Grumman Corp. sued Rohr Industries for $500 million yesterday, contending that Rohr concealed serious design faults that led to a nationwide recall of more than 2,600 Grumman Flxible buses.
The lawsuit charges that Rohr, a California aerospace company, covered up problems with a new bus model when it sold its bus business to Grumman in 1978. Grumman alleges that Rohr claimed the prototype for its new model 870 bus had undergone extensive simulated service tests when, in fact, it had received none.
In a statement yesterday, Rohr labeled the suit "astonishing" and "totally without merit." The faults of the 870 were disclosed to Grumman before the sale, according to Rohr, which called the charges "an unwarranted attack on the integrity of our company."
Grumman's problems began late in 1980, when model 870 buses operating in New York City were found to have cracked frames. The discovery forced Grumman, a high-tech aerospace specialist, to recall 2,600 of the buses for costly reinforcing.
The recall, which is still underway, also helped to sour transit officials on U.S. manufacturers' advanced-design buses, which were developed in cooperation with the federal government and introduced in the late 1970s to replace older models.
Grumman said that its bus company, known as Grumman Flxible, lost more than $140 million through the end of 1982, due primarily to the recall program. Grumman is negotiating final terms for sale of the bus subsidiary.
A statement from Grumman yesterday said that its suit, filed in a U.S. District Court on Long Island, alleges Rohr was under heavy financial pressure in the mid-1970s to sell the bus company to offset the parent company's indebtedness. The sale "essentially saved" Rohr from insolvency, Grumman claims.
During the sale negotiations, Rohr allegedly told Grumman that a prototype of the 870 was tested to the equivalent of 500,000 miles of passenger service. In fact, "The bus had not been tested at all," the Grumman statement says.
The suit also charges that, in a limited test of a prototype in the months before the sale, "Numerous components of the test vehicle suffered severe cracks due to fatigue, none of which was ever disclosed to Grumman."
"If any of these facts had been known to Grumman, it would not have entered into the sale," the Grumman statement said.
Grumman spokesman Sandy Jones said the suit was based on information that came to light in a records review for the impending sale of the bus company to General Automotive Corp., a privately held company based in Ann Arbor, Mich.
In a response yesterday, Rohr said the 870 was tested extensively, that Grumman got the results and that Grumman was informed of a prototype's cracked underframe in a presentation on Nov. 7, 1977. Grumman spokesman Jones confirmed that a presentation took place that day but said Rohr officials did not disclose the information.