Mercedes 2003 Annual Report Download - page 159
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Please find page 159 of the 2003 Mercedes annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.30. Litigation and Claims
Various legal proceedings are pending against the Group. Daimler-
Chrysler believes that such proceedings in the main constitute
ordinary routine litigation incidental to its business.
Various legal proceedings pending against DaimlerChrysler’s sub-
sidiary DaimlerChrysler Corporation allege defects in various com-
ponents (including occupant restraint systems, seats, brake sys-
tems, ball joints and fuel systems) in several different vehicle
models or allege design defects relating to vehicle stability (rollover
propensity), pedal misapplication (sudden acceleration), brake
transmission shift interlock, or crashworthiness. Some of these
proceedings are filed as class action lawsuits that seek repair or
replacement of the vehicles or compensation for their alleged
reduction in value, while others seek recovery for personal injuries.
Adverse decisions in these proceedings could require Daimler-
Chrysler Corporation to pay substantial compensatory and punitive
damages, or undertake service actions, recall campaigns or other
costly actions.
Three purported class action lawsuits are pending in various U.S.
courts that allege that the paint applied to 1982–1997 model year
Chrysler, Plymouth, Jeep®and Dodge vehicles delaminates, peels
or chips as the result of defective paint, paint primer, or application
processes. Plaintiffs seek compensatory and punitive damages,
costs of repair or replacement, attorneys’ fees and costs. Seven
other previously reported class action lawsuits regarding paint
delamination have been dismissed.
Like other companies in the automotive industry, DaimlerChrysler
(primarily DaimlerChrysler Corporation) have experienced a grow-
ing number of lawsuits which seek compensatory and punitive
damages for illnesses alleged to have resulted from direct and indi-
rect exposure to asbestos used in some vehicle components (prin-
cipally brake pads). Typically, these suits name many other corpo-
rate defendants and may also include claims of exposure to a
variety of non-automotive asbestos products. A single lawsuit may
include claims by multiple plaintiffs alleging illness in the form of
asbestosis, mesothelioma or other cancer or illness. The number of
claims in these lawsuits increased from approximately 14,000 at
the end of 2001 to approximately 28,000 at the end of 2003. In the
majority of these cases, plaintiffs do not specify their alleged ill-
ness and provide little detail about their alleged exposure to com-
ponents in DaimlerChrysler’s vehicles. Some plaintiffs do not
exhibit current illness, but seek recovery based on potential future
illness. In 2001, DaimlerChrysler and other automobile manufactur-
ers asked the federal-bankruptcy court in Delaware overseeing the
bankruptcy proceedings of an automotive supplier, Federal-Mogul
Corporation, to consolidate all of the asbestos brake cases pending
in state courts throughout the U.S. with the asbestos brake litiga-
tion involving Federal Mogul supervised by the bankruptcy court.
The Group believed that consolidation would reduce the cost and
complexity of defending these individual cases. In 2002, the bank-
ruptcy court decided that it did not have the authority to consoli-
date these cases, and the U.S. Court of Appeals upheld that deci-
sion. The U.S. Supreme Court in January 2003 denied
DaimlerChrysler’s request and that of other manufacturers to
review the decision. DaimlerChrysler believes that many of these
lawsuits involve unsubstantiated illnesses or assert only tenuous
connections with components in its vehicles, and that there is
credible scientific evidence to support the dismissal of many of
these claims. Although DaimlerChrysler’s expenditures to date in
connection with such claims have not been material to its financial
condition, it is possible that the number of these lawsuits will con-
tinue to grow, especially those alleging life-threatening illness, and
that the company could incur significant costs in the future in
resolving these lawsuits.
As previously reported, the Antitrust Division of the U.S. Depart-
ment of Justice, New York Regional Office, opened a criminal inves-
tigation in connection with the allegations made in a lawsuit filed in
2002 in the United States District Court for the District of New Jer-
sey against DaimlerChrysler’s subsidiary Mercedes-Benz USA, LLC
(“MBUSA”), and its wholly-owned subsidiary Mercedes-Benz Man-
hattan, Inc. The Department of Justice advised those companies in
the third quarter of 2003 that it had closed the investigation and
will take no further action. The lawsuit, certified as a class action in
2003, alleges that those companies participated in a price fixing
conspiracy among Mercedes-Benz dealers. MBUSA and Mercedes-
Benz Manhattan will continue to defend themselves vigorously.
Other Notes
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