The Economics of Deadly Cars


Will Fix Defects For Caffeine © by James Nash (aka Cirrus)

You would think that in our modern society where as consumers we have some of the best legal protection and recourse in history, that OEM’s would think twice about either launching (or continuing a product) with known defects that could lead to serious injury or even death.

OEM’s spend vast fortunes on developing vehicles to comply with various safety testing requirements such as Euro NCAP and even larger amounts advertising their results. All sales and product training for sales executives concentrate heavily on the safety aspects of their vehicles and brochures place prominence on safety. Many OEM’s are also at pains to illustrate how many hundreds of thousands of test kilometres are performed. The point is car manufacturers are making safety claims about their vehicles loud and clear. It is reasonable to assume then that customers who buy their vehicles do so in good faith that any gremlins, especially safety critical, are ironed out.

However, despite all of this, there are many examples of OEM’s willingly and knowingly exposing customers to potential safety related hazards.
In 2002, Mercedes-Benz launched the latest iteration of their E-Class code named the W211. One of the much vaunted bits of gadgetry introduced with this model (and in others) was Sensotronic Brake Control (SBC) which was a brake-by-wire system. It was not long after the launch before customers started reporting brake failures.

Clearly the problem was bigger than Mercedes cared to admit to. In May 2004, 680 000 vehicles were recalled and again in March 2005 a total of 1.3 million were recalled because the problem had still not been resolved. Mercedes seemed persistent in continuing with the system and considering it cost some $170 million to develop over nine years, I now cynically understand why. However, Mercedes eventually ditched the SBC system in 2006 on the E Class and reverted back to a traditional hydraulic system – unusually during the current life cycle of a model. With the overwhelming amount of failures and recalls, how could Mercedes not have known there were problems and why did they continue to put customer’s lives in danger for over four years? After nine years of development and a huge amount of money spent on it, did Mercedes introduce it prematurely with some actuarial calculation which weighed up the costs of development versus the cost per accident? They must have. Why else were there TWO SBC systems fitted in the Maybach?

Mercedes-Benz is not alone. In what was referred to as “one of the largest corporate scandals in Japanese history” Mitsubishi was twice forced to admit to systematically covering up defect problems in its vehicles. Four defects were first publicized in 2000, but in 2004 it confessed to 26 more going back as far as 1977, including failing brakes, fuel leaks and malfunctioning clutches. The effect on the company was catastrophic, forcing it to recall 163,707 cars (156,433 in Japan and 7,274 overseas). Further recalls by Fuso Truck and Bus brought the total number of vehicles requiring repair to almost one million.

Chrysler was under investigation by the NHTSA for more than 55,000 warranty claims for Steering problems with Dodge Intrepid, Chrysler 300M, Concorde, LHS and Eagle Vision vehicles and 1,450 reports of steering control problems. Some including complete loss of steering control with 1993-1996 models, reported as of 1999 alone. According to a consumer body “Chrysler has clearly known about a defective and “dangerous” steering design since 1993. (The then) DaimlerChrysler knows the entire “design” is defective and will do everything in its power to avoid responsibility.”

In May 2000, the U.S. National Highway Traffic Safety Administration (NHTSA) contacted Ford and Firestone about the high incidence of tyre failure on Ford Explorers, Mercury Mountaineers, and Mazda Navajos fitted with Firestone tyres. Ford investigated and found that several models of 15-inch Firestone tyres (ATX, ATX II, and Wilderness AT) had very high failure rates, especially those made at Firestone’s Decatur, Illinois plant. This was one of the leading factors to the closing of the Decatur plant.

Defective Firestone tyres on Ford Explorers took the lives of at least 271 people and seriously injured many more before the companies issued the largest tyre recall in history. Internal company documents would later show that the two corporations had known of the deadly tyre separation and associated rollover problems for years. Firestone knew by at least 1997 that there were serious problems with its tyres. Vehicle owners began sending complaints of tyre failures in a rate 100 times greater than normal. Firestone employees would later state that they punctured bubbles in tyres to conceal flaws and that inspection of finished tyres was nonexistent. In May 2000, at least three years after Firestone had learned of serious problems with its tyres, the National Highway Traffic Safety Administration (NHTSA) opened an investigation into the tread separations. In August 2000, Firestone recalled 6.5 million tyres. The following month, NHTSA warned the company that over a million more tyres had worse problems than the recalled tyres. Firestone refused to order another recall.

In what was arguably the most infamous example of a cover-up Ford Motor Company was well aware that its Pinto was a potential death trap, but chose not to fix the problems. Ford knew from crash tests that the Pinto’s design rendered it liable to explode in rear-end collisions at speeds as low as 20 miles per hour. An internal memo from 1973, just two years after the Pinto’s launch, estimated that fixing the problem would cost just $11 per car, but that it would be cheaper to LET PEOPLE DIE and pay out the subsequent law suits. The same memo estimated the eventual death total at 180, with another 180 suffering serious burn injuries. Ford did not recall the 1.5 million Pintos for another five years.

The list of manufacturers involved in cover-ups includes Volkswagen, Toyota and many more which I unfortunately do not have the space to discuss in this article. But it is suffice as to say that I look at OEM executives in a completely new light these days and find myself asking: “what else are you covering up?” I also find it hard to believe anything they say when we are in dealer council meetings as we may just also be included in their next “economies of death” calculation. But what I cannot conceptualise is the person sitting at their desk who signs off the effective death warrants of innocent people. What kind of monster are they and why on earth are they not punished to the full extent of the law?

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