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Just came across this. Might be worth a call to get the ball rolling.

 

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While unfortunately legal action seems to be the only way to get a large company to take significant action, only the vulture lawyers seem to benefit. Looking at their website, they seem like the same snakes I encountered who didn't even know which vehicles have the PowerShift transmission and which did not.
 

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In my experience, only the lawyers get the lions share in a "Class Action Law Suit"
 

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In my experience, only the lawyers get the lions share in a "Class Action Law Suit"
While certainly true that plaintiff lawyers get the "lion's share" in successful class actions, it's also unfortunately true that they are sometimes the only mechanism whereby damaged consumers (plaintiffs) get any measure of financial relief and/or defendants are discouraged from repeating / continuing the offending act(s).

I'm not a fan of class action lawsuits, but IMO they do have a legitimate and useful role in consumer remedies under the US system of tort law, particularly when the damage suffered by any individual consumer is relatively small in comparison the the aggregate of damages suffered by all similarly situated consumers (there is strength in numbers).

Lacking the strength in numbers of class action, all too often a large defendant can successfully prevail against individual plaintiffs (by virtue of overwhelming ability to absorb litigation effort and expense if nothing else), the merits of the plaintiff's underlying claims notwithstanding.

Just sayin'

Tort laws serve two basic, general purposes: 1) to compensate the victim for any losses caused by the defendant’s violations; and 2) to deter (discourage) the defendant from repeating the violation in the future.
 

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In the Hyundai/Kia Theta engine lawsuit, powertrain warranties were extended to 10 years/100,000 miles to the 2nd owners. Current Hyundai/Kia 4cyl non-turbo engines have a similar TSA which somehow monitors the engine for premature main bearing failure. Once those vehicles have the procedure done, their warranties are extended to 10/100,000 even to the 2nd owner.....
 

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Unfortunately these types of lawsuits have also made OEM's acutely aware of the potential financial fall out of said failures when deciding how to proceed. More so than ever. What that means is, the OEM is already expecting this and has already calculated what it will cost them to fight vs fix. By the time it's reached "Class action lawsuit" level, the only ones that get anything tangible out of it, are the vultures. They are not lawyers, they are vultures. There is a difference.

Case-in-point, transmission issues with the 2012-16 Focus and 2011-16 Fiesta. Ford KNEW about the issues before the DPS6 transmission was released. They calculated potential revenue/profit lost if they waited to fix the issue before release vs potential losses from lawsuits, repairs, etc, if they released the product as-is. You can guess which figure was bigger.


GM did the same thing when they had their HUGE ignition switch recall back in 2014. Something like 2.2 million cars needed their ignition switch replaced. GM weighed the pros and cons and ran with a bad design.

IMO the only thing the class actions have done is made the OEM's more calculating and driven the cost of cars up beyond normal inflation. You don't actually think the OEM's are paying for these things out of their pockets do you? (that's a collective you, not any specific , you. I'm not calling anyone out or making an argument against someone, just this general idea of call-actions).
 

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Unfortunately these types of lawsuits have also made OEM's acutely aware of the potential financial fall out of said failures when deciding how to proceed. More so than ever. What that means is, the OEM is already expecting this and has already calculated what it will cost them to fight vs fix. By the time it's reached "Class action lawsuit" level, the only ones that get anything tangible out of it, are the vultures. They are not lawyers, they are vultures. There is a difference.

Case-in-point, transmission issues with the 2012-16 Focus and 2011-16 Fiesta. Ford KNEW about the issues before the DPS6 transmission was released. They calculated potential revenue/profit lost if they waited to fix the issue before release vs potential losses from lawsuits, repairs, etc, if they released the product as-is. You can guess which figure was bigger.


GM did the same thing when they had their HUGE ignition switch recall back in 2014. Something like 2.2 million cars needed their ignition switch replaced. GM weighed the pros and cons and ran with a bad design.

IMO the only thing the class actions have done is made the OEM's more calculating and driven the cost of cars up beyond normal inflation. You don't actually think the OEM's are paying for these things out of their pockets do you? (that's a collective you, not any specific , you. I'm not calling anyone out or making an argument against someone, just this general idea of call-actions).
I fail to understand how any of that recommends against class actions; perhaps you can explain the outcome you imagine in each of those situations absent the threat of class action, and how that difference would benefit anyone?

