Ford Faces Lawsuit Over How it Handled Faulty Transmissions
July 26 2017 - 4:00AM
Dow Jones News
By Mike Cherney
An Australian regulator is suing Ford Motor Co. regarding a
transmission that caused jerking while accelerating and excessive
noise, the latest legal challenge for global auto makers stemming
from safety concerns.
The Australian Competition and Consumer Commission, which filed
a lawsuit Wednesday in the Federal Court of Australia, says Ford
misled customers who complained about the dry-clutch PowerShift
automatic transmission. The ACCC says Ford violated the Australian
Consumer Law by telling customers they weren't entitled to a refund
or a replacement vehicle at no cost.
The ACCC said Ford sold about 70,000 vehicles with the
transmission in Australia from 2011 to 2016--including the Focus,
Fiesta and EcoSport models--and that about half the vehicles had at
least one repair related to the transmission. If found liable, Ford
could face penalties of up to 1.1 million Australian dollars
(US$870,000) per breach of the law. It would be up to the court to
determine how many breaches occurred.
Ford is facing other legal action relating to the transmission.
A settlement is pending in one class action filed in U.S. federal
court in California, which offers customers up to $2,325 in cash,
among other possible remedies. At least one class action is also
pending in Australia, separate from the ACCC's lawsuit.
Ford rebutted the regulator's allegations that it purposefully
denied customers their rights and indicated it would challenge them
in court. The auto maker, however, acknowledged that issues have
arisen in certain vehicles with the PowerShift transmission and
apologized for its initial slow response to the complaints.
More recently, Ford says, it has reached out to customers who
had had their transmission repaired twice or more to offer the
latest updates free. Overall, more than 12,000 vehicles have had
clutches upgraded to the latest specifications, Ford said.
Graeme Whickman, Ford's chief executive for Australia, said at a
news conference that the Australian safety regulator, the
Department of Infrastructure and Regional Development, investigated
the vehicles and transmission and concluded that there are no
safety concerns.
The allegations distract from what has been a profitable two
years for Ford, as demand for trucks and SUVs amid low gas prices
pushed U.S. auto sales to record highs. But Ford said in April that
first-quarter profit fell 35% amid lower sales in China, recall
costs associated with fire risks and faulty door latches, and
falling interest for new cars in the U.S.
The ACCC says that from 2011 to May 2015, Ford refused to
provide refunds or replacements even after vehicles had multiple
repairs that didn't fix the issues. It said that in most cases,
Ford provided replacement vehicles only if customers participated
in a loyalty program, requiring an average payment of 7,000
Australian dollars.
The ACCC said Ford blamed the problems on customers' handling of
their cars but that the company knew by October 2013 that there
were problems with the transmission. That is when it started
issuing technical-service bulletins to dealers concerning repair
work.
Global auto makers have paid out hefty sums to settle legal
claims over safety worries. General Motors Co. has reached
settlements to pay more than $2 billion relating to its
ignition-switch defect. In 2012, Toyota Motor Corp. agreed to pay
about $1.1 billion to settle a class action about the unintended
acceleration of its vehicles.
Japanese company Takata Corp. filed for bankruptcy protection in
recent weeks after making faulty air bags that led to at least 16
deaths and the recall of 42 million vehicles in the U.S.
ACCC Chairman Rod Sims said the Australian lawsuit is the first
brought by the regulator against an auto maker alleging breaches of
Australia's new consumer law, which went into effect in 2011. Under
the law, customers can ask for a replacement or refund if there is
a major fault with a product.
"Some people took the car back seven times for transmission
faults," Mr. Sims said. "I think most people would think that's a
major fault."
Mr. Sims said other suits against auto makers are in the
works.
Write to Mike Cherney at mike.cherney@wsj.com
(END) Dow Jones Newswires
July 26, 2017 03:45 ET (07:45 GMT)
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