GM presses suppliers for future recall costs

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Thread: GM presses suppliers for future recall costs

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    GM presses suppliers for future recall costs

    GM presses suppliers for future recall costs
    Automotive News
    August 5, 2013

    General Motors has adopted a new purchasing contract that would allow it to recover from suppliers the cost of safety recalls -- even if a component met GM specifications, says a lawyer for suppliers.

    The new contract framework also demands unprecedented access to a supplier's financial information.

    Under the new contract, which GM began to implement July 15, suppliers can be held responsible if GM later determines that a component the supplier built to GM specs poses a safety risk to consumers, said Sheldon Klein, a lawyer for Butzel Long, which analyzes contracts for the Original Equipment Suppliers Association.

    This language creates a "potentially catastrophic" financial liability for suppliers, Klein asserts. "As a practical matter, it's not insurable," he said.

    The potential cost of such after-the-fact design-related safety determinations was highlighted this year when Chrysler Group agreed to install trailer hitches on as many as 1.56 million 1993-98 Jeep Grand Cherokees and 2002-07 Libertys. The hitches are intended to protect vehicles' fuel tanks, even though the Jeeps met federal safety specs when they were built.

    Chrysler estimates the hitch fix will cost $151 million. The recall was requested in June by the National Highway Traffic Safety Administration, which concluded the vehicles' fuel tanks, positioned behind the rear axle, were unsafe.

    NHTSA Administrator David Strickland told Automotive News afterward that to avoid recalls, automakers must stay "within the zone of reasonable risk," not only meeting federal safety standards but also keeping up with the state of the art in design and technology among competitors.

    Asked whether GM suppliers might be held at least partially responsible in similar recalls involving parts, Klein responded: "It fits the scenario to a T."

    The new GM contract has open-ended implications, stating that the supplier's components "will not, at any time (including after expiration or termination of this contract), pose an unreasonable risk to consumer or vehicle safety."

    Warranty costs have been a traditional source of tension between suppliers and automakers, which have sought to expand suppliers' liability.

    Full article at link.
    Last edited by ne_one; 08-06-2013 at 09:20 PM. Reason: Formatting: guidelines appear in the article submission category

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    Re: GM presses suppliers for future recall costs

    This seems to be in direct contrast to Dan Akerson's words of just s couple of years ago from AutomotiveNews

    "DETROIT — General Motors Co. CEO Dan Akerson said GM is working to improve its relationship with suppliers, in part by giving them more precise production targets and being willing to pay a premium for new technologies.

    GM is trying to be “a more reliable buyer” by sticking to its volume forecasts, Akerson said in an Oct. 13 interview. He also said GM is trying to be more upfront about its product plans so suppliers are better able to offer innovations early in the new-vehicle development process.

    “We have to be more proactive in terms of what our needs are, and we have to be willing to say that if they’ll bring a good idea to us first, we’d be willing to pay for it,” Akerson said.

    He also acknowledged GM’s mostly sour relationship with suppliers over the years. GM long has languished near the bottom of industrywide rankings of automaker-supplier relations.

    “You can’t remedy a relationship that you’ve damaged by simply saying, ‘I’m sorry,’ ” Akerson said. “You’ve got to start to build the history again and a record of reliability. I know we have to do that.”

    GM ranked ninth out of 10 major automakers, ahead of only Volkswagen Group of America, in a detailed survey of North American suppliers conducted in May for Crain’s affiliate publication Automotive News by J.D. Power and Associates. The survey measured how well automakers work with suppliers to commercialize innovations".

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    Re: GM presses suppliers for future recall costs

    Interesting to say the least! Perhaps there were cases were suppliers knew there was an issue with a part yet continued to pump them out anyway.

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    Re: GM presses suppliers for future recall costs

    This won't fly. As a supplier either T1, T2, or T3 the margin on parts is small. If GM wants to shift its responsibilty to the supplier two things would need to happen. 1)The supplier might want to over engineer the part thus raising the price to GM. 2) The margin would have to increase to account for the potential recall cost etc. GM and all OEM's routinely push their suppliers to deliver a part at X cost with only meeting the minimum specs that GM ordered. If I'm the supplier I would want to increase the quality of the part and cost to take into account the potential risk from recalls. GM seems to want to low cost and specs with ZERO risk.......
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    Re: GM presses suppliers for future recall costs

    Who knew, GM innovates but fails to implement, re the bottom of the post up there.

