Collaboration Among Suppliers, Automakers Needed To Significantly Reduce Warranty Cost.

Warranty costs in 2003 could be reduced significantly with improved collaboration among auto manufacturers, tier one suppliers and their suppliers, according to the initial findings of a warranty analysis survey of the automotive industry conducted by BearingPoint, Inc., in conjunction with Automotive News and the Original Equipment Suppliers Association (OESA).

The BearingPoint survey, which involved more than 60 automotive suppliers, measured how effectively automotive suppliers and vehicle manufacturers were implementing internal warranty management strategies.

The survey also sees the potential to standardize internal processes for more effective warranty management and increased visibility. In order to achieve this, BearingPoint maps out the following steps for Tier One, Two and Three suppliers to consider:

- Better access and ability to analyze warranty data, failed parts and systems;

- Clear direction on design responsibility for OEM generated engineering changes; and

- Early design involvement

"These initial findings document that warranty performance is a key strategic issue, differentiator and growing risk element for suppliers," said Wayne J. Stein, managing director with BearingPoint, one of the world's leading business consulting and systems integration firms.

"The goal for us in conducting this survey is to provide insight into how these findings can be translated into significant costs savings for the industry overall." "This survey confirmed that the warranty is a complex issue and suppliers will play an increasingly larger role in warranty sharing in the future," said Neil De Koker, president of OESA.

"OESA recently formed a study group comprised of 30 supplier company representatives to dig deeper into warranty trends and changing responsibilities as it impacts suppliers."

Other initial findings from suppliers' responses:

- 66 percent believe warranty charge-backs have become a significant cost-shifting strategy for automakers;

- 69 percent said they do not get enough information on warranty charge-backs;

- 90 percent said automakers are increasing their focus on analyzing warranty costs;

- 50 percent said they are not sure who has design responsibility;

- 77 percent of supplier employees are not trained on warranty issues;

- 57 percent use multiple versions of warranty management systems, translating into high maintenance costs.