« Back to Home Page

Is there a better way?

Steve Puma | Thursday May 1st, 2008 | 1 Comment

The following was recently posted on Steve Puma’s new blog, ThePumaBlog, where he writes about technology, sustainability and the future:

When I first saw this video, I thought it was coming to me through one of the sustainability blogs that I am subscribed to. Turns out, it came through that constant stream of absurd and funny videos, BoingBoing.net, which just goes to show you just how absurd it really is…Check out this Wall Street Journal Online report of Mazda destroying over 4,000 brand-spanking-new cars, after the transport ship that they were on spent several weeks at a 60-degree list.
Perhaps there is a better way?

Mazda was in a really tough situation here. They could take a chance, and try to resell or otherwise reuse the cars in a number of ways, from parting them out to donating them to school auto-shop programs. But there were too many factors working against them:

  • Their insurance company wouldn’t pay any damages unless all of the cars’ components were rendered unsalable(!).
  • They had no way of knowing what types of lawsuits could result from the consequences of overexposure to seawater and long periods spent on an angle (apparently, corrosive fluids could get into places where they were never intended to go, rendering the cars unsafe).
  • There was the precedent from Katrina, that salvage-titled cars could be taken out of the country and re-sold as new cars by unscrupulous persons.

When Mazda added all of this up, they decided that the potential damage to their brand was too much to risk, so they decided to dismantle the cars and sell them as scrap.
As a student in Sustainable Management at the Presidio School of Management, Mazda’s choice seems less than ideal, from a sustainability standpoint, but I can understand why they made that choice. They were simply doing what they felt was best, by minimizing the potential losses for their shareholders. Unfortunately, this episode is a study in how business does not currently place a high enough value on actions which will have a positive net impact for the environment as a whole.
From a dollars-and-cents perspective, Mazda’s losses from this unfortunate event amount to the lost profits from cars which could no longer be sold as new. Their costs to dismantle the cars have been covered by insurance. But, given the increasing awareness of environmental issues, one has to wonder if the potential fallout from making this controversial decision will be greater than the potential benefit they could have gained by finding a way to take the high road, recycle the cars and make an attempt to position themselves as a cutting-edge, environmentally friendly company. Royal Dutch Shell certainly learned this lesson the hard way, when they made the purely financial decision to sink the Brent Spar offshore oil storage facility.
Probably the biggest criminal in this whole thing is Mazda’s insurance company, who mandated that all of the parts from these cars had to be rendered useless. This even included such components as the aluminum alloy wheels, even though it would be hard to argue that there would be much danger to reselling these parts on the secondary market. I am no expert in insurance matters, but it would seem to me that insurance companies should be focusing on minimizing the amount of money that they have to pay out when a disaster happens. Doing so would make sure that insurance rates stay as low as possible, and that they maintain enough reserves for future catastrophes.
It is easy to imaging a scenario where a good portion of the salvaged parts were remanufactured and sold, or sold to other companies who could do the remanufacturing. It seems to me that, in this case, the quick, simple solution won out over everything else.
If the world is ever to tackle the sustainability and global warming problems in a way which will actually make a noticable difference in a reasonable amount of time, business and government will need to tackle the difficult issues surrounding how to better handle large incidents like this, especially how to provide incentives for companies to make the difficult choices which will be better for the world in the long run.
If we fail to face these issues, incidents like these will continue to undermine a lot of the good work that is currently being done in sustainability.
Steve Puma is a 3rd-semester student in Presidio School of Management‘s MBA in Sustainable Management program. In his blog at http://www.thepumablog.com, he writes about technology, sustainability and the future.

▼▼▼      1 Comment     ▼▼▼

Newsletter Signup
  • Foo

    Sound’s like the insurance company is the real dummy here. That’s what happens when you let robots make decisions instead of humans.