Ageless Machine Tools Cause Industry Woes

By Joe Lazzara, President & CEO, Scientific Technologies Inc.

America’s machine tools are old. Many of these machines, often in use every workday inside US factories, were built before the creation of OSHA, before Neil Armstrong walked on the moon, before Ronald Reagan became President and even before the Beatles came to America. They are still in use, stamping, bending, cutting, trimming, plugging and chugging away. Yet, this seemingly ageless equipment creates endless liabilities, and is the source of nearly half of the machine tool industry’s lawsuits.

According to American Machinist magazine, in 1996, the last year for which the data is available, over 60% of the machine tools used in the U.S. metalworking industries were over 10 years old. When new machines are purchased by a factory upgrading its equipment, often there is old machinery to be sold – rarely are they every really scrapped. This old machinery is often rebuilt or extensively modified to the requirements of its new owner, sometimes contrary to government safety regulations. The original factory controls, valves and safety guards may be absent or gutted and replaced. This process is repeated, as newer machines are acquired and older equipment is resold. Often, the original manufacturers of the machine would not even recognize the control system, the guards, and perhaps even the machine itself.

Ironically, the government itself can be the source for much of this old machinery. For example, as a result of many base closings the Department of Defense has resold 13,000 overage machine tools since 1994. Most of these machines are of World War II or Korean War vintage. This large quantity of overage machine tools on the U.S. market exposes the manufacturers, or often their corporate descendants, to the threat of product liability litigation.

How realistic is the product liability exposure? SMS Group is a Saginaw, Michigan manufacturer of CNC Machine Tools for turning, drilling, welding and leak detection applications and employs about 100 people. The company was created in 1983 out of a corporate divestiture, and these assets were purchased to form SMS. Over a nearly 20 year period, SMS has defended 23 product liability suits, and all 23 cases involved equipment that was never manufactured by SMS. In fact, SMS provided no service, no spare parts, and in fact does not even manufacture the same types of machines involved in the claims. In every case the machine had at least two owners, and in some cases, as many as five. All 23 of the machines were older than 18 years. All of the machines had been modified, at times without regard to government safety standards. Furthermore, SMS would often discover that every safety door and guard had been removed prior to the accident. Yet, SMS spent $6.5 million to defend these cases.

As difficult as the situation is for SMS, it could have been worse. Consider the predicament of Mattison Technologies. In 1996, Mattison lost a case involving a $7.5 million verdict. The machine involved was built in 1948, more than 50 years ago! Sadly, the 100-year-old company in Rockford, Illinois was forced into bankruptcy.

The machine tool and capital goods industries are looking for relief in the form of HR 940, recently introduced into the U.S. House of Representatives. This bill would enact an 18-year statute of repose for durable goods used in the workplace. Essentially, this would prohibit actions against a machine manufacturer for personal injury, death or property damage if the accident involving a workplace durable good occurred more than 18 years after the machine was delivered to its first purchaser. However, no injured worker would go uncompensated, as HR 940 would only apply in situations where the injured party is eligible for workers’ compensation.

A House Judiciary Committee Report on this legislation noted that the bill "is intended to eliminate the economic inefficiency of litigation that seeks to hold manufacturers of durable goods liable for harms caused by machinery they have not controlled for almost two decades." The report further explained that: "Manufacturers almost always prevail in such litigation when they go to trial, but the costs of defending the design of a machine that was produced two decades ago are unusually large." Consider the prior example of SMS Group, who spent nearly $300,000 per machine in defense costs, likely far more than the value of the machines or even their original sales price.

HR 940 would allow for the routine maintenance, repair and replacement of machine components without restarting the clock on the repose period. Also, the bill would not affect statutes of repose for consumer or non-durable goods.

Why was 18 years selected as the statute of repose duration? The text of HR 940 was modeled after the General Aviation Revitalization Act of 1994, which was responsible for single-handedly restoring life to the general aviation manufacturing industry in the U.S. Their industry problem was very similar, as many of the private aircraft flying today are 25 – 35 years old and beyond. (Think about it – just when do airplanes stop flying?)

Supporters of HR 940 consist of the National Electrical Manufacturers Association (NEMA), Association of Manufacturing Technology (AMT), the Society of Plastics Industries (SPI), Printing Equipment and Suppliers Association (NPES) and many other workplace durable goods manufacturers.

Opponents of this legislation, led by the trial lawyers, believe the bill would deny a worker’s right to a full recovery for injuries incurred on the job. As a result, injured workers would have to rely solely on state workers’ laws that provide for medical costs and limited disability payments.

Proponents of HR 940 also argue that the liability exposure of these overage machine tools places U.S. builders at a disadvantage to the Japanese and European competitors, since the incursion of these foreign suppliers in the American market has generally been in the last 20 years. Thus, the foreign manufacturers do not have the exposure and costs associated with the old machines, while the U.S builders must absorb these liability expenses in the cost of their new production. Furthermore, both Japan and Europe have 10-year statutes of repose. Enacting a federal statute of repose would, supporters argue, help to level the playing field for U.S. machine tool builders.

HR 940 is identical to legislation that passed the House last year, but was stalled in the Senate by a threatened Clinton veto. This year, with a 50/50 party split in the Senate, passage of HR 940 is uncertain. Now would be an appropriate time to let write or e-mail your Senators and Representatives in Washington D.C. to let them know your position on HR 940.

In the meantime, be safe out there!

Lazzara on Safeguarding is a regular column written for Safetyonline.com and Plantautomation.com. These columns also appear at Vertacross.com and the Precision Metalforming Association's member website, and are also featured regularly in Plant Safety & Maintenance magazine.

Joseph J. Lazzara is President and CEO of Scientific Technologies, Inc ("STI"), the largest provider of automation safeguarding solutions in North America (www.sti.com).

Joe began his career with Hewlett Packard in 1973 where he had responsibility for safety and environmental issues for one of HP's largest divisions. After several other positions at HP in environmental, process and engineering management, Lazzara joined Scientific Technologies, Inc. (STI) in 1981 as Vice President and became President in 1989 and then
President and CEO in 1993.

He has a Bachelor of Environmental Engineering degree from Purdue University and a Masters in Business Administration degree from Santa Clara University.

Joe is the Chairman of the Safety, Health and Environmental Committee for the Association of Manufacturing Technology (AMT). He is also a member of the Board of Directors of the American Electronics Association (AEA), the nation's largest high-tech trade association.