Ford Hit With $2b Ruling In Commercial Truck Case

Edward Niedermeyer
by Edward Niedermeyer

An Ohio judged has ruled [full ruling in PDF here] against Ford in a 2002 case alleging the automaker overcharged dealers by selling commercial trucks at unpublished prices between 1987 and 1998. According to the summary judgement, Ford’s “CPA” program violated its contract with dealers by publishing “unrealistically high” wholesale prices and using “secretive, unpublished discounts” on an uneven basis, thereby overcharging some 3,000 dealers by an average of $1,650 for each of the 474,289 medium- and heavy-duty trucks sold in the applicable time period (about $1.2b of the ruling is for unpaid interest). The story is intriguing in its illustration of the differences between consumer and dealer incentives: while consumer-end incentives can be applied on a market-by-market basis, dealer invoice prices must be evenly applied across all markets according to Ford’s contract with its dealers. The story is also of major significance considering Ford’s still-shaky financial position, with automotive gross cash exceeding total debt by a mere $1.4b. Ford will appeal the ruling, but because the damages awarded are material rather than punitive, an expert tells the Cleveland Plain Dealer, Ford’s appeal could be “interesting.” Which doesn’t sound like great news to us…


Edward Niedermeyer
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  • Doctor olds Doctor olds on Jun 12, 2011

    @pacificpom2- Manufacturers sell to dealers only. Dealers in turn sell to retail and fleet customers. Dealers are independent businesses with a large body of federal and state laws to protect them from unfair treatment by manufacturers. Federal law requires a "Monroney"(after the sponsor of the law) label which lists Manufacturers Suggested Retail Price, but dealers can sell for whatever price they can get. Even large fleet purchases such as Avis or Hertz are handled by a dealer. In the U.S. historically about 80% of new vehicle sales are from Dealer stock. Dealers order those vehicles equipped as they deem appropriate and pay the manufacturer for them a fixed time after shipment. The beef in the subject lawsuit appears to be that Ford did not have a defined "dealer price" for these commercial vehicles. Dealers sometimes "trade" another dealer for a car if they have a customer for that specific vehicle. Typically, they do not pay a premium to the other dealer, with the expectation that they will return the favor in the future. In the case of hot selling cars, the other dealer may decline to trade, forcing the dealer to order a car to be built to the specification the customer desires. . The remaining 20% of new sales are customer orders, similar to your Falcon example.

    • See 9 previous
    • Doctor olds Doctor olds on Jun 13, 2011

      @Scoutdude- I do go back to the 70's! I started with Olds in '69 and was a District Service Manager from '76-'83. The 80/20 rule was true then, had been true for a long time, and is still true today. That ratio seems to be common among many endeavors. 20% of new car salesment sell 80% of the vehicles,for example.

  • Obbop Obbop on Jun 12, 2011

    But... but.... it appears to my biased Disgruntled point-of-view that the USA Supreme Court adores the corporate entity despite the occasional slap-on-the-wrist slowly but steadily altering corporations into both "human" and business entities having the benefits of being both but with the business aspect creating a human aspect akin to an economic Superman!!! Oh, and a Superwoman. Bow down to your economic masters!!!!

  • Eldard Eldard on Jun 13, 2011

    GM actually just jumped past Ford in revenues. As for profits, well they gotta pay the loans. Poor Ford. Whatever it does GM outsells it everytime. The General ruled the sedans last month. GM sells more cars in Europe.

    • See 6 previous
    • Doctor olds Doctor olds on Jun 17, 2011

      @kamiller42- As a GM Salaried retiree who had as much "skin" in the game as anyone, I have been paying close attention since the collapse in mid October '08 which coincided with my retirement. I am quite sure that only $6.7B was in the form of a loan to be repaid by the company issued by the Bush administration. That is why it was true when Whitacre said that ALL government "loans" had been repaid early. In fact, the total government investment was about $50B ($49.9 according to your link: http://money.cnn.com/news/storysupplement/economy/bailouttracker/#TARP, though another of your links sums to $54.3B: http://www.nytimes.com/packages/html/national/200904_CREDITCRISIS/recipients.html). The Obama administration orchestrated the details of the bankruptcy and decided to swap all the rest of the debt for equity in the new company. Still $Billions in taxpayer dollars, but not repayable from company funds. The return is now dependent on the stock price when government sells. The latest reports are that all but $26.5B has been returned to treasury. The government's 500million shares would have to sell for $53 to break even. If sold at yesterday's closing price of $28.59 taxpayers would lose $12.2B. Here is a link that mentions the $53/share breakeven.http://investmentwatchblog.com/us-govt-selling-off-gm-shares-they-want-53share-yet-stock-yesterday-was-worth-29-97-talk-about-fuzzy-math/ I think the $49.9B is correct and perhaps this is a symantics issue. The money was put into the company, just not structured as debt, but equity in the new company. I am certain that GM company has no repayable debt associated with the bailout. That is not to say the company does not have a "moral debt" to the taxpayers for the lifeline, just to clarify the actual financial arrangements determined by the Auto Task Force and bankruptcy court.

  • Doctor olds Doctor olds on Jun 13, 2011

    @MikeAR- I am with you with regard to knocking your competitor down, though I think it is fair to compare data. Reminds me of an old phrase, "standing on someone else toes to make yourself taller", or Jimmy Olsen's "pocket full of kryptonite".

    • VikingBlue VikingBlue on Aug 10, 2012

      Wish I had seen this article and related comments last year when first posted. doctor olds, you may be surprised as to how many die-hard Olds families have switched to driving late model Fords these days. Mark my word, GM is dying a slow death and they only have themselves to blame.

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