5 Neither GEICO nor any legitimate insurer would even permit, much less insist, on repair and replacement of damaged automobile parts with unsafe, inferior or defective parts. How would it benefit insurers if the replacement parts somehow could cause or generate additional claims and additional costs? Keystone Automotive Industries, whose products GEICO recommends, guarantees its sheet metal parts for as long as you own your car. We know of no OEM company that matches that guarantee. Such guarantee insures a product that is as good or better than an OEM part. NAII believes that it is a myth put forth by the OEM and body shop people that any additional labor is required to use competitive replacement parts. GEICO discloses to insureds when an estimate has been prepared based on the use of an automobile part not made by the OEM. Our computer produced estimates include the following statement: "This estimate may include the use of aftermarket parts of Keystone Automotive Industries which Keystone guarantees for as long as you own your vehicle. Ask your adjuster or repair shop for details." Finally, we are opposed to this legislation because there is no reliable evidence that the quality of aftermarket parts are deficient in any of the ways being claimed. The alleged 6 structural and safety standard issues are a smoke screen that have been completely refuted. We are sure that you are aware that Brian O'Neill, President of the Insurance Institute for Highway Safety, has testified that the controversy relative to crash parts is an economic, not a safety, matter. GEICO has a 50-year history of service to its policyholders which we would do nothing to jeopardize. The control of loss costs is an important obligation to our insureds and is necessary to contain the cost of automobile insurance. We believe that any legislation which would aid in the effort of the OEMS to regain their monopoly position is not in the best interests of the automobile insurance consumer. We urge you to exclude automotive crash parts from the scope of the proposed legislation. Mr. KASTENMEIER. I have just a couple of questions. One is-and Mr. Moorhead, if he were here, would ask, I think, more or less the same question-you urge that we exclude automotive crash parts from the scope of the legislation. Does this legislative approach solve underlying copyright problems? It doesn't really go to the purpose of the bill, does it? Mr. ALEGI. You mean excluding automotive crash parts? Mr. ALEGI. We think that the automobile owner has a right to repair his car. One of the previous professors discussed the British Leyland case, where in England, the House of Lords has actually given the consumer a right to repair. When he buys a useful article, whether it's patented or not, when it's broken, when it's crashed or damaged in any manner, he then has an absolute right to repair that article. We think the American consumer ought to keep that right which he now has. Certainly, our position doesn't go to, well, patent-you can get a design patent now. Volvo, I know, has patented their crash parts. Whether that would hold up or not, Mr. Chairman, is another story. But we know that those fenders have been patented. Mr. KASTENMEIER. To put it another way, Mr. Moorhead asks specifically, do you oppose H.R. 1179 generally or do you object only to its application to crash repair parts? Mr. ALEGI. I'm sorry. I misunderstood your question. We object only to the subject dealing with automobile crash parts. Mr. KASTENMEIER. Does GEICO ever get, to your knowledge, consumer complaints about the use of replacement parts not bearing the name of the original auto manufacturer? Mr. ALEGI. The parts themselves don't bear names. The Taiwanese parts are now being stamped with a logo of the manufacturer. There are over 50 manufacturers on Taiwan manufacturing competitive replacement parts. They have some type of logo that's stamped into the metal of the part. We've never heard from a consumer saying, what does this mean, because they never see it. It's on the inside of the part. Mr. KASTENMEIER. What about this display here between those two fender parts? Mr. ALEGI. If we had known that this was going to be an issue, we would have brought our fenders. When we had a hearing in the other House, they brought fenders and we brought fenders and we had fender wars. It was fun but it didn't prove anything. The automobile insurance industry has tested competitive replacement parts and the testing we've done has shown that the competitive replacement part lasted longer than the-in that case, it was a Chrysler fender. I mentioned in my statement the Certified Automotive Parts Association. That has been established by the industry, the initial funding comes from the industry. We have hired an independent testing laboratory to establish standards and to test and certify parts. We are as interested as you are in seeing that the fender or the hood that goes on our policyholders' car-that's our customerand we want to make sure that it is as good a fender as can be produced. Therefore, we are spending a lot of money in testing and certifying fenders to that end. Mr. KASTENMEIER. Mr. Moorhead, if he were here, would ask you the following question. Who warrants your policyholder's vehicle if use of an imitation part voids the manufacturer's warranty? Mr. ALEGI. This is another issue that's come up. It's my understanding that the OE position is that the warranty on the part that's being removed will be void, which is fine because it's now been thrown away, and perhaps parts that it touches will be void. The maker or the distributor of the after market part, in our case Keystone, will then warrant the replacement part and Keystone warrants it for as long as you own your car, which is, in our opinion, a fine warranty. I think what we object to-I didn't hear it today-is the allegation that somehow the use of an after market part voids the warranty of the car. We've heard that said in other forums. It doesn't and I think everybody needs to know that. Mr. KASTENMEIER. I guess the question doesn't necessarily make that assertion, but nonetheless, it raises the issue. I want to thank you. That's all the questions I have and, as I said, we will expect to hear later from Mr. Fitzpatrick at a later point in time. We appreciate your contribution here today. We may have other questions of the industry in due course. But in any event, thank you for your statement. Mr. ALEGI. We'd be pleased to answer any other questions. Thank you, sir. Mr. KASTENMEIER. That concludes today's hearing. I think that it has been, for those members who have been present, a most enlightening one. The committee stands adjourned. [Whereupon, at 1:15 p.m., the subcommittee adjourned, to reconvene subject to the call of the Chair.] APPENDIX ADDITIONAL MATERIALS INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE & AGRICULTURAL IMPLEMENT WORKERS OF AMERICA-UAW The United Auto Workers commends you for introducing and pushing S. 791. the proposed Industrial Innovation and Technology Act. The UAW supports this legislation and urges you to include it in the Senate trade bill. The UAW has supported efforts to increase funding for research and development of new products. We believe that product innovation is important in keeping American manufacturing strong. When the necessary resources are put into product design. American-made products can hold their own anywhere in the world. Jobs in American plants grow as a result. Unfortunately, as you have learned in your hearings this year, the U.S. is the only major industrial nation that does not have a workable system of design registration. Our present industrial design patent system offers virtually no protection to innovators. Last year our government issued only 3,000 design patents and about two-thirds of them were ultimately overturned in court. By contrast, Japan issues 30,000 design registrations a year: Germany issues more than 60.000. The UAW has researched the absence of industrial design protection to determine the impact on automobile, construction equipment and farm equipment employment. Approximately 20,000 UAW jobs are at risk because of our dereliction in offering a modern design registration system. Already $200 million in auto crash part sales and 6,000 jobs have been lost to look-alike imports. And the imports copies of American designs are growing daily. The Senate's consideration of trade legislation this year offers an appropriate opportunity to redress this situation. U.S. law should. at a minimum, meet international standards. In this area of intellectual property law, the U.S. is woefully behind. 89-733 0 - 89 - 7 |