That arguement is so weak I can't believe an attorney would have made it. When they took on the job to make you a drive shaft, they took the responsibility for it failing either by their improper design or craftsmanship. They can't claim they are not responsible for your damages, they were the experst here, not you. If they felt and stated that it would fail, than they should have not attempted to make you one, they don't have to do as the customer wants. All they had to do is tell you sorry it can't be done and send you on your way. Their letter is an attempt to scare you into not wanting to spend more money on an Attorney than you have in damages.

I would bet the shop owner has a friend or a relative who is doing the work for free, since it would have already charged them more in attorney fees for the office visit and the letter than your total damages.