DaimlerChrysler Services North America Statement in Response To Two Lawsuits Filed in Chicago
FARMINGTON HILLS, Mich., March 10 -- The following is a statement by DaimlerChrysler Services North America in response to two lawsuits filed in Chicago.
* Company Outraged by Allegations Made in Lawsuits * Company Neither Condones nor Tolerates Racial Discrimination of Any Kind
* Company's Automated Credit Evaluation (ACE) System Treats All Applicants Fairly and Lawfully
* Initial Investigation Shows Chrysler Financial Did Finance Sales for Some of the Plaintiffs and Offered Financing to Others
* Difficulties at Gorman Dealership Result of Mismanagement and Financial Improprieties
* DaimlerChrysler Has Long history of Supporting Minority Initiatives Background:
A purported class-action lawsuit filed Feb. 3, 2003 in U.S. District Court in Chicago alleging that DaimlerChrysler Services (DCS) North America LLC denied automobile financing to six African Americans based on their race and geographic location. And a separate lawsuit filed against DCS by a Chicago Chrysler dealer alleging violation of motor vehicle franchise laws and breach of contract.
Statement:
The allegations of racially discriminatory lending practices and the use of racial slurs by employees in its business dealings are shocking and have been taken very seriously by the Company. While DCS continues to conduct investigations into these disturbing allegations, the Company emphasizes that it does not tolerate discrimination based upon race or any other prohibited bases in its lending practices or in its business dealings with others.
To suggest that we engage in these unlawful activities runs counter to the Company's shared values and beliefs, business practices and its established reputation pertaining to its minority programs and initiatives.
The allegations contained in the lawsuits are unfounded and without merit.
The class action lawsuit alleges the Company denied credit to six African Americans based on race and geographic location through manipulation of the ACE System. Contrary to the lawsuits' allegations, DCS previously financed sales for some of the plaintiffs and offered financing to others, but the Gorman dealership chose an alternative financing source. ACE is designed to function without regard to race. Our investigation has confirmed that ACE is functioning as designed and has not been altered to facilitate discrimination. In addition, DCS has not seen any evidence that it denied financing to the plaintiffs based on race or geographic location.
The dealership lawsuit alleges that Mr. Gorman's dealership was damaged by actions allegedly taken by Chrysler Financial to prevent minority customers from receiving financing, and to repossess the vehicles of minority customers that had been financed by Chrysler Financial. However, the evidence shows that any difficulties at the Gorman dealerships were the result of mismanagement and improper withdrawal of money from the dealerships by Gerald Gorman himself. Chrysler Financial merely took lawful and prudent steps in response to Gorman's mismanagement, financial improprieties and breached contractual agreements to limit its own risk of further loss at the Gorman dealerships. Gorman threatened to sue and to support a class action against Chrysler Financial unless Chrysler Financial immediately agreed to certain demands. When Chrysler Financial rejected this strong-armed threat, Gorman filed the present lawsuit.
Fact Sheets:
1). DaimlerChrysler Code of Conduct Information
2). The Automated Credit Evaluation (ACE) System
3). A History of Diversity Initiatives
DaimlerChrysler Code of Conduct Fact Sheet
The companies within the DaimlerChrysler Group value their reputation as one of their most important assets. To maintain this image and reputation with the public, our customers and business partners, an unwavering commitment to honesty and ethical behavior by every individual within the company is essential. The Company emphasizes that it will not tolerate discrimination based upon race or any other prohibited bases in its lending practices or in its business dealings with others.
These shared beliefs and values are embodied within a set of guiding principles, policies and code of conduct called the DaimlerChrysler Integrity Code. The basic policy underlying the Integrity Code is the employee's ongoing commitment to conduct their business with a high degree of professionalism, honesty and respect for others and in full compliance with applicable law. Employees are responsible for understanding and conforming their conduct to the legal and ethical requirements relevant to their jobs and communicating this standard to those they supervise.
The Integrity Code demands strict adherence to guidelines outlining respect for employees and business partners, and expects all of its employees (and employees of its suppliers, dealers and other business partners) to be treated with dignity, their rights respected and their privacy maintained. This applies to all employees regardless of age, disability, national origin, race, religion, sex or sexual orientation. The company does not tolerate discrimination of any kind and is committed to maintaining safe and healthy working conditions for its employees. The Company remains committed to uphold the principles of the DaimlerChrysler Integrity Code and its Standards of Conduct in all business dealings.
The Automated Credit Evaluation (ACE) System Fact Sheet
Chrysler Financial's Automated Credit Evaluation (ACE) system is a computer software application that assigns a score and grade to retail credit contracts dealerships wish to assign to Chrysler Financial.
* The score and grade assigned to each retail credit contract reflects the specific retail transaction being submitted by the dealership and the creditworthiness of the dealership's retail customer
* The score and grade are calculated using statistical models, from objective information entered into the ACE system by the dealership, credit history information obtained by ACE from third-party credit bureaus, and "FICO" credit scores obtained by ACE from a third-party credit scoring company
* The information entered into the ACE system by the dealerships includes the customer's name, address, income and employment, the vehicle being purchased, and the structure of the credit transaction
* None of the information entered into ACE identifies the race of the dealerships' retail credit customers
* Only the dealerships' personnel have any face-to-face contact with retail credit customers
All retail credit contracts that dealerships wish to assign to Chrysler Financial must be processed through the ACE system.
