corporate
scandals dating back to the earliest days of the first
corporations. Scandals come in a variety of forms
and often involve some sort of fraudulent activity,
such as insider trading, theft, and tax evasion. In
some cases—rare cases—it’s not fraud, which is a
matter of personal gain, but poor judgement and lax
And then there’s the other sort, the type that surfaces when a manufacturer is found liable for defective products. Perhaps the most high-profile case
concerned the Chevrolet® Corvair. Profiled in
Unsafe at Any Speed: The Designed-In Dangers of the
American Automobile, the Corvair was portrayed as
an accident waiting to happen by the book’s (
in)fa-mous author, Ralph Nader.
Although the book contributed to the end of the
Corvair’s run, just one chapter focused on that specific model. Much of the book dealt with improving
the safety of all automobiles, regardless of make or
model. For example, at that time, the shift pattern
of automatic transmissions wasn’t standardized. A
customer familiar with one shift pattern, P-R-N-D-L, was in for a wicked surprise if he borrowed or
bought a car with a P-N-D-L-R layout and attempted
to use “Low.” The author went on to skewer automakers for metal-laden dashboards, a reluctance
to make seat belts a standard item, and many other
safety and pollution concepts that eventually took
hold and improved all automobiles.
Was taking aim at the Corvair justified? Maybe,
maybe not. In 1972, the National Highway Traffic
Safety Administration (NHTSA) conducted a series of
tests and comparisons and found that the car was at
least as safe as four other contemporary cars. The conclusion was too late to save the Corvair, though. It had
been out of production for three years by that time.
Then the Ford® Pinto reared its ugly head. At-
tempting to capitalize on the runaway success of
the Mustang®, Ford Motor Co. introduced one of the
most hideous creations ever devised and named it
after a horse. If aesthetic repulsiveness had been its
only drawback, it likely would have been forgotten
(or remembered as the car that was actually uglier
than the AMC Pacer), but it was dangerous, too. In
1973, reports started surfacing of Pintos burning up
after low-speed, rear-end collisions.
In Ford’s defense, the crash standard for a rear-end collision was in a state of flux at that time, and
updating the design to keep up with changing safety
standards was the issue. The damning evidence was
cost-benefit analysis submitted by Ford to the NHTSA. It compared the cost of improving fuel system
safety for all subcompact cars—not just Ford’s—with
the social cost of injuries and lost lives and concluded that society would be better off without any
improvements. Even if such a cost-benefit analysis
was common practice and the NHTSA agreed with
the assessment, it sounds unbelievably callous. Two
key lawsuits were filed in the late 1970s, and Ford
discontinued the Pinto in 1980.
More recently, Volkswagen was caught in a diesel
emissions scandal and Kobe Steel Ltd. admitted it
had falsified documentation on some of its products.
The Volkswagen case had nothing to do with adapting to a changing emissions standard; compliance
wasn’t a problem at all. It merely sought to work
around a tradeoff—smog control versus fuel efficiency—by faking smog control. The Kobe case is
still unfolding, but so far the extent of falsified certifications involves the strength of materials used in
some automobiles and airplanes and coatings applied to products used in centrifuges for enriching
uranium to make nuclear fuel.
Will these two recent scandals turn out to be different from the Corvair and the Pinto fiascos? Maybe.
General Motors and Ford were portrayed as callous
and uncaring, but the products were two specific
models. Volkswagen was found to have liability for
11 million cars, which is a much broader problem,
as is the situation at Kobe Steel.
Hopefully manufacturers of all sizes and sorts
will consider these corporate disgraces to be warnings and put a little extra emphasis on quality, regu-latory compliance, and product safety.
A corporate scandal that
hits too close to home