You don't actually think the OEM's are paying for these things out of their pockets do you?
The expense of class action settlements, just as any and all expenses an OEM incurs, must come from their revenue.

That expense is necessarily offset by a combination of
  • Increased unit pricing (which bears on product price competitiveness)
  • Decreased shareholder return (which bears on corporate competitiveness)
Both consumers and shareholders do act in response to those fiscal stimuli, both bear on the health of the corporation, those market realities do serve as incentive to make better decisions and improve overall corporate competitiveness in this extremely competitive industry.

IMO you're sorely mistaken if you don't think that large-block shareholders in particular (which have the attention of corporate boards, and the ability to discipline those boards and their selected management teams) watch and know every aspect of the balance sheets and constantly push for the elimination of those 'built-in' expenses associated with bad production decisions that reduce their return on investment.

No board or management team wants to bear the brunt of dissatisfied shareholders resulting from any of those misguided decisions; they fully understand that shareholders have the wherewithal to demand better and replace those individuals who fail to deliver better.

Large and wasteful warranty, recall, and litigation / litigation settlement expenses all play a role in that feedback loop; they all bear on incentivizing more 'responsible' corporate management. One good example is the 'shakeup' of GM's management following that ignition-switch debacle you mention.

... they are vultures ....
Even the much maligned vulture plays a beneficial role in nature, the world and all it's inhabitants would suffer in their absence. I wouldn't want one as a pet, any more than I'm a 'fan' of class action lawsuits, but that doesn't blind me to the harsh realities that make both a beneficial thing when circumstances dictate. ;) :)
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(and no, I'm not nor have I ever been a lawyer of any ilk)
 

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I fail to understand how any of that recommends against class actions; perhaps you can explain the outcome you imagine in each of those situations absent the threat of class action, and how that difference would benefit anyone?
I do like a good debate :D


In order for a publicly traded company to remain in high favor with it's investors and the market in general you must maintain a predictable and manageable growth. That is fact. When a company's earnings are too far off the mark (high or low) it hurts the company because investors look at the company as unreliable or too volatile. If a company is predicting a 3% liability and forecasts a 3% growth, you have to make up for that liability somewhere.Again, you want to keep the shareholders happy, they keep as close to the predicted growth as they can.

So, instead of just a 3% price hike, you issue a 6% price hike or, 5% while making up the other 1% by reducing employee raises or cheapening a part on certain models. Those are grossly simplified numbers but, if you can reduce your liabilities by 1% (i.e. cost of lawsuits) to say 2%, one would hope that the price increases on new vehicles would go from 6% to say 5% or that the employees are paid better from than 1% savings. Better yet, the OEM would invest that money into actually resolving/fixing a problem (like the lug nut issue on Fords). Nope, they let themselves get sued and actually had that one thrown out.

The expense of class action settlements, just as any and all expenses an OEM incurs, must come from their revenue.

That expense is necessarily offset by a combination of
  • Increased unit pricing (which bears on product price competitiveness)
  • Decreased shareholder return (which bears on corporate competitiveness)
Agreed, it must come from the revenue. Where does the revenue come from?

You and I the consumer, and in some cases the employees, bear the majority share of that the increase in revenue through increased unit prices, service costs, and OEM parts cost and a decrease in pay increases or benefits. The decrease in Shareholder return is a last resort.

The only time a company loses is when they mis-judge, mis-predict. Lawsuits are built into their liabilities/predictions. How much they put aside all depends on how accurately they predict the size of the lawsuits or legal problems encountered by a decision. The more the class actions are filed, the better corporations get at using a predictive model to cut their losses (aka actuarial science).

Notice I said cut their losses, not reduce their liability? WE pay for the liabilities in the long run.


IMO you're sorely mistaken if you don't think that large-block shareholders in particular (which have the attention of corporate boards, and the ability to discipline those boards and their selected management teams) watch and know every aspect of the balance sheets and constantly push for the elimination of those 'built-in' expenses associated with bad production decisions that reduce their return on investment.

No board or management team wants to bear the brunt of dissatisfied shareholders resulting from any of those misguided decisions; they fully understand that shareholders have the wherewithal to demand better and replace those individuals who fail to deliver better.
Built-in expenses like lawsuit liability is a calculated risk. Every large-block share-holder takes calculated risks into account. While they may want to see that number reduced, as long as it doesn't affect the bottom line and the corp is not doing something so gross and obvious against humanity, I don't think they care. There are some exceptions but a shareholder is interested in one thing, making money in a predictable fashion.

