The Progress of this case will be followed from a


in chronological order with links to appropriate documents.

Top of Memorandum on the
Racketeering Nature of State Farm's Misconduct
for which this is an exhibit.

The List of Exhibits

                              Exhibit 7
   October 8, 1990
                                ROUGH DRAFT
   MEMO TO: Jack Gillis
   FROM: Ben C. Parr
   RE: Taiwan Technical Committee Findings
   We found that there was a China Productivity Center whose
   responsibility is to establish export criteria for all exported
   Taiwanese products for the world which includes automotive parts.
   There are currently three inspectors and one manager on the DTL staff
   in Taipei. The frequency of their visits varies by manufacturer.
   DTL arrived 1  hours late necessitating the cancellation of the
   scheduled Evergreen visit. The visits were to Lio Ho and Young Shine
   Lio Ho/ Young Shine
    1. Lio Ho was producing the GM C10 hood (the same as the poor quality
       one returned to Taiwan from CPD (Collision Parts Distributor).
       Todays production run would not correctly pass their fixture. The
       OEM sample fit! Specifically, six major deficiencies were noted
       any one of which should warrant decertification. When specifically
       asked. Wayne Tung and Don Auen (of DTL) did not indicate that they
       would decertify the hood.
    2. 2. Michael Ma indicated that there is a dual quality control
       standard at Lio Ho: one (1) for OEM and two (2) for the
       aftermarket part industry. The OEM is more stringent. He stated
       that unlike the OEM there was no penalty for inferior quality from
       the aftermarket part industry, i.e., no displeasure or clout
       exercised to date by CAPA, or the importers. He recommended that
       we somehow establish consequences for poor quality and noted that
       in the past we (ABPA/ State Farm/ et al.) had stated that.
       "Without quality there would be no future". However, he concluded
       that today we are saying. "Without quality there is no future for
       you." He was not offended and felt that it was a constructive and
       positive position on the part of CAPA.
       The production and quality control people in the plant work on
       both the superior (OEM) and inferior (aftermarket) quality levels
       simultaneously. The OEM give frequent, sometimes daily, feedback;
       while the aftermarket give feedback only when they want money
       back. Michael Ma stated that he had not received any comments on
       the hood from DTL [Detroit Testing Laboratory] and CAPA [Certified
       Automotive Parts Association] and would like daily FAX or no less
       than weekly, to him and TABPA on this product. He suggested
       publicizing the poor quality to the trading companies, the TABPA
       [Auto Body Parts Associaiton], the APBA and say that these are
       inferior parts to "buy at your own risk." Michael also stated that
       Lio Ho would correct the irregularities we noted today. We should
       follow up later to see when DTL checks the Lio Ho "corrections".
    3. At Young Shine, Mr. Lin stated that it was his error in placing
       the CAPA label on a non-certified part and he apologized. However,
       the part fit the fixture very well. It warrants certification from
       a fit perspective.
    4. Young Shine was producing a Skyhawk fender on which DTL had a
       complaint. DTL had closed the complaint by saying "Deleted Part"
       (due to CAF-certification applied for). At least seven major
       discrepancies, such as holes, contour gaps, edge waveness, fender
       to door gap, etc., were observed on the fixture! Additionally, the
       OEM part did not fit the fixture. DTL has this as a CAPA certified
       part. Prior to discussion Wayne stated that it was "in spec."
       However, after consultation with us he did say it should be
       The Young Shine quality control leader stated that it was the
       first time that they had received useful comments from CAPA. They
       expressed no knowledge of the complaint. Mr. Lim asked for closer
       cooperation and communication. Quoted as follows, "Did not know it
       was a problem and would like direct communication with CAPA."
    1. Neither plant had sufficient quality control procedures in
       operation to produce consistent quality parts.
    2. DTL is not fulfilling its quality control responsibilities to the
       manufacturing plants orCAPA.
    3. Need (mandatory) a good line of communication to be established
       between DTL, CAPA, and manufacturing plants on a daily, or at
       least weekly, basis regarding problems and other experiences with
       their parts, whether these experiences be verified or not! They
       wanted information!
    4. The China Productivity Center should be further explored.
   The second day of the visit required air transport to Tianain to visit
     Tong Yang, then required motor transport three hours to visit Coin
      Join Key. After these visits we then motored four hours back to
                                 Tong Yang
    1. At Tong Yang we were successful in achieving an unannounced visit.
       They received information only that morning that we were coming.
       They missed us at the airport since we took a taxi. Tong Yang was
       successful in delaying until they somewhat got their plans formed.
    2. We saw excellent quality plastic components being manufactured for
       Japanese and Taiwanese OEM. There were many different components
       for many different models using the injection molding process. We
       saw their paint system for their bumper covers. It was absolutely
       first class and the production protocols, though somewhat labor
       intensive (not surprising due to the lower labor rate) was high
       quality, as was the management and quality control. Tong Yang has
       a GM Service Parts Organization contract for grilles and headlamp
       doors, using GM tooling.
    3. Finally we were shown the sheet metal stamping facility which was
       of significantly lower quality and far less organized and managed.
       A new stamping line was being installed which will be as modern as
       any in the world including quick die change provision and material
       transfer equipment We were told that the China Productivity Center
       was working with Tong Yang on this project.
    4. The sheet metal checking fixtures were not used during production
       at Tong Yang.
    5. The Tong Yang fixtures (especially the older ones) were light
       weight and of questionable value. Some of these were certified.
    6. We heard from Michael Ma that Tong Yang was looking for additional
       press capacity and was "farming out" their dies to other stampers
       to make parts. It is unclear how DTL handles this issue even
       though we know that Tong Yang has ownership of some other
       factories making aftermarket parts.
    7. Generally speaking, we saw examples of substandard parts at Tong
       Yang, which I believe represented more of an indifferent attitude
       which resulted in poor repeatability, or in consistent quality

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Created: February 4, 2000
Last Updated: May 28, 2000