Ford to expand warranty cost-sharing programme
Ford is expanding a programme that requires parts suppliers to share warranty costs, according to the Detroit News.
The newspaper said that Ford launched a warranty cost sharing pilot programme in 1998 with seven top suppliers.
After achieving some cost savings, the company told top suppliers in a memo distributed last week that it is now expanding the programme across nearly every part that can affect its three-year, 36,000-mile bumper-to-bumper warranty on new cars, the Detroit News said.
David Velliky, Ford’s director of supplier technical assistance, told the Detroit News that, by the end of this year, about 70 suppliers will be participating in the programme.
The Detroit News said Ford aims to reduce its warranty costs 10 to 20% each year, which would amount to hundreds of millions of dollars in savings. Ford officials have told top suppliers its warranty costs rose 16% to $2.2 billion last year, the newspaper added.
The Detroit News said the warranty performance would be judged on a year-over-year basis.
For savings over 5% annually, suppliers will share 25 to 50% of the improvement but would be charged 50% of any increase in warranty costs attributable to defective parts, the Detroit News said.