As the number of data points increases the predictive capability of an actuarial model improves. Over time it's not by leaps and bounds like in the beginning but, still incremental.

Large and wasteful warranty, recall, and litigation / litigation settlement expenses all play a role in that feedback loop; they all bear on incentivizing more 'responsible' corporate management. One good example is the 'shakeup' of GM's management following that ignition-switch debacle you mention.
The GM ignition switch recall of 2014 goes all the way back to vehicles built in 2000. They (GM) grossly underestimated the amount of loss that would occur at that time which is why the management team was replaced. I can think of several that were more life threatening than that one in reported incidents vs deaths. Pinto comes to mind but even that was not a class action, it was multiple individuals (100+) that brought their own cases against Ford.

If you go back in automotive history, there were very few automotive class action lawsuits up until around the mid-90's. Computers and the internet presented an easy way for lawyers to turn it into a business. Which they have. These days you can easily Google, Automotive class action lawsuits and you'll find many sites with several lawsuits either pending or moving forward. You don't believe that OEM's haven't already caught onto that and automatically take that into account?

That is why I don't believe class actions contribute anything worthwhile. So they bring attention to some bad designs and risk laden decisions. What does it change that actually improves the decision making of the OEM? They just sharpen their actuarial model and make decisions based around that along with the accountants to shave a few pennies here and there all the while marking up the cars. All of the OEMs still make money, year-after-year and grow. Meanwhile our purchasing power is diminished while our own personal expenses and liabilities go up (inflation).

Even the much maligned vulture plays a beneficial role in nature, the world and all it's inhabitants would suffer in their absence. I wouldn't want one as a pet, any more than I'm a 'fan' of class action lawsuits, but that doesn't blind me to the harsh realities that make both a beneficial thing when circumstances dictate. ;) :)
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(and no, I'm not nor have I ever been a lawyer of any ilk)
I agree but in this scenario the class actions and the class action trolls are not beneficial. The lawyers have merely created a business for themselves in which I feel any small good they provide to "set the OEM's straight' or "make them aware that they need to do better for the general public' is far outweighed by their main objective, to make money for themselves.

This greed has simply forced OEMs to be smarter about the risks they take, not actually avoid them as evident by a number of recent lawsuits where the OEM knew about the problem and chose to ignore it.

Side note, Ford knew about the Pinto but decided against fixing it. This was before the advent of the internet so it was cheaper to ignore the problem and deal with it as it came up. In fact, most OEM's are aware of their product short comings before release to the general public. That is one good though I guess about the class actions, you get to see how brazen they (OEMs) are. Too bad nothing is actually been done about it... :(
 

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Following the above thread, here is an interesting comparison of Ford, GM, and Tesla booked warranty costs. I have not had time to fully digest and am unsure I am up to the task but I fined the presentation interesting. US Automaker Warranty Report, 8 March 2018
 

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Following the above thread, here is an interesting comparison of Ford, GM, and Tesla booked warranty costs. I have not had time to fully digest and am unsure I am up to the task but I fined the presentation interesting. US Automaker Warranty Report, 8 March 2018
Fantastic find!

Disclaimer: Maybe I'm just seeing what I want but, regarding Figure 7 alone.

I wonder if their lawsuit payouts are partially/fully from those warranty reserves since both would be categorized under liabilities/risk. You know, steal from Peter to pay Paul?

I see a big dip in GM until 2014 when the Ignition switch debacle hit.

Ford Hits a spike in 2017 following a yearlong increase when the DPS6 transmission lawsuit was investigated and getting under way...It's also interesting that their warranty reserve increases for the years they had the DPS6 in vehicles. 2011 to 2016 were up and stayed up. As mentioned Ford knew there were risks with that trans but ignored them. Ford didn't bat an eye at the 30M cash settlement + 47M in buybacks.

I'm also curious how much of that increase in the years from 2011-2016 was also floated by the Ecoboost 1.5L/1.6L head issues. I'm waiting for the class action to hit on that one and it appears Ford may also be based on their high reserve rates.

I would love to see data that goes back to 1999-ish to see if the 2001 Explorer tire class action affected these numbers as well.
 
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