Product Liability and Innovation Managing Risk in an Uncertain Environment (1994) / Chapter Skim
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Indirect Effects of Product Liability on Automotive Engineering Practice
Indirect Effects of Product Liability on Automotive Engineering Practice
Pages 68-76
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From page 68... ...
Of the more than 35 major product liability claims against Unison during the last 12 years, all involved general aviation aircraft. The company has yet to sustain a single product liability claim for a commercial airline or military aviation application.
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From page 69... ...
The growth of the kit plane industry is a specific product strategy that has resulted from product liability. Rather than sell assembled airplanes, some companies are hedging their product liability exposure by selling
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From page 70... ...
This sometimes leads to canceled deals, as happened in March 1991 when the French firm Aerospatiale withdrew from its proposed acquisition of Piper Aircraft because of inadequate product liability indemnification. It can also lead to transactions being structured more around coping with product liability than optimizing the future prospects of a business or product line.
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From page 71... ...
Some enterprising vendors to these OEM manufacturers, who do not have the same liability burden, have begun to sell their components directly to the end users at prices below those of the OEM producers, thus undercutting their own customers. Since aviation manufacturers cannot easily switch vendors, some OEMs are forced to handle the problem by placing contractual limitations on vendors, putting themselves potentially at risk of an antitrust claim.
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From page 72... ...
This includes requiring that certain or all documents be reviewed for wording before they are archived, starting courses in memo writing and note taking, establishing elaborate record retention policies that limit what documents are stored and how long they should be kept, and employing special staffs just to enforce these policies. The cost of all this to businesses with high product liability exposure is substantial.
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From page 73... ...
And how much safer are high liability products when the best engineers refuse to work on them? The net effect of product liability on a company's engineering is a narrower selection of engineers, a higher cost of engineering, a slower product development cycle, and the imposition of bureaucracy in an area where creativity, quick reaction, and bold thinking are the keys for product success.
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From page 74... ...
Major manufacturers track every aircraft accident and review it to see if it could generate a product liability claim. Accidents involving serious injury or death are all investigated at the accident site, not only by safety authorities with the FAA or the National Transportation Safety Board, but also by trained accident investigators sent by the major product manufacturers.
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From page 75... ...
Product liability affects a company's product strategy; relationships with other firms; financing; communications policies; engineering, manufacturing, and personnel policies; and organizational structure. All these extra indirect costs have to be paid somehow, usually in the form of product price increases.
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From page 76... ...
With these few safety successes has come a flood of examples of companies and products being damaged by the system. Moreover, only a small portion of the total amount expended in a lawsuit 15 percent according to some sources is actually getting to the victims of unsafe products.
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