Autolaw

What If?

It seems that the $5  gallon of gas is almost here. Hey, wait a minute it is here. And with it sit huge inventories of 15 mpg SUVs on most dealership lots. While Nissan is cranking out hybrid vehicles, Detroit is trying to figure out how to move its product and get back in the game. How did they miss the boat, er, the hybrid vehicle? I came across an interesting article recently that attempts to explain Detroit's misfire.

The gist of this Harvard Business Review blog is that "cognitive biases" (read "rose colored" glasses) and organizational pressures lead managers to overestimate the likely outcome of an undertaking. In plain English, 'We're moving these rigs, we're making money, this will last forever". What should have happened is that someone in the organization should have said "What if: gas goes to $5 a gallon? Or the the housing market craters? Or home equity lines dry up?" Unfortunately, no one caught on in time.

 I don't want to be too hard on Detroit; it is an American icon that has proved its mettle on more than one occasion, and I still believe in its product. I just wish the it would say "What if?" a little more often. There is probably a lesson in here for all of us.

Green is Red (Hot)

Could "Green" get any hotter? With gas at $4 bucks a gallon (if you can find it) going green has never held wider appeal in the auto industry. Today I was driving through Berkeley and I passed an independent dealership called "Green Motors". OK, I know, it was Berkeley for crying out loud. But "going green" has gone mainstream as well.

Ford has announced that in addition to marketing a sedan version of that venerable gas sipper the "Fiesta", it will now be producing a hatchback version. A hatchback Fiesta? The car will smaller than  a "Mini". Where are you going to put the groceries? Ford must feel the high MPGs are destined to drive up those sales numbers.

Meanwhile, Toyota has announced plans to produce over a million hybrids in America in 2009. That's right, a million hybrids. Never mind the increase on the window sticker, the typical consumer can't see past the price at the pump. 

Even my neighbor wants in on the action. He is trying to find a Mid-Eighties Mercedes Diesel so he can convert it to Bio-Fuel. You know, using the oil from French Fries.The problem is, demand has been so high, that thieves are now stealing the used oil from the grease pits of your local McDonald's. Like I said, "Green" has never been so hot.

Boardroom vs. Showroom

In today's Autoblog, there is Part Two of a story about General Motors' effort to shrink its dealer network. Rather than the current 14,000-plus dealerships in the United States, GM wants to establish mega-delaerships in major markets, with all the GM brands together, and service located elsewhere. Why? Well, the math doesn't work. As Autoblog put it in Part One of this story yesterday,

Chevrolet has 4,000 dealerships. Toyota, to sell the same amount of cars, has just 1,244 dealers. Put another way, the typical Toyota dealer moves 1,766 cars per year. The typical Chevrolet dealer moves 554. And the other domestics fare about the same: the usual Ford dealership rolls 556 vehicles off the lot every year, while a Dodge dealer does 374 per year.

Fine. Maybe even a good idea. But if you're a dealer, it can be a whole different story. Like, say, Gary Hamner's. Things look different in the showroom compared to the boardroom.

Hamner is an auto dealer in Stockton, California, and the former owner of a Nissan dealership. According to Hamner, when he sought to sell his dealership, Nissan first insisted that Hamner relocate it closer to competing Honda  and Toyota dealerships.

Hamner alleges that this tactic cost him mliions, which, of course, Nissan disputes. He has filed suit, which is scheduled to go to trial sometime in 2008. The case has received extensive coverage in the California business press, which hasn't helped NIssan's reputation any.

The point of all this is not the merit, or lack thereof, of GM's consolidation strategy. It's more basic. The people who actually own the francise, the dealers, have quite a bit to say about moves like this. Auto companies, particularly in California, overlook this at their peril.

An Auto Dealer's Bedside Manner

Earl Stewart, an auto dealer in the Palm Beach, Florida region, is one of our favorite bloggers. And one of his recent posts got us thinking about not just prevailing in litigation -- which is what we do for a living -- but avoiding litigation altogether.

How does Stewart do business?

• He almost never advertises.
• He carries a cell phone 24/7, and anyone can call him, anytime. No voice mail, no screens, no gatekeepers.
• And he trains his employees that if the customer believes she is right, do whatever it takes to resolve the problem.

In short, his dealership openly eschews all the stereotypical auto dealer tricks, manipluation and scams. Which, according to Stewart, is why he sold more Toyotas than any other dealer in the county.

