The warranty war: Suppliers vs. automakers

David Barkholz and Robert Sherefkin, Automotive News

The campaign to cut warranty costs has created tension between the Detroit 3 and their suppliers.

Traditionally, automakers have paid 85 percent of total warranty costs and suppliers the rest, says Warranty Week Editor Eric Arnum. Suppliers produce about 70 percent of a vehicle's components.

The automakers' purchasing contracts hold suppliers liable for the quality of their parts. But there are limits to what an automaker can recover, says Bo Andersson, General Motors' vice president of global purchasing and supply chain.

"It is hard to determine who was at fault because you develop things together," Andersson says. "Sometimes it is 100 percent us. Most of the time, it is 50-50."

GM is pushing suppliers to reduce warranty costs by 10 to 50 percent annually, he says. GM says it reduced its warranty costs by $700 million last year.

In the past, the automaker assumed the supplier was at fault. Now Andersson acknowledges that it's not so simple. A part may meet GM's specs, yet fail to work properly in a module.

Besides, Andersson says, you can push a supplier only so far. If a supplier makes a part for $1 apiece, a $50 million recall could bankrupt the company.

Says Andersson: "You have to use common sense."

From Automotive News (A Crain publication)