15 June 2011

JUDGEMENT REACHED IN FORD CASE WITH DEALERS

Ford's shares recovered some of their losses, but still closed down 1.6%, or 21 cents, at $13.14 today on news of the $2 billion judgment against it in a class action suit by 3,000 Ford truck dealers. Shares had dipped as low as $12.78, or more than 3%, at midday.

The damages ruling in an Ohio state court came late Friday and was based on a February jury verdict against Ford.

A statement from Ford General Counsel emphasized that Ford believes the ruling is wrong and will appeal. They believe the decision made Friday by a state court judge in Ohio is highly flawed, and are appealing.

The judge ordered Ford to pay the dealers $781 million in damages and about $1.2 billion in interest in the suit, which alleged Ford overcharged them for 474,000 600-series and heavier trucks from 1987 through 1997. The suit, filed in 2002, claimed Ford violated its agreements with the dealers by not disclosing discounts on the published wholesale prices that it gave some dealers through its so-called Competitive Price Assistance program (CAP).

Ford’s attorney argued that the evidence they presented at trial showed clearly that the former (CAP) program – which was a common practice formerly used by companies selling in the extremely competitive medium- and heavy-truck market – resulted in thousands of additional sales benefitting customers and dealers, and it did not violate their agreement with dealers.

Ford also took strong issue with the expansion of the suit, initially filed by one dealer, into a class action, leading to the huge award:

They believe among the most egregious errors was the decision to apply alleged damages from this one case to each and every dealer in the class without allowing any evidence of how other dealers might have been affected.

The judge delayed his ruling pending the appeal on the condition Ford post a $50 million bond.

Ford’s statement expressed confidence about the appeal -- and indicated the dealers shouldn't expect a check any time soon. They feel the decision is far outside the bounds of normal legal process, and are confident that the Ohio appellate courts will reach the same conclusion upon review of the matter, which will take several years based on normal timing.

That also would leave time for Ford and the dealers perhaps to settle for a less eye-popping amount.

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