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State Farm auto-parts trial documents, Ben Parr 1

Editor's note: The following excerpted memo is a verbatim copy of State Farm's internal documents that were entered as evidence in the auto-parts class action lawsuit in Marion, Ill. On Oct. 4, a jury found State Farm guilty of breaching its contract with its policyholders and awarded $456 million to the plaintiffs. On Oct. 8, Judge John Speroni ordered State Farm to pay an additional $730 million in damages.

October 8, 1990

ROUGH DRAFT

MEMO TO: Jack Gillis
CAPA

FROM: Ben C. Parr

RE: Taiwan Technical Committee Findings

We found that there was a China Productivity Center whose responsibility is to establish export criteria for all exported Taiwanese products for the world which includes automotive parts.

There are currently three inspectors and one manager on the DTL staff in Taipei. The frequency of their visits varies by manufacturer.

DTL arrived 1 hours late necessitating the cancellation of the scheduled Evergreen visit. The visits were to Lio Ho and Young Shine only.

Lio Ho/ Young Shine

  1. Lio Ho was producing the GM C10 hood (the same as the poor quality one returned to Taiwan from CPD (Collision Parts Distributor). Todays production run would not correctly pass their fixture. The OEM sample fit! Specifically, six major deficiencies were noted any one of which should warrant decertification. When specifically asked. Wayne Tung and Don Auen (of DTL) did not indicate that they would decertify the hood.

  2. Michael Ma indicated that there is a dual quality control standard at Lio Ho: one (1) for OEM and two (2) for the aftermarket part industry. The OEM is more stringent. He stated that unlike the OEM there was no penalty for inferior quality from the aftermarket part industry, i.e., no displeasure or clout exercised to date by CAPA, or the importers. He recommended that we somehow establish consequences for poor quality and noted that in the past we (ABPA/ State Farm/ et al.) had stated that. "Without quality there would be no future". However, he concluded that today we are saying. "Without quality there is no future for you." He was not offended and felt that it was a constructive and positive position on the part of CAPA.

    The production and quality control people in the plant work on both the superior (OEM) and inferior (aftermarket) quality levels simultaneously. The OEM give frequent, sometimes daily, feedback; while the aftermarket give feedback only when they want money back. Michael Ma stated that he had not received any comments on the hood from DTL [Detroit Testing Laboratory] and CAPA [Certified Automotive Parts Association] and would like daily FAX or no less than weekly, to him and TABPA on this product. He suggested publicizing the poor quality to the trading companies, the TABPA [Auto Body Parts Associaiton], the APBA and say that these are inferior parts to "buy at your own risk." Michael also stated that Lio Ho would correct the irregularities we noted today. We should follow up later to see when DTL checks the Lio Ho "corrections".

  3. At Young Shine, Mr. Lin stated that it was his error in placing the CAPA label on a non-certified part and he apologized. However, the part fit the fixture very well. It warrants certification from a fit perspective.

  4. Young Shine was producing a Skyhawk fender on which DTL had a complaint. DTL had closed the complaint by saying "Deleted Part" (due to CAF-certification applied for). At least seven major discrepancies, such as holes, contour gaps, edge waveness, fender to door gap, etc., were observed on the fixture! Additionally, the OEM part did not fit the fixture. DTL has this as a CAPA certified part. Prior to discussion Wayne stated that it was "in spec." However, after consultation with us he did say it should be decertified!

    The Young Shine quality control leader stated that it was the first time that they had received useful comments from CAPA. They expressed no knowledge of the complaint. Mr. Lim asked for closer cooperation and communication. Quoted as follows, "Did not know it was a problem and would like direct communication with CAPA."

Summary

  1. Neither plant had sufficient quality control procedures in operation to produce consistent quality parts.

  2. DTL is not fulfilling its quality control responsibilities to the manufacturing plants orCAPA.

  3. Need (mandatory) a good line of communication to be established between DTL, CAPA, and manufacturing plants on a daily, or at least weekly, basis regarding problems and other experiences with their parts, whether these experiences be verified or not! They wanted information!

  4. The China Productivity Center should be further explored.

The second day of the visit required air transport to Tianain to visit Tong Yang, then required motor transport three hours to visit Coin Join Key. After these visits we then motored four hours back to Taipei.

Tong Yang

  1. At Tong Yang we were successful in achieving an unannounced visit. They received information only that morning that we were coming. They missed us at the airport since we took a taxi. Tong Yang was successful in delaying until they somewhat got their plans formed.

  2. We saw excellent quality plastic components being manufactured for Japanese and Taiwanese OEM. There were many different components for many different models using the injection molding process. We saw their paint system for their bumper covers. It was absolutely first class and the production protocols, though somewhat labor intensive (not surprising due to the lower labor rate) was high quality, as was the management and quality control. Tong Yang has a GM Service Parts Organization contract for grilles and headlamp doors, using GM tooling.

  3. Finally we were shown the sheet metal stamping facility which was of significantly lower quality and far less organized and managed. A new stamping line was being installed which will be as modern as any in the world including quick die change provision and material transfer equipment We were told that the China Productivity Center was working with Tong Yang on this project.

  4. The sheet metal checking fixtures were not used during production at Tong Yang.

  5. The Tong Yang fixtures (especially the older ones) were light weight and of questionable value. Some of these were certified.

  6. We heard from Michael Ma that Tong Yang was looking for additional press capacity and was "farming out" their dies to other stampers to make parts. It is unclear how DTL handles this issue even though we know that Tong Yang has ownership of some other factories making aftermarket parts.

  7. Generally speaking, we saw examples of substandard parts at Tong Yang, which I believe represented more of an indifferent attitude which resulted in poor repeatability, or in consistent quality problems.

Go on to part two of the memo

Back to State Farm auto-parts trial documents

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