A fine of R35 million is no real deterrent
This is what is wrong with the Ford settlement
Most Kuga consumers have been sold down the river, and don’t count on the National Consumer Commission to back you up
The National Consumer Commission (NCC) announced last week that it had reached a settlement with Ford after investigating the combustion of Ford Kuga vehicles.
It states that Ford acknowledged contravening the Consumer Protection Act (CPA). A fine of R35m was imposed on Ford and the manufacturer undertook to pay consumers whose cars burnt out an amount of R50,000.
Consumers have been looking to the commission to enforce the CPA in a manner that deters suppliers from disregarding consumers’ safety. In principle the settlement is a step in the right direction, but at closer glance it is disappointing.
It seems as if the settlement was reached without proper consultation with the victims, or at least without proper consideration of all the victims’ interests. The consumers affected by the defect in the Kugas are not only those relatively few Kuga owners (70, according to media reports) whose cars burst into flames, but the more than 10,000 who experienced a sudden and substantial drop in their resale value and receive nothing from the settlement.
For my clients the drop was in the range of R75,000 according to Mead & McGrouther data. Some of these consumers experienced damage to their vehicles due to perpetual overheating. Others didn’t experience problems with the car’s performance but started driving around with a fire hydrant on the front seat. They suffered the inconvenience of having to suddenly dispose of a car that no-one wants and urgently replace the family’s vehicle, as well as experiencing the aggravation that often resulted from engaging with Ford.
I am a consumer attorney and have represented six Kuga owners. In the process of doing so, two Ford CEOs misrepresented to me what the NCC told them, the in-house legal counsel for Ford has repeatedly put the phone down on my calls, and I’ve been unjustifiably accused of unethical behaviour (double-charging clients).
This behaviour was so extreme as to leave me astounded.
As a consumer, I’m concerned when a government watchdog, the NCC, is willing to bend the rules for a large supplier in a way that places my life at risk.Trudie Broekmann
Then the general legal counsel of Ford offered in writing to pay 50% of my clients’ legal fees, but when the fees were submitted to them, Ford denied liability, forcing my firm to sue them for the fee contribution.
As a result, what has happened practically is that my clients have usually managed to get a replacement vehicle through their dealership at a small loss, or in the case of the vehicle having burnt, been compensated by their insurance.
According to what I understand from the spokesperson of the NCC, victims of Ford’s defective vehicles where the vehicle has not been destroyed by fire, are not being compensated at all. The NCC says the settlement is in response to 160 Kuga consumers’ complaints — the majority of these have been sold down the river by the settlement.
The NCC didn’t enforce its own product recall guidelines. Those require the supplier to “remove the unsafe product from the marketplace”, not attempt to repair the product and then release it back onto the roads. The guidelines also required Ford to stop distribution of the product being recalled, to cease production and dispose of the recalled products safely. The NCC allowed Ford to attempt to do repairs instead of destroying the defective cars and, as we know from several instances reported in the media, some Kugas caught alight after being repaired by Ford. As a consumer, I’m concerned when a government watchdog is willing to bend the rules for a large supplier in a way that places my life at risk.
The four Ford recalls are not limited to the Kuga 1.6L Eco-boost. Ford has also recalled its Fiesta and Ikon models over similar concerns of spontaneous combustion, as well as its Focus, Kuga, Transit Connect, and Tourneo Connect models for risk of clutch pressure plate fracture — a fault in cars fitted with manual gearboxes. These owners’ interests have been disregarded in the settlement.
The compensation is arbitrary. If is it intended to compensate the consumers whose cars burnt out for their financial loss, the amount is far too low. Kugas are sold new for between R403,700 and R576,700. Possibly the amount is intended to compensate the consumers for their emotional distress at the “near death” experience of a Kuga conflagration.
From what my clients have described to me, the fires started so suddenly that the temperature gauge was not even registering an increase in temperature by the time the smoke started coming out of the bonnet, and then there was just time to grab a child out of the baby seat before the car was in flames. The fires were so destructive that, for example, only the metal frames of the headrests were left once the flames subsided.
The compensation is a trap. If your Ford Kuga burnt out and you have not yet been otherwise compensated, accepting the payment of R50,000 prevents you from claiming the rest of your damages, as the offer is made “in full and final settlement”.
The entire process may well have been used to prevent consumers from timeously claiming. Claims against Ford will probably lapse as a result of the legal rule that requires claimants to summons within three years of discovering that they have a claim. That allows consumers only up to January 15 2020 to instruct attorneys and have a summons drafted, issued and served.
The fine is too low. The CPA allows for a maximum fine of 10% of the last year’s turnover. Ford reported that its turnover in SA came to 1% of the country’s GDP, and Ford’s global turnover was $160,336bn in the 2018 financial year.
A fine of R35m provides no real deterrent to Ford.