This is obviously, and demonstrably, a great way to do business. But we suspect it's also an excellent way to stay out of court.

If we shift gears (no pun intended) for a minute, studies have shown repeatedly that one of the most effective ways to prevent a medical malpractice suit is to be a physician with a good bedside manner. A 2007 study published by in the Journal of the American Medical Association concluded that "Those doctors with low ‘communication scores’ were significantly more likely to have a complaint made against them that was retained." When a patient perceives a physician as arrogant, uncaring, preoccupied, inattentive or indifferent, they are far more likely to sue.

We suspect that the same thing holds true in car dealerships. If a customer perceives that they're being listened to, leveled with and that their issues and needs are being taken seriously, they will not get the idea of suing or filing a complaint in the first place. Stewart deals with this by making his operation as transparent as possible. Anyone who wants to talk to the owner can ... talk to the owner.

Now, again, we're trial lawyers. The courtroom is where we make our living, and one reason we're good at what we do (and we are) is that we truly enjoy the thrust and parry of a trial. But for us, an even higher ambition is to serve our clients. And the best possible thing for our clients is to stay out of court in the first place. To make this happen, we can certainly take a page from Stewart's hymnal, and help our clients stay out of court in the first place.

GPS = Good Possibility of being Sued?

In a story posted on his Autoblog, Jonathon Ramsey shares a story from MSNBC in which a man was following the directions in his GPS naviation device while driving, and was steered onto a railroad track. At which point his vehicle was struck by a train.

The man survived -- he managed to escape the crash -- but the legal exposure here for all involved are sobering. Since this was a rental car, and presumably the manufacturer did not install the GPS system (although renting a consumer a car with a GPS system you've already installed opens a different legal can of worms) there may be some limitation of liability. Maybe.

However, if, like an increasing number of manufacturers, you are selling, and like an increasing number of dealers, you are selling, cars with built-in GPS systems, we could see some interesting plaintiff suits coming down the road. Of course, it's always possible to file these under "Look where your going." But if there's one thing I've learned in 25 years of trial law, it's never say never.

Despite all the warranties, all the limitations, and everything else, it can be pretty hard to convince a jury that's seen the remnants of a car hit by a train -- or driven onto a bridge that's out, or the wrong way down a one-way street, or whatever -- that the manufacturer wasn't at fault.

Stay tuned.

When I'm Eighty-Four: The Cost of Elderly Customers

Sunday mornings, go for a drive
The Beatles, "When I'm 64"

Oh, man. From a defense lawyer's perspective, this is not a good idea.

According to Edmunds' Inside Line blog, Toyota has teamed up with Professor Ryuta Kawashima of Japan's Tohoku University, to develop a car that's specifically designed for elderly drivers.

Kawashima is the inventor of the Nintendo BrainAge series. As he describes it, the car, which is obviously still an R&D project, will measure the drivers' brain activity, and at least in theory, help stimulate it. According to Kawashima, the car will actually encourage elderly drivers to engage in more mental and physical activity by getting behind the wheel of a car.

Elderly drivers are at significantly higher risk of being involved in accidents than younger ones. Some of the most tragic stories imaginable arise from older drivers who, disabled by dementia, Alzheimer's, or simply the slower reflexes and physical limitations of aging, end up being charged with vehicular manslaughter for what occurs behind the wheel.

And from our perspective, God help the dealer who allows an elderly driver who doesn't belong there get behind the wheel. The plaintiffs' bar is already well aware of this, and one can only imagine what they would do to a dealer who they could portray as selling a car to a clearly incapacitated old woman simply to make a sale.

You Gotta Believe!

Recently our local NBA team, the Golden State Warriors went on a tear in the playoffs, knocking off the number one seed, the Dallas Mavericks. Their battle cry? Well, it's was borrowed from the 1973 New York Mets and their famous relief pitcher Tug McGraw -- "You Gotta Believe!"

How does this relate to the automotive industry? Well, take a look at GM's shot at the Number One seed in US sales: If you want to test drive a Toyota Camry or Honda Accord, you'll now be able to do it at a Saturn dealership. Yup, a Saturn dealership. The full story is online at, among other places, the Autoblog.

General Motors is asking Saturn dealers to have one or more of the competing models in the showroom so customers can look at it, sit in it and drive it. Naturally, these Saturn dealers can't sell you an Accord or a Camry. But they hope that, when you see a Toyota or Honda sedan next to the Saturn Aura, you'll decide to buy the Aura.

