Vehicle recalls prompt attention to supplier warranties

04/15/2014

Not long ago I wrote about a report on GM possibly requiring its suppliers to participate financially in any vehicle recalls regardless of whether particular supplier's parts were involved. It got some suppliers to sit up and take notice.

A new editorial from Plante & Moran notes that product recalls by Toyota and GM for vehicle safety issues have raised the issue of warranty claims and the financial risk to auto suppliers. "While warranty claims haven't traditionally been the hot topic for discussion in the automotive industry, they'll garner much more attention in the future," write Jason Carano and Daron Gifford, of Plante & Moran. "On top of the current recalls, the automotive industry is scrambling to handle a record number of new vehicle launches over the next five years, with increasing risks of future product problems emerging in recalls and warranty claims. For any supplier, these risks have the potential to result in significant financial liabilities that were unforeseen when the part of was originally designed, produced, and sold."

Carano and Gifford note that actually assessing costs for warranty claims on parts that perhaps were made many years prior to the recall is difficult because the data isn't available. "This difficulty in analyzing historical product information has resulted in many OEMs simplifying warranty cost and sharing as 50/50, even when it's not clear that the supplier has any responsibility for the problem!"
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