DETROIT (June 1, 2010)—Auto suppliers' new contracts with General Motors Co. include a provision that makes suppliers liable for half of GM's warranty costs.
GM introduced the change in mid-April. GM spokesman Dan Flores declined to comment.
Until now, GM has recouped warranty costs from its suppliers on an ad hoc basis. If GM attributes warranty costs to a supplier, GM makes a claim against the supplier, leading to an often-protracted back-and-forth to assign responsibility and decide which one will pay.
William Kohler, co-leader of the automotive industry practice at the Detroit law firm Butzel Long, said: “If GM has designed a way to streamline the process of allocating warranty cost responsibility, God bless them. But in 100 years of automobile manufacturing, auto makers and suppliers have not been able to do that.”