"In that side-by-side comparison, we come out really well," said Mark LaNeve, head of North American sales and marketing for General Motors. Later this year, Chevrolet dealers will be doing the same thing as they introduce customers to the redesigned Chevrolet Malibu, which shares its engineering platform with the Aura. Talk about a battle cry!

And talk about smart. Up until GM made this move, car dealers typically acted as if the competition didn't exist. This, of course, is factually nonsense, but that's Detroit for you. By making this move, they have at last openly admitted that, yes, they have competitors. But by yielding on that point, they have done something much, more more important. They have devised a way to keep the customer on the lot.

Selling cars is all about controlling the prospect. Car dealers are trained to never, ever let you out of their sight, or off the lot, if they believe you're serious about buying a car. When you go to a dealership, test-drive a car, then leave and say "I want to test-drive a Toyota" you have just sharply reduced the chances you'll come back.

This strategy prevents that. When you inform the salesperson that you want to go test-drive an import, they can then tell you that they have one right on the lot, and they invite you to compare it. This makes them, and the car they're selling, seem extraordinarily confident, and it also allows the salesperson to keep working on you rather than having you leave.

For years I drove a European car (Triumph TR7, Volkswagen Jetta), because of the perception that they were built better than Detroit's metal. Then a friend bought a Ford Explorer, I drove it and I was hooked. The fit and finish exceeded my expectations, it handled nicely and was built to last. I bought one. That was 16 years ago. I am now on my fifth Explorer. GM may actually have something here.

As for the Warriors? Next year.

First James Bond, Now the Big Cat

Well, it was bound to happen. A few months ago, Ford shed the prestigious Aston Martin nameplate. A consortium led by David Richards, chairman of the British company Prodrive, were the buyers, thus returning the home of the gadget-loaded car of choice for Bond, James Bond, back to the Brits. Now word on the street is that Ford is shopping its Premier Automotive Group which includes Volvo, Land Rover and the big cat, Jaguar.  The conventional wisdom is that a sale of this European luxury line would allow Ford to concentrate on its core North American business. Something's got to give, as Ford posted a $12.7 billion dollar loss last year. Personally, if this sale can right the Ford ship, more power to 'em. Maybe the time is right to make "American Metal" Number One, again. 

Hang 'Em Up

I went out and bought a pair of inexpensive athletic cleats last week. You know, the kind you find at Big 5 for $12.99. I put them in a box with a suit hanger and mailed them, with no note, to an attorney in southern California who was opposing counsel on a matter I recently litigated. "What gives?" you ask.

This all relates to an earlier post involving the alleged negligent entrustment of a dealership car to one of its employees. Plaintiff's counsel claimed the employee let his girlfriend drive the vehicle, all the while knowing that she was drunk. When the car was involved in an accident that caused major injuries to the plaintiff, he sued the dealership and the employee. The case was heavily contested (as you might imagine), and full of legal potholes.

We prevailed at the trial court level, and also at the Court of Appeal. The case is now done and we proved our point: neither the dealership nor the employee had any liability. But what stuck with me throughout the case were the constant head games played by opposing counsel. Normally, I let this kind of thing go, but sometimes enough is enough. The minute before our summary judgment was called by the court in this matter, opposing counsel leaned over the aisle and told me (loud enough for nearly everyone in the courtroom to hear) "You're going to lose this case; I can't believe you are bringing this motion; you're just milking the file. If I lose this motion I'll hang up my cleats."

Sometimes you just have to fire back. Like I said, I put a hanger in the box.

Full Circle

Funny how things that may not seem germane to your everyday life come circling back around when you least expect them. My earlier post on the Cummins decision dealt with an important, yet rarely encountered fact pattern involving the purchase of out-of-state vehicles and the application of California's Lemon Law, aka the Song-Beverly Act.

Turns out one of my best friends recently bought a luxe SUV- out of state -and had it shipped to California. No reason, really, other than availability. After numerous problems with the vehicle, they came to me for a referral to a lawyer-someone who would be able to resolve the matter simply, say wth a buyback under the Lemon Law.

Once they gave me the fact pattern I explained the uphill battle they faced under Cummins. Not often that you can give a friend a quick answer in an arcane area of the law, too bad it wasn't what he wanted to hear.