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    Re: GM presses suppliers for future recall costs

    What it does is take those companies out of business. If it meets the GM specs, it shouldn't be the supplier's fault unless they knew of a safety risk. Oh, and coming from someone that works at a T1 supplier, this started happening before July 15th.
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    Re: GM presses suppliers for future recall costs

    The GM Lawyers that drew-up those contracts have been drinking too much of their own GM DexCool Cool-Aide!

    When a product is designed, accepted & delivered "...to contract requirements..." further responsibility passes to the purchaser--GM.

    Sure, some vendors will give-in to this corporate arm-twisting, but after the first reclama court case, expect GM to get a reaming.
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    Re: GM presses suppliers for future recall costs

    Quote Originally Posted by cad1cts View Post
    Wow....they seem at first glance to be shooting their foot off!

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    ...a little HIGHER up and more CENTRAL in the anatomy, I'd say. When Coke Can Dan's voice goes up an octave or two, we'll know for sure.
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    Re: GM presses suppliers for future recall costs

    I don't like their chances of getting anyone to actually agree to this, especially if the supplier does not control the spec. I certainly wouldn't and I know it was policy not to agree to such terms in at least three of the places I have worked. Still if you don't ask the question then the only answer is no.

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    Re: GM presses suppliers for future recall costs

    How many suppliers in their right mind would agree to this? "Design a part to our spec, but you're going to do it cheaper than you did it last year, and if it breaks you're paying for the recall..."

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    Re: GM presses suppliers for future recall costs

    We are not a parts supplier for GM but we provide services. GM pushes some difficult terms, but what really peeves me is they don't even abide by their own terms. E.G. GM demands 2-10 net 30 terms, then they pay late (sometimes 90 days or more) and take the 2% discount anyway. I hear these things from other suppliers. GM would do better to cultivate good relationships with their suppliers rather than take them for everything they can get.

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    Re: GM presses suppliers for future recall costs

    I'm feeling the reason I can see this passing muster is that if the supplier KNOWS that the part has a defect but fails to contact GM and then stays in the dark until a recall happens. Then they say well we told them it wasn't a good part but we just build it to the specs.

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    Re: GM presses suppliers for future recall costs

    GM keeps using the same defective parts year after year even after recalls and TSBs, then they use the same suppliers for new models with the same results.
    Who's to blame? GM specs or poor suppliers?

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    Re: GM presses suppliers for future recall costs

    Quote Originally Posted by jzchev28 View Post
    Interesting to say the least! Perhaps there were cases were suppliers knew there was an issue with a part yet continued to pump them out anyway.

    Yes, but how does one get to that scenario? GM specs a parts, (appearance, durability, longevity, etc.) vendors work to that level and submit their bid price, after GM accepts the price and approves the part, everything is finalized. (If you over-engineer the part, your cost will be too high, and you won't get the business).

    I've been indirectly involved in situations like this, as a supplier, that after testing, yes it "passed" but it’s clear to see that it will soon fail (and I'm not necessarily about my company and GM). The part is built to the spec, it passes the testing that's established, all at a given price, as the vendor, we don't say "OK, we make 50 cents per part, but even though all the requirements have been met, let’s make it better and only make 15 cents"

    I'll create an example, with a part not related to any of my business units; let’s say a timing belt, GM wants it to last 6 years or 60,000 miles, and we meet that spec with room to spare. GM publishes in their service schedule that they should be changed at 5 years or 50,000 and since we've never had one fail before that time, both GM and the supplier have zero exposure, well what happens if due to the way GM designed the engines, that when it fails, all driver control of the car is lost (along with costly engine damage) and the belts are consistently failing at 70,000 miles, (right where we knew they would) and roughly 60% of owners ignore the service interval, because of the cars depreciate value and the cost of the repair. The Government would tap GM on the shoulder, and say we've got lots of complaints, you've got a problem, fix it.

    GM coming back to me and expecting me to pay one red cent of this is ludicrous.


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