The Effects of Product Liability on Automotive Engineering Practice

FRANÇOIS J. CASTAING

Some years ago, a young couple drove a compact car into a horse that was wandering down the middle of the road. The horse's body smashed into the windshield, killing the wife. A jury ruled the vehicle wasn't ''crashworthy."

In another case, a woman tried to commit suicide by locking herself into the trunk of her car. She changed her mind, but it took nine days before someone found her and let her out. The woman claimed the automaker was negligent in not providing a release inside its trunks. A jury agreed, and the verdict was upheld on appeal.

In a third case, a teenage boy, a first-year driver, took his teenage girlfriend out for a drive. He had heavily modified his 10-year-old vehicle, including jacking it up and installing much larger wheels than the chassis and suspension were originally designed to accommodate. It was a rainy Friday night. The teenage driver had been drinking, and he was also speeding. Neither he nor his girlfriend was wearing the manufacturer-installed seatbelts. The vehicle left the road, and the teenage girl was ejected from the vehicle. She suffered permanent damage to her spine and ended up in a wheelchair. The girl could not sue the boy, because he did not have any money, so instead, she went after the manufacturer.

As different as these cases may be—a collision with a horse, a woman locking herself in a trunk, and an instance of severe reckless driving—they all have four major points in common: First, the vehicles involved met all of the requisite federal safety standards at the time of their design and manufacture. Second, in none of these cases was a technical malfunction deemed the proximate cause of the accident or incident. Third, all of these



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Product Liability and Innovation: Managing Risk in an Uncertain Environment The Effects of Product Liability on Automotive Engineering Practice FRANÇOIS J. CASTAING Some years ago, a young couple drove a compact car into a horse that was wandering down the middle of the road. The horse's body smashed into the windshield, killing the wife. A jury ruled the vehicle wasn't ''crashworthy." In another case, a woman tried to commit suicide by locking herself into the trunk of her car. She changed her mind, but it took nine days before someone found her and let her out. The woman claimed the automaker was negligent in not providing a release inside its trunks. A jury agreed, and the verdict was upheld on appeal. In a third case, a teenage boy, a first-year driver, took his teenage girlfriend out for a drive. He had heavily modified his 10-year-old vehicle, including jacking it up and installing much larger wheels than the chassis and suspension were originally designed to accommodate. It was a rainy Friday night. The teenage driver had been drinking, and he was also speeding. Neither he nor his girlfriend was wearing the manufacturer-installed seatbelts. The vehicle left the road, and the teenage girl was ejected from the vehicle. She suffered permanent damage to her spine and ended up in a wheelchair. The girl could not sue the boy, because he did not have any money, so instead, she went after the manufacturer. As different as these cases may be—a collision with a horse, a woman locking herself in a trunk, and an instance of severe reckless driving—they all have four major points in common: First, the vehicles involved met all of the requisite federal safety standards at the time of their design and manufacture. Second, in none of these cases was a technical malfunction deemed the proximate cause of the accident or incident. Third, all of these

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Product Liability and Innovation: Managing Risk in an Uncertain Environment incidents involved circumstances that most people would agree fall far outside of the normal operating range of cars or light trucks. Fourth, and most important, all of these cases pitted very sympathetic plaintiffs who had suffered horrible personal tragedies against what were seen as large, faceless, uncaring, "deep-pocket" corporations. In each case, the jury found that the vehicles involved were somehow deficient in their design, and large cash settlements were awarded to the plaintiffs. The purpose of this paper is not to discuss whether justice was served in the aforementioned cases. Instead, this paper argues that these cases illustrate characteristics of today's product liability environment that have unintended and deleterious effects on the automotive engineering process. PRODUCT LIABILITY IMPACTS ON AUTOMOTIVE ENGINEERING PRACTICE The proliferation of product litigation cases in the United States raises an important question for those who design and engineer cars and trucks. In fact, it is a question that was asked in the title of an article written by automotive business writer Paul Eisenstein (1993) in Investor's Business Daily. The question is this: "Will your next car be designed by the courts?" The answer is, in part, yes. Fortunately, we have yet to come to the point where American juries take a designer's pen and a computer in hand to execute a structural design or to develop automotive electronics. (Although in the past this engineer has had to listen to many lawyers claiming to know enough about automotive engineering disciplines to "teach" a lay jury what they need to know to adjudicate a product liability case.) Unfortunately, however, we have long since crossed the line where the threat of product liability litigation influences the design of cars and trucks—including those that are driven today. Ultimately, that threat of litigation includes three elements that have a big impact on the competitiveness of the American auto industry itself. First, the threat of product liability suits inhibits the incentive to innovate. Ironically, it inhibits most dramatically the incentive to innovate safety features. Because automotive manufacturers are frequently called on to defend past product designs in the courtroom, American engineers are understandably hesitant to explore anything but evolutionary product designs. Revolutionary or radical new designs are nearly out of the question because they are simply too risky. Second, the threat of product liability also creates a huge disincentive for the honest and critical evaluation of the features on current and past vehicles. Imagine, if automotive engineers had not been critical of their past work, everyone would still be driving Model Ts! In fact, no one should be

