Product liability sends plane manufacturers into tailspin


An industry in which the United States was the undisputed leader for half a century has been all but abandoned in this country. You may not want to mourn that, but you should. Next time it could be your industry, your job, your welfare.

In 1978, American builders of general aviation aircraft -- small private and business airplanes -- built about 18,000 planes. In 1988, those manufacturers built 1,143 airplanes.

Indeed, in 1986 the Cessna Company, an industry leader for decades, announced it was stopping its manufacture of light single-engine airplanes of the sort you see in the sky every day. Meanwhile, prices of used airplanes were skyrocketing. Demand for small airplanes had not diminished.

Why, then, would aviation manufacturers abandon the market?

The answer is product liability.

According to court precedent, aircraft manufacturers are responsible for their products virtually forever. And the law is such that manufacturers can be made to pay damages even when it is shown that their products had little if anything to do with the mishap.

The manufacturers of aircraft parts, too, face huge liability exposures. Teledyne Continental, a leading aircraft engine manufacturer, is an example. According to William Boettger, president of the company's Aircraft Products Division, the cost of product liability was less than $300 per engine in the early 1970s. It is now about $16,000 per engine. Because companies are in business to make money, they must add those costs to the price of their goods. The price then rises beyond that which the market will bear.

"The cost of product liability has eliminated earnings at many companies," noted Boettger, who said that as a result his company has had to reduce its work force by 500.

The problem has become ridiculous. Unison Industries, the manufacturer of aircraft ignition systems, was named in a lawsuit that followed a plane crash. Several months and a $5,000 legal bill later, the company managed to be dropped from the suit.

Nothing built by Unison was aboard the plane when it crashed. Unison had nothing whatsoever to do with the plane crash, nor could it have had. Yet the lawyer who brought the suit agreed to drop Unison from it only after the company agreed not to hold the lawyer liable for his error.

When each company making a part for an airplane adds one-third to one-half to its price just to cover liability costs, and when the aircraft manufacturer does the same thing to the finished product, prices go through the roof. Few pilots will -- or can -- pay $200,000 for an airplane that would otherwise cost $100,000.

Yet time and again juries have slapped manufacturers with big judgments, even on airplanes 20 years old or older that have been involved in accidents -- even when the manufacturer has had no control over the maintenance of the airplane or the skill of the pilot.

"No matter how irrational or stupid the act of the pilot, if the pilot is not highly insured, it must be the fault of the manufacturer of the airplane," says M. Stuart Millar, owner of Piper. "It does not seem to matter to a jury that the pilot may have been unqualified to fly or might even have been drunk. The fact that the airplane may have been poorly maintained counts for little."

Each year, legislation is introduced into Congress that would hold aircraft manufacturers responsible only in cases where there is some reason to believe the manufacturer is some way at fault, through design, omission or other action or failure to act.

The legislation is, each year, embraced not only by the aircraft manufacturers but also by general aviation consumers and their organizations. Those affected, save for one group, loudly endorse the proposed new law.

The one group that doesn't is the Association of Trial Lawyers of America, an organization of 65,000 lawyers with members, it would seem, in every congressional district. It should not be surprising that, thus far, the lawyers' opposition has been effective.

As a result, new airplanes are being imported from places like Czechoslovakia and the Soviet Union.

By all accounts, most of the foreign airplanes are very good. And by all accounts, most of the American airplanes were very good.

The difference is that the American industry has all but died.

NEXT: How you pay for punitive damages

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