Ford Motor Settles Ignition Lawsuit

Ford Motor Co. will reimburse customers who paid hundreds of millions of dollars to replace a faulty part that caused their vehicles to stall, under terms of a nationwide settlement that received preliminary approval Thursday.

The deal, approved by Alameda County Superior Court Judge Michael E. Ballachey, covers current and former owners of 22 million Ford, Lincoln and Mercury vehicles, in the largest automotive class-action settlement in history. But it is uncertain how many would qualify for reimbursements in the range of $160 apiece.

Plaintiffs’ lawyers said the cost to Ford would be as high as $2.7 billion if all eligible class members file claims. But Ford representatives--contending the number of failures of the parts has been exaggerated--predicted that the cost would be less than $1 billion.

The settlement caps six years of bitterly fought litigation, during which Ballachey ruled that Ford had concealed a defect in the vehicles and Ford tried unsuccessfully to have him removed.

The dispute involves a device, known as the thick film ignition module, that controls the flow of current to the spark plugs. Ballachey ruled that Ford’s decision to mount the device on the distributor, where it was exposed to high heat, made it unusually vulnerable to failure, including at highway speeds.

In an unprecedented ruling last year, Ballachey ordered a recall of the 1.7 million affected vehicles still on the road in California, the first time a recall order had ever been issued by a state court judge.

For Ford, the settlement dissolves the recall threat, along with a separate phase of the case in which plaintiffs had sought about $3 billion in monetary damages for California owners of the vehicles.

Similar class actions pending in five other states--Illinois, Washington, Tennessee, Maryland and Alabama--also would be dismissed under the agreement. An estimated 16 million of the 22 million vehicles are still on the road.

Ford will begin mailing settlement notices within the next few weeks, and Ballachey is expected to give final approval next year after hearing from any objectors. Class members then would be able to file claims. .

The settlement comes at a tumultuous time for Ford, which posted a huge third-quarter loss, has announced as many as 5,000 layoffs and remains mired in controversy over rollovers of Explorer sport-utility vehicles equipped with Firestone tires.

“Given the scrutiny Ford’s been facing recently,” putting “a big issue like this behind you ... is a positive,” said Stephen Girsky, an auto analyst with Morgan Stanley.

Ford representatives said that in reaching the settlement, they were not conceding a defect in the modules, which they say are as reliable as parts competitors used.

“Our position is there’s nothing wrong with these modules,” said Kristen Kinley, a Ford spokeswoman. Settling the case is “purely a customer-satisfaction issue for us.”

The settlement covers 29 models, produced from 1983 to 1995, that were equipped with distributor-mounted ignition modules.

It would extend the warranty on the ignition modules from the usual 50,000 miles to 100,000 miles. Moreover, the agreement would provide that current and former owners who replaced failed modules before 100,000 miles would be reimbursed by Ford.

Customers have had to replace about 13 million ignition modules, according to an analysis prepared for the plaintiffs by the Princeton Economics Group. The average cost for parts and labor was $160 during the 1980s but currently is as high as $257. Ford would be on the hook for up to $2.7 billion if all of these estimated costs were reimbursed, the analysis shows.

But Ford representatives, insisting there has been no unusual trend of failure in the devices, said they don’t expect anywhere near that number of claims.

The settlement also would require Ford to contribute $5 million to independent research on vehicle safety.

In addition, Ford would pay nearly $29 million in legal fees and costs.

The settlement would exclude claims of injuries or deaths from wrecks blamed on stalls from ignition module failures. Ford has faced hundreds of such stalling claims, but the number of cases involving the modules is uncertain.

In 1987, Ford recalled 1.1 million four-cylinder cars whose TFI warranty replacement rates were unusually high. But in ordering a recall last year, Ballachey said the evidence showed that Ford had withheld documents from the National Highway Traffic Safety Administration that might have resulted in a wider recall.

Clarence Ditlow, who heads the Center for Auto Safety, an advocacy group in Washington, said the high cost of the Ford settlement could deter auto makers from stonewalling NHTSA in the future.

“It changes the calculus for the auto companies,” because until now “it has paid to cover up defects and avoid recalls,” Ditlow said.

“This puts a much-needed check-and-balance back into the system.”

Ford shares closed up 46 cents at $16.52 on the New York Stock Exchange.