The Credit Decision Process
* Once ACE scores a retail credit contract, a limited number of such contracts can receive "automatic approval." Automatic approval is limited to credit contracts that receive the highest score and grade, and have excellent credit history. The vast majority of credit contracts do not receive automatic approval.
* Contracts that do not receive automatic approval are referred by ACE to Chrysler Financial's retail credit personnel for an approval decision.
* The decision whether to purchase an assignment of a contract is based upon the information submitted through the ACE system; the retail credit personnel receive no other information on which to base their decision.
* The approval decision is based upon the creditworthiness of the dealerships' customer relative to the specific retail credit transaction.
If a credit contract is approved for assignment to Chrysler Financial, the offered rate reflects the creditworthiness of the customer relative to the specific retail transaction, as well as any rate incentive programs that may be in effect and for which the customer may be eligible.
Ineligibility for Automatic Approval
* A dealership can remain in the ACE system, but can be determined to be ineligible for the automatic approval feature.
* Reasons for determining a dealership to be ineligible include abuse of the system by the dealership (such as by submitting false or fraudulent information), lack of credit support from the dealership (such as dealerships that do not utilize Chrysler Financial for their wholesale lending), or poor retail contract performance (such as excessive number of contracts that result in repossession).
It is important to note that in the pending litigation with the Chicago- based dealership, the company has documented evidence showing that in late 2000, employees at the dealership owned by principal Gerald Gorman submitted more than fifty (50) credit applications containing false information.
Chrysler Financial purchased several of the dealer's retail installment contracts based upon the applications with false information. After Chrysler Financial discovered this, it presented Mr. Gorman with a list of each account with a description of the false information. In a written acknowledgement, Gorman's dealership accepted financial responsibility for these retail installment contracts. A list of each account with a description of the false information was attached to the dealer's acknowledgment. Some characteristics of these applications, as described on the document that Gorman signed, are as follows:
* The applicants worked for employers Chrysler Financial determined did not exist and could not be verified;
* The dealership overstated the invoice/wholesale value of the vehicles; and
* The consumer had no vehicle insurance, it was cancelled or it could not be verified.
As a result of the above activities acknowledged by Mr. Gorman's dealership, DCS no longer allowed the dealership to receive automatic loan applications approvals from the ACE system. DCS did this to prevent any future automatic approvals of loan applications submitted by Mr. Gorman's dealership based on criteria containing false information and to require manual approval of all loan applications submitted by Gorman's dealership.
* A code is entered into the ACE system to prevent such dealers from taking advantage of the automatic approval function.
* Credit contracts submitted by such dealers are still scored and graded by the ACE system in the same manner as contracts submitted by dealerships that are eligible for automatic approval.
* The decision whether to purchase an assignment of a contract submitted by a dealer that is ineligible for automatic approval, and the rate offered for the contract, are determined by Chrysler Financial's retail credit personnel based on the same considerations used for contracts submitted by dealerships that are eligible for automatic approval.
* The retail credit personnel evaluating credit contracts submitted by dealerships that are ineligible for automatic approval do not receive information identifying the race of the dealerships' customers.
ACE is designed to function without regard to race. Our investigation has confirmed that ACE is functioning as designed and has not been altered to facilitate discrimination.
A History of Minority Initiatives Fact Sheet
DaimlerChrysler has long been recognized for its many diversity and minority programs aimed at fostering productive and rewarding business practices and relationships with minority-owned and managed suppliers and business partners.
Of particular note are updates on several significant DaimlerChrysler minority initiatives in the United States:
* DaimlerChrysler participates in 13 activities and organizations that support African-Americans. These include:
-- NAACP and its Image Awards and Freedom Fund Dinner -- Rainbow Push Coalition -- Michigan Minority Business Development Council -- National Minority Supplier Development Council -- Black Engineer of the Year Awards -- National Society of Black Engineers National Convention and Conference -- National Association of Black Automotive Suppliers Annual Award -- Black Enterprise Entrepreneurs Conference -- National Urban League -- Congressional Black Caucus Foundation Legislative Conference -- National Black MBA Association Nation Conference -- National Diversity Week 2002 Sponsor -- Women of Color in Technology and Business Awards and Conference
* In terms of purchasing, the Chrysler Group established in 1983 the Diversity Supplier Development Department. Today the company's annual spending with minority vendors and suppliers exceeds $3 billion. Furthermore, the Chrysler Group is the architect of the Tier 2 Program which has been adopted industry-wide to further business between majority suppliers and minority companies. And, the Chrysler Group is the architect of the first of its kind mentoring program that matches minority companies with majority companies in an effort to help minority suppliers grow and develop their business.
* DaimlerChrysler's Minority Dealers Program is designed to assist individuals who -- though lacking sufficient capital resources -- are qualified by experience and ability to realize the opportunity to invest in and operate dealerships that sell and service DaimlerChrysler products. The program -- which provides up to 75 percent of capital requirements -- enables qualified individuals through its program to purchase DaimlerChrysler's equity interests and thereby become the sole owner of the dealership.
DaimlerChrysler is committed to expanding its Minority Dealer Program, which account for 3.2 percent -- or 137 dealerships -- out of DaimlerChrysler's 4,259 dealerships in the United States. Nearly 90 percent of those minority dealers are profitable.
