Automakers could cut their warranty costs by as much as 25 percent by making claims and manufacturing processes more efficient, a new analysis says.
MSX International, a consulting firm with headquarters in a Detroit suburb, estimates that warranty costs amount to 2 to 4 percent of total revenue for most automakers. Globally, that's 30 billion euros - about $36.35 billion at current exchange rates - a year, MSX says.
That estimate includes only the direct cost of claims - vehicle repairs, warranty administration and capital spending to fix chronic manufacturing problems, MSX notes.
It doesn't include costs related to dealer inefficiencies or customers who are lost because of poor warranty experiences. Colin Dobinson, MSX's director of marketing and business development in London, says such costs "are hard to quantify properly, but they could take the bill close to 40 billion" euros or $48.47 billion.
Pieter van Rosmalen, MSX's vice president for business services, says automakers can reduce warranty costs by improving the efficiency of their dealers' repair and recall operations. Those activities account for 30 percent of warranty expenses, he says.
"Within a year, you can halve cost at the dealer level, reducing total warranty cost by 15 percent," van Rosmalen says. "Improving the carmaker's internal processes can cut another 10 percent."
That could help European automakers compete better with Asian brands that typically offer three- to five-year warranties, MSX says. Most European brands offer a two-year warranty.
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