Tuesday, March 15, 2005

Zetsche decries baseless lawsuits

Chrysler CEO says they undermine Big 3's ability to compete against Asian rivals.

By Brett Clanton / The Detroit News

Chrysler CEO Dieter Zetsche urges automakers to fight product liability lawsuits. Comment on this story Send this story to a friend Get Home Delivery

Chrysler CEO Dieter Zetsche said domestic automakers should fight more product liability lawsuits in court if they are serious about achieving real tort reform and reducing legal expenses that hurt their ability to compete with Asian rivals.

"I understand the reluctance to fight, especially when the case for settling is strong," Zetsche said in a speech Monday to the Detroit Economic Club in Rochester. But "as more and more companies begin to fight back, we can and will make a difference."

Zetsche put frivolous lawsuits and the escalating cost of health care at the top of a list of "long-festering impediments to the domestic industry's competitiveness," and said U.S. automakers must come up with innovative approaches to dealing with the problems or face the possibility of more market share losses.

The combined U.S. market share for General Motors Corp., Ford Motor Co. and Chrysler, a unit of DaimlerChrysler AG, hit an all-time low of 59 percent last year and fell to 57.6 percent through February, according to Autodata Corp.

With Japanese and Korean automakers making bigger inroads in America and the Chinese on the way, Detroit's Big Three are in danger of losing even more ground, Zetsche said.

"No matter how tough anyone might think this business is today," he said, "it's going to get tougher still."

The explosion of meritless product liability lawsuits is one area of particular concern, Zetsche said. He cited a case last month in which DaimlerChrysler was ordered by a Tennessee jury to pay $50 million to a family who claimed that defects in a Dodge Caravan led to the deaths of two women in Arkansas in 2002.

But Zetsche said the Arkansas wreck was the result of a 17-year-old driver falling asleep and striking the minivan at a high rate of speed. As a result, an unbelted, 245- pound passenger in the back seat of the minivan "hurled forward," hitting and killing the van's driver.

"The lawsuit was less about the accident," Zetsche said, "and more about the trial bar going after 'deep pockets.' "

He said the legal costs of such cases ultimately cost a family of four in the United States an average of $3,380 a year in the form of higher insurance rates, consumer prices and health care costs.

Richard Dauch, chairman of Detroit-based auto supplier American Axle & Manufacturing Inc., also stressed the need for protection from meritless lawsuits.

"Tens of billions of dollars are being exploited improperly because of frivolous lawsuits," said Dauch, who introduced Zetsche. "All of these are a burden."

Patrick Keenan, a law professor at University of Detroit Mercy, said tort reform is a complex issue that should be studied carefully and thoughtfully.

"To turn it into a political quip ignores the suffering of someone who can instantly be turned into a paraplegic by a gas tank that catches fire," he said.

While some federal reforms have been enacted that make it harder for certain product liability lawsuits to land in court, Zetsche urged auto companies to fight for more reforms at the state level.

But Keenan said insurance companies and auto manufacturers already have lobbied for and gotten caps on trial rewards in many states.

"In a sense, the battle for the hearts and minds and influence and votes of state legislatures has already been won," he said.

Zetsche said the auto industry also must work collaboratively to address double-digit increases in employee and retiree health care costs.

"While the domestic auto industry can and should work with Washington on this issue, we can't expect or wait for relief," he said. "Once again, any improvement will require innovation on our part."

Chrysler's health care expense is about $1,400 per vehicle. New partnerships, such as a recently announced deal to have Chrysler, Ford and GM launch an electronic drug prescribing initiative for workers, are designed to reduce that cost over time.

More good ideas are needed on the health care front, as well as in the area of building better relationships with auto parts suppliers, Zetsche said.

The Big Three have been blasted in recent years for demanding steep price concessions on parts, failing to include suppliers in the vehicle design process early and refusing to guarantee repeat business to parts makers that have spent millions developing a unique part.

Zetsche said Chrysler already has started bringing suppliers into vehicle design earlier, with an eye toward making them long-term partners. The approach mirrors agreements in place at Asian automakers, with whom many U.S. suppliers say they prefer to do business.

"Forget thinking out of the box," Zetsche said. "We need to reinvent the box."

Also Monday, Zetsche said for the first time that the 2006 Dodge Caliber will be built in Belvidere, Ill., once a $419 million renovation of the plant is finished.

The Caliber was shown at the Geneva auto show this month as a concept vehicle, and was billed as a harbinger of the small five-door hatchback that will replace the Dodge Neon compact car next year.

While Chrysler had given strong hints that the Caliber would be Neon's successor, Zetsche's comments mark the most definitive word yet that the car will be built.

Zetsche also hinted that the Auburn Hills automaker will announce a major renovation of two Sterling Heights plants next week.

Zetsche said Chrysler was still "fleshing out" labor agreements at the two plants, and is working to implement many of the same team-oriented concepts that were recently adopted in Belvidere.

Last month, Chrysler was awarded about $19 million in state incentives to help pay for retooling its Sterling Stamping plant and Sterling Heights Assembly plant, which builds the Dodge Stratus and Chrysler Sebring midsize cars.

In an application filed with the state, Chrysler said it was considering spending $506.8 million to modernize the factories.

You can reach Brett Clanton at (313) 222-2612 or bclanton@detnews.com.