Ford ignition settlement may cost automaker $2.7 billion

HAYWARD, Calif. -- Ford Motor Co. agreed Thursday to reimburse current and former owners for repairs on millions of cars and trucks prone to stall because of a flawed ignition system.

The deal approved by a California judge could cost the automaker $2.7 billion, the plaintiffs said. Ford attorney Richard Warmer disputed that estimate, without offering specifics.

"This will not be something that will have a material effect on the company's financial position," Warmer said.

The settlement was approved as the beleaguered automaker weathers a series of setbacks, including a 15 percent erosion in vehicle sales and the costly Firestone tire situation.

The settlement ends years of litigation and will pave the way for millions of current and former Ford owners nationwide to be reimbursed for repairs and related expenses, such as towing fees.

However, it does nothing to remove from the road the estimated 12 million Fords nationwide equipped with the ignition system originally installed in 20 million vehicles, critics said. These cars and trucks remain prone to stall without warning, according to Ford's internal documents.

"I think it's as good as they could have possibly gotten, short of a recall," said Jeff Fazio, the lead attorney suing Ford.

Ford has maintained that its ignition devices and vehicles are safe and admitted no wrongdoing in the settlement.

Alameda Superior Court Judge Michael E. Ballachey, who said earlier that the automaker was living an "Alice in Wonderland" dream by denying the ignition modules were defective, signed the settlement Thursday after weeks of closed-door negotiations.

"I thought this wasn't going to happen," Ballachey said.

The out-of-court agreement came two months after reports that at least 11 deaths and 31 injuries were blamed on stalling in Ford vehicles equipped with the ignition device. Internal Ford memos also showed the automaker had evidence its ignition design could make engines suddenly fail on the road.

Ballachey ruled that Ford knew as early as 1982 that the vehicles were prone to stalling, especially when engines grew hot, and that Ford failed to alert consumers and deceived federal regulators by claiming the modules weren't flawed.

A trial was expected to begin later this year and could have exposed Ford to billions of dollars in damages under California consumer laws.

The suit challenged Ford's placement of the thick film ignition (TFI) module, which regulates electric current to the spark plugs.

In 29 models for years 1983 through 1995, the module was mounted on the distributor near the engine block, where it was exposed to high temperatures. According to internal documents, Ford had re-designed the ignition to save as much as $2 per vehicle and to increase fuel economy.

The settlement came a week after Ford reported a third quarter loss of $692 million. In addition, Standard & Poor's reduced Ford's credit rating two notches after the company said it would cut fourth quarter dividends in half.