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Product Liability and Innovation: Managing Risk in an Uncertain Environment more critical of a vehicle or its components than the people who designed and engineered it. In the auto industry, new product development cycles are now just 30 to 36 months long. That means that engineers must be looking at how they will improve the next generation of vehicles as soon as they complete the development of the current generation vehicle. This is where the threat of product liability litigation has an absolutely chilling effect on the creative process and the free flow of ideas, for any document generated in an innovation-oriented corporate culture—be it a detailed proposal, a note in a day planner, or a sketch on a napkin—might be taken out of context and become evidence in a courtroom. A hypothetical but very realistic example will illustrate this conundrum. An automotive engineer thinks she can design an improved antilock braking system. Her idea is to design a braking system that will pulse 20 times a second instead of 5 times a second. That would mean additional and more controlled braking power for the customers. In addition, her design would be less complex and expensive to build than an existing system. What she is saying is, "I think we can design a better braking system that more Americans will be able to afford in their automobiles." She puts her ideas on paper. Any vice president of engineering would say that proposal is a dream come true. Maybe it will work, and a better, more affordable braking system that will increase customer satisfaction can be built. This kind of innovation, and the thinking that generated it, is certainly something the company wants to promote. However, the engineer's promising proposal could also become the company's worst nightmare if it were to be faced with a product liability suit on the generation of antilock brakes currently in production. A case could be made, using the engineer's new braking system proposal as the "smoking gun," that the company knew that its old antilock braking system was deficient. Such a case could be made even though antilock brakes are not required by any federal standards. This explains why engineers and designers might fear that their ideas or criticism of current products might be taken out of context in court. The third element of the threat of product liability is that it can actually prevent manufacturers from implementing new or improved designs in their vehicles quickly, the backward logic being that implementing a design change quickly is often misconstrued in a courtroom as an admission of a faulty design. As a result, manufacturers may be slower to implement improvements simply because of the fear that someone might contend that they knew from the start that a vehicle or component was deficient, even though the ability to make quick product changes can be a strong competitive advantage. "Different" is all too often made out to be "defective."

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Product Liability and Innovation: Managing Risk in an Uncertain Environment WHAT IS THE IMPETUS FOR MAKING CARS SAFER? Many contend that one benefit of high settlements in product liability suits is that they force automakers to manufacture better and safer vehicles. Instead of "necessity being the mother of invention," this is the "product litigation is the mother of invention" school of thought! Experience in the real world of automotive engineering, as opposed to a theoretical one, shows that argument to be faulty. One of the tactics used in courts is to try to persuade the jury that engineers and manufacturers are irresponsible and that they purposely and knowingly design defective products. They are painted as part of a large, faceless, and uncaring corporation that would gladly have people get hurt if it makes a buck. What this ignores is that virtually everyone who works for an American auto company drives the cars and trucks that they help to design, engineer, market, and assemble. Furthermore, their children, parents, neighbors, friends, and relatives drive those cars, too. While these people may work for large corporations, the safety and design of their products are a very personal concern. It should also be noted that if indeed the number of product liability suits has a direct causal link with the safety and innovativeness of automobiles, the United States should have the most innovative and safest cars on the road. As the Investor's Business Daily article referred to earlier points out, in 1992, while Ford faced more than 1,000 product liability cases in the United States, Ford of Europe had just one product liability suit. In Japan, product liability suits are about as rare as sumo wrestling is here in the United States. Despite this, the Europeans and Japanese are known to be extremely innovative automotive engineers. Companies like Volvo and Mercedes, for instance, have long enjoyed reputations for being at the forefront of safety technology. How can this be? A big part of the reason is that European and Japanese engineers can more freely experiment with engineering and designing better products. They do not have the fear that the work of proposing, discussing, trying, or testing ideas could be used against them in a future law-suit. An American engineer never feels as comfortable being as critical of a car he is supposed to replace as would his European or Japanese counterpart. As someone who was born and raised in France, and then trained as an engineer and spent the early part of my engineering career in Europe, this author can verify from experience that the product litigation phenomenon is uniquely American. CONCLUSION It is well understood that product liability laws have a purpose. They are supposed to compensate for injury, promote safety, and penalize gross

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Product Liability and Innovation: Managing Risk in an Uncertain Environment negligence. If a corporation is irresponsible, it should be held accountable. But in the United States, the situation has gone beyond punishing gross negligence. Now punishment is meted out for many risks that simply cannot be avoided when a product is produced and sold to a public that has wide discretion in how it chooses to use that product. When no distinctions are made in assigning responsibility for risk and companies are held responsible (and penalized) for all risk—from those attributable to the vagaries of human nature to those truly within a company's aegis—the ability to innovate, engineer, and compete is compromised. REFERENCE Eisenstein, Paul A. 1993. Will your next car be designed by the courts? Investor's Business Daily, July 12.