DETROIT - General Motors will try to cut the cost of warranty repairs by coaxing suppliers to fix quality problems quickly.
Vendors will be given a time period - perhaps 90 days or so -to address problems. Those that succeed will be rewarded. Those that fail could pay a substantial portion of the warranty bill.
To speed the process, up to 150 top suppliers will be given online computer access to dealers' repair data.
'We are setting very aggressive goals,' said Harold Kutner, GM vice president in charge of worldwide purchasing. 'We want to reward suppliers who drive warranty cost out of the vehicle.'
Kutner outlined the policy last week in an interview with Automotive News. This week, GM is expected to share details as it meets in Brazil with its 178 worldwide 'suppliers of the year.'
Kutner stressed that the program is aimed at more than a short-term fix. He said he wants suppliers to correct the process that created the problem. 'We are talking areas where it is clearly demonstrated that the supplier is responsible,' he said.
Rewards could be financial or they could take other forms, such as more business with GM, Kutner said. GM now decides on a case-by-case basis whether suppliers will be responsible for warranty costs.
Kutner said he expects the program to take effect this year in North America. Europe, Latin America and the Asia-Pacific region will likely get it in 1998.
Two suppliers contacted were interested but, in the absence of details, wary.
An electronics supplier said GM's attitude will make the difference. 'If they are nonconfrontational, like Chrysler, we will embrace it,' said the supplier, who did not want to be identified.
Another supplier said he wonders how GM will determine responsibility. Will suppliers that deal directly with GM be accountable for the failure of sub-tier suppliers that might not have deep pockets?
This year, GM launched an audit of dealers' warranty repairs to eliminate improper claims. The audit was prompted by complaints from suppliers who were angry about rising warranty chargebacks.
ACCESS TO REPAIR RECORDS
After GM's latest move, each of the Big 3 appears ready to give suppliers online access to their dealers' repair data. Last fall, Chrysler Corp. announced a pilot program to share warranty data with 14 suppliers. The goal is to find ways jointly to cut down on repairs.
Ford Motor Co. also is preparing to give suppliers online computer access to dealers' warranty repair records, according to purchasing chief Carlos Mazzorin.
GOAL: BE LIKE ASPIRIN
The emphasis on warranty costs comes as the Big 3 have made steady improvements in vehicle quality. Kutner said GM suppliers have reduced their defect rate, measured in problems per million parts, by 40 percent during the past two years.
But he is pushing for the kind of quality found in the pharmaceutical industry: zero defects.
'We studied this industry to see how they design for perfection,' Kutner said. 'When you buy an aspirin, you expect every pill to work.'
At some GM assembly plants, 60 to 70 percent of the suppliers report component defect rates of 25 to 50 parts per million. That's world-class performance, Kutner said. As a group, GM's Saturn suppliers report the lowest defect rates.
He also noted that suppliers to light trucks have made big improvements.
Kutner declined to estimate defect rates reported by typical GM suppliers.