Company is often initially unable to develop a best estimate of loss and therefore the minimum amount, which could be zero, is recorded. As information becomes known, either the minimum loss
amount is increased, resulting in additional loss provisions, or a best estimate can be made resulting in additional loss provisions. Occasionally, a best estimate amount is changed to a lower amount when events result in an expectation of a more
favorable outcome than previously expected.
Company is regularly involved in a number of claims and litigation matters in the ordinary course of business. Most of the Companys litigation matters are third-party claims for property damage allegedly caused by the Companys products,
but some involve allegations of personal injury or wrongful death. The Company believes that the ultimate resolution of the current litigation matters that are pending against the Company, except potentially those matters described below, will not
have a material effect on the Companys financial condition or results of operations.
Ford Speed Control Deactivation Switch Litigation: The Company is involved in a number of litigation matters relating to a pressure switch that TI sold to Ford Motor Company (Ford) for
several years until 2002. Ford incorporated the switch into a cruise control deactivation switch system that it installed in certain vehicles. Due to concerns that, in some circumstances, this system and switch may cause fires, Ford issued seven
separate recalls of vehicles in the United States between 1999 and October 23, 2009, which covered approximately fourteen million vehicles in the aggregate. Also, in October 2009, Mazda issued a recall in the United States of 36,000 vehicles
that Ford had manufactured for it which contained the system and switch; and in December 2009, Ford China issued a recall of 528 vehicles imported into China by Ford.
In 2001, TI received a demand from Ford for reimbursement of costs related to the first recall in 1999, a
demand that TI rejected and that Ford has not subsequently pursued against the Company. Ford has never made such a demand to the Company, nor made demands of the Company related to the subsequent recalls.
In August 2006, the National Highway Traffic Safety
Administration (NHTSA) issued a closing report based on a multi-year investigation which found that the fire incidents were caused by system-related factors. On October 14, 2009, NHTSA issued a closing report associated with a more
recent recall which modified the findings of the 2006 report but continued to emphasize system factors.
As of December 31, 2009, the Company was a defendant in 26 lawsuits in which plaintiffs have alleged property damage
and various personal injuries from the system and switch. Of these cases, 17 are pending in a state multi-district litigation in the 53rd Judicial Court of Travis County, Texas, In re Ford Motor Company Speed Control Deactivation Switch
Litigation, Docket No. D-1-GN-08-00091; 3 are pending in a federal multi-district litigation in the United States District Court for the Eastern District of Michigan, Ford Motor Co. Speed Control Deactivation Switch Products Liability
Litigation, Docket No. 05-md-01718. The remainder is in individual dockets in various state courts of California, Georgia, Tennessee, and Texas, and the federal court for the Southern District of Iowa.
For the most part, these cases seek an unspecified amount of
compensatory and exemplary damages. For the plaintiffs that have requested a specific amount, the range of the demand is $50,000 to $3.0 million. Ford and TI are co-defendants in each of these lawsuits.
In accordance with terms of the acquisition agreement entered
into in connection with the 2006 Acquisition, the Company is managing and defending these lawsuits on behalf of both the Company and TI. The majority of these cases are in discovery. Two have been set for trial and one is on appeal.
During fiscal year 2008, the Company settled all outstanding
wrongful death cases related to these matters for amounts that did not have a material effect on the Companys financial condition or results of operations. As for the cases that are still pending, the Company has included a reserve in its
financial statements in the amount