Toyota’s cost-savings memo valued money over life

posted on:
February 25, 2010

author:
KURT NILAND

Before federal officials called Toyota executives to Washington for a series of hearings over the company’s sudden unintended acceleration recalls, they first demanded the company turn over all internal communications and other records concerning the problem. Toyota complied, providing investigators with more than 75,000 pages of information. Among that massive pile of paper was a chilling internal memo that clearly valued dollars over human life.

During the House Committee on Oversight and Government Reform hearing last Wednesday, Rep. John Mica (R-Fla.) blasted the Toyota’s North American president Yoshimi Inaba over the memo, which circulated in Toyota’s upper echelon last summer and classified efforts to mitigate or avert safety recalls and federal regulations as “wins” for the company’s bottom line.

“Mr. Inaba, this is one of the most embarrassing documents I’ve ever seen,” Mica said to Inaba while waving a copy of the memo at him. Mica said the document was “absolutely appalling.”

Much of the memo reads like a laundry list of ways in which Toyota sacrificed the quality and safety of its vehicles for increased savings and profits. Listed among the “wins” is how Toyota negotiated an “equipment recall” concerning sudden acceleration problems in its Camry and Lexus ES models to the tune of $100 million or more.

Now, after dozens of lives lost and hundreds of people seriously injured, Toyota is liable to spend many billions in recall repairs, litigation, lost sales, civil fines and possibly criminal penalties for the willful negligence and greed its executives so concisely outlined in the confidential memo — not to mention the cost of restoring its image and regaining the faith of consumers everywhere.

But it is not the first time a motor company has explicitly stated the importance of profits over human life. 

In 1977, a Ford memo revealed that the company knew of design defects in its Pinto models that made them more susceptible to crash-related fires, yet it had deemed the overall benefits of redesigning the car’s gas tank configuration, which included preventing an average of 180 deaths each year, to be not worth the cost – an estimated $11 per automobile.

According to Ford’s records, crash testing revealed that the Pinto’s gas tank was positioned in such a way that studs protruding from the rear axle would puncture the gas tank in the event of a crash. This defect did not violate federal regulations of the time, so Ford chose not act, even though test after test revealed the cars to be extraordinarily prone to gas leaks, explosion, and fire.

In studying its ill-positioned gas tanks, Ford conducted a “cost benefit analysis” using a National Highway Traffic Safety Administration approved figure of $200,000 “cost to society” for each estimated fatality, versus an estimated $11 per vehicle production cost to modify the design and location of the fuel tank.

Figures showed the repairs for a projected 11 million cars and 1.5 million light trucks that also featured the faulty tank design would cost the company $137 million, but that was too expensive for the manufacturer, even though such safety repairs would have prevented hundreds of people from being seriously burned and dying in fiery crashes.

Likewise, in 1973, General Motors found that the cost of redesigning its gas tank configuration to prevent fuel-fed fires would cost more than compensating families who lost loved ones in a crash, leading the company’s executives to a decision not to repair the vehicles.

GM buried that memo, dubbed the Ivey Memo for its author, engineer Edward C. Ivey, until 1998, when it resurfaced during a Florida trial involving two children who burned to death when the station wagon in which they were riding caught fire after a crash. 

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