Ford files lawsuit against Dana for violation of indemnification clause

Article by Anita Panait, on August 2, 2012

Ford Motor Co. filed a legal action against supplier Dana Holding Corp.  on July 27, 2012 in Wayne County Circuit Court for its refusal to reimburse the carmaker for recalled subframes in 1999-2003 Windstar minivans. Ford alleges that Dana refused to pay the carmaker for defective subframes in the Windstars, which were recalled in 2011 in cold weather states.

According to the lawsuit, the refusal constituted a violation of a supply agreement between the companies, in which Dana had "impliedly assured indemnification." Ford recalled around 425,000 Windstars in 22 northern states in 2011 because the subframe parts in some of the minivans were vulnerable to corrosion from road salt used in winter.

Deterioration of those components had led to reduced steering control in some vehicles, thus increasing the risk of an accident. The subframe is a part of the vehicle that supports its engine, transmission, steering rack and front suspension. Legal actions between carmakers and suppliers may mirror a failing relationship between them.

 Before its collapse in 2009, Chrysler initiated legal actions against a number of suppliers over contractual disputes. The litigation partly ruined the carmaker’s reputation to suppliers, prompting the late Dan Knott, who was Chrysler Group's head of purchasing, to work hard just to regain its good standing with its supply chain. In May 2012, Knott’s work paid off, attaining its highest score ever in a yearly survey of carmakers’ relations with suppliers.

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