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State Farm auto-parts trial documents 2

Editor's note: The following excerpted text is taken verbatim from 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.

State Farm Mutual Automobile Insurance Company
One State Farm Plaza
Bloomington, Ill. 61710 G.

Robert Mecherle JD, CPCU, CLU
Claims Vice President
Area Code 309 764-2700

November 12, 1990

Mr. Pier Talenti
Detroit Testing Laboratory, Inc.
7111 East Eleven Mile
P.O. Box 869
Warren, MI 48090-0869

Dear Pier:

This letter is an attempt to clarify Detroit Testing Laboratorys authority as validator of the Certified Automobile Parts Association program. It is also an attempt to share concerns of the CAPA Board of Directors regarding our relationship with Detroit Testing Laboratory and concerning the overall testing program.

First of all, the Board is in complete agreement that under the terms of our contract with DTL, DTL has the sole authority for determining whether tested parts are in compliance. Although not covered directly in the contract, decertification of manufacturer would be implied and also within your authority, and we believe it is implied from the fact that plant approval must be given by DTL for a plant to have a part certified.

In this regard, you have recommended that three manufacturers be decertified: CFU, Huar Tay and Conjoin Key. That is your decision, and we presume you will be able to justify it to those manufacturers. It as been suggested by Frank McGiboney, whose company has had some experience in dealing with Far Eastern companies, that it would probably be more tactful to simply require those three companies to have their plants approved rather than use the negative "decertification". Until they are approved we would remove all parts from the directory and he would be instructed not to use any [CAPA] seals.

The primary concern of the CAPA Board is to make certain that only high quality parts receive the CAPA seal. The quality of the CAPA program is being attacked on many different fronts. Rumor has it the Federal Trade Commission is investigating the CAPA program. We know that Ford has an outside company testing CAPA parts and plans to release the results at the NACE Convention at the end of November. Ken Myers in a press release has already signaled those results wont be good for CAPA. The Ferrari Brothers, body shop owners in southern California, at the Collision Industry Conference showed a comparison of ten CAPA parts (actually, one part was a certified-applied-for part) versus the OE. The difference between the CAPA parts and OE [Original Equipment] were spelled out. We believe they are continuing their comparison in the other areas, and we suspect that they are financially sponsored by Toyota.

Although numbers of complaints have been increasing, it is very difficult to judge the significance of this, since we do not know how many parts are being produced. DTL has been unsuccessful in getting production counts from the Taiwanese manufacturers, probably because giving these would be an admission the manufacturers are not buying the seals.

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