The calculation basically determined that if the cost of a potential legal settlement was less the cost of a recall and subsequent modification of the exploding fuel tank, Ford wouldn't do the recall. The memo was famously referenced in Chuck Palahniuk's Fight Club.
Ford estimated the potential cost of the recall at $121 million. The cost of leaving the exploding fuel tanks intact and facing potential litigation was projected to cost around $49 million. Quoting Galaxy Quest: "By Grabthar's Hammer, what a savings."
So there wasn't a recall. By the way, it's worth noting that they calculated a dollar figure of $200,000 "per burn death." 27 people were killed, but Ford didn't recall the vehicle until years later, and never actually repaired the exploding tank issue.
Toyota clearly hasn't been anywhere near as negligent as Ford. As reported by WalletPop, a recall is underway involving eight -- eventually nine, including the Prius, of its most popular models. However, the acceleration problem has been under investigation by the National Highway Traffic Safety Administration (NHTSA) for some time now. After a stuck accelerator death in August, 2009, Toyota blamed poorly designed floor mats as the cause of the problem, but it's since become obvious that the accelerators would stick regardless of the design of the mats.
What did Toyota know and when did it know it? It's difficult to know for sure as the NHTSA investigation, along with the recall, is still in progress. Nevertheless, we deserve to know.
My rule of thumb is to distrust major corporations. History, especially recent history, has proved we have enough evidence for skepticism (I mentioned a partial list of suspects here). At the same time, I've been a Toyota owner since 2005 and have nothing but positive things to say about its cars.
So what you're about to read isn't necessarily a defense of Toyota, but rather a defense of what Toyota represents. My fear is that with the potential decline in the Toyota brand, there will be a serious deficit in technological innovation and leadership in fuel efficiency.
In 2005, I owned a Jeep Liberty. I loved that car. It was slick, reliable and I could comfortably fit my 6'4" body into it. But when Hurricane Katrina struck and gas prices shot up above $3 per gallon, I decided it was time to switch to something more fuel efficient. For all of its positives, the Jeep averaged only around 16 miles per gallon. Pretty awful. And it wasn't the most environmentally friendly vehicle in terms of emissions either.
Out of curiosity, I took a look at the Prius. The first challenge was to shoehorn my lanky body into it without having to bust a hole in the roof like The Flintstones. Amazingly, I fit into it nicely. But primarily, I was knocked out by the technology and the fuel economy.
So I decided to trade up. At the time, there was a two-month waiting list, but when I finally sat down to do the deal, I managed to actually save some cash on my monthly payments compared with the Jeep. Savings all around.
Speaking of which, in practical application (rather than the somewhat inaccurate EPA sticker estimates) the Prius gets around 45 miles per gallon on average. And the LCD video screen that came with the first and second generation Priuses quickly became almost like a video game -- the bar graph displaying the real time miles-per-gallon played to my type-A personality and motivated me to take it easy on the accelerator.
The Prius fuel tank is only 11.9 gallons, but I've been able to routinely top 500 miles on a single tank. Combined with the fact that I work from a home office, I only fuel up the Prius around once a month. And once I grew accustomed to the silent electric motor, the resulting "stealth mode" became another video game-ish challenge -- to try to keep the car in that electric mode "sweet spot" for as long as possible. (I hasten to note: No, I'm not one of those people. I always make sure not to futz along in traffic if you're behind me.)
Beyond the anecdotal evidence, Toyota has been a true innovator. The heretofore success of its vehicles has become a gold standard, both in terms of technology and reliability. I know more than a few friends who owned Toyotas well beyond 100,000 miles.
And Toyota's Hybrid Synergy Drive has proved that environmentally friendly "green cars" are just as practical and affordable as standard gasoline-only vehicles. Contrary to popular myths, you don't have to plug in a Prius in order for it to run, and the battery doesn't suddenly conk out like your cellphone. Obviously, in terms of fuel economy, it far exceeds traditional cars, and with regards to the sticker price, it's comparable to any mid-range four door car -- especially given its advanced technology.
Without Toyota and, secondarily, Honda leading the way with hybrid technology, the excitement surrounding fuel economy would have very likely taken a serious hit. Even with the advances and success stories, fuel efficiency has remained almost static since the 1980s, and based on a 2006 EPA study, it's actually declined somewhat. The average fuel economy of a light-duty vehicle in 1987 was 22.1 mpg. By 2006 that number had dropped to 21. There's no telling what it might look like without hybrid innovations and the fact that Toyota stuck with its technology even when it wasn't necessarily profitable, offering a gas-electric hybrid that people could afford. With an eye on the future, they refused to bail out like some American car makers had and have been reporting a profit on the Prius since 2001.
There's much to be said about this kind of vision.
General Motors, meanwhile, famously dropped its EV-1 electric car under pressure to turn a profit (among other reasons detailed in the documentary Who Killed the Electric Car?). American cars makers have been playing catch-up with Toyota all along, but the consequence -- and the benefit for the rest of us -- has been the opportunity for average, middle-class Americans to afford a vehicle that tops 30-40 miles per gallon.
And with gas prices permanently hovering in the post-Katrina, post-oil-bubble $2.60/gallon range, it's clear that American car makers are motivated to continue to innovate. But even with the Ford Escape Hybrid and other domestic attempts to match the prowess of Toyota, these efforts have come up short compared with the Prius and other overseas hybrids. Actually, American car makers have been really good at marketing the idea of hybrid fuel efficiency, but their actual miles-per-gallon figures don't come close to Toyota's.
Yes, Toyota royally screwed up and it deserves the hit it is going to take with the cost of these recalls. This is, to put it mildly, an epic fail in quality control. But I'm concerned that a hit in the arena of public opinion and conventional wisdom might be more damaging to the macro cause of cleaner-burning, more fuel efficient cars on American roads. Therefore, I think it's important to not be too hard on Toyota. Personally, I'm maintaining my usual level of healthy skepticism about it, as I would with any car maker or corporation. But my experiences have proved that it deserves a bit more latitude than most. It'd be a shame to see the Prius go the way of the Pinto.
Correction: The Pinto Memo was made public by Mother Jones magazine in 1977. The Pinto itself wasn't sold until 1971.