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State Farm Decision Misleads Public on Automotive Aftermarket Parts Industry

6 October 1999

State Farm Decision Misleads Public on Automotive Aftermarket Parts Industry

    BETHESDA, Md., Oct. 5 -- The recent decision against State
Farm Mutual Automobile Insurance Co. in a class action lawsuit in Illinois was
not about all automotive aftermarket parts, as was widely reported, but about
a small segment of the aftermarket parts business. Sheet metal parts, the
focus of the lawsuit, are used for exterior repairs on vehicles. The
aftermarket parts industry generates $264 billion annually. Sheet metal parts
represent only 1.8 percent of the aftermarket and are typically sold through
body shops.
    "The casual reference to 'aftermarket parts' in the recent Illinois legal
decision against State Farm infers that other aftermarket products and
services, such as under-the-hood repair parts, are guilty by association,
which is not true," said Gene Gardner, Automotive Aftermarket Industry
Association president. "On the contrary, most parts purchased for cars used in
auto racing are aftermarket parts, because of their reputation for quality,
innovation and durability."
    Many original equipment (OE) replacement parts sold through car
dealerships and to independent repair facilities are produced by independent
parts manufacturers -- not car companies -- that market those same products
under their own brands in the aftermarket. In addition, a significant number
of aftermarket parts manufacturers have long-established reputations for their
innovative engineering improvements over the parts used to build the OE
manufacturer's typical new car.
    The lawsuit was brought by auto insurance policyholders against State
Farm, the nation's largest insurer. Policyholders claimed that State Farm used
inferior aftermarket sheet metal parts instead of more expensive OE parts
without informing the insureds. An Illinois jury found that State Farm failed
to perform its contractual obligations with insured motorists and awarded the
plaintiffs approximately $456 million in compensatory damages. Punitive
damages will be determined separately, and would be in addition to this
amount.
    The Automotive Aftermarket Industry Association (AAIA) is a Bethesda, Md.-
based association whose member companies manufacture, distribute and sell
motor vehicle parts, accessories, tools, equipment, materials and supplies.
The organization is comprised of manufacturers, distributors, jobbers,
wholesalers, retailers, manufacturers' representatives, and other companies
doing business in the automotive aftermarket.  AAIA formerly served the
automotive aftermarket as ASIA and APAA.