GM Shifts Financial Burden From Recalls to Suppliers

GM Shifts Financial Burden From Recalls to Suppliers

General Motors has taken on a new purchasing contract that allows the company to recover costs spent on safety recalls from suppliers that provided defective components. 

Not only does the contract cover new parts, it also states that even if the supplied part met with GM specifications at the time it was purchased and installed, the supply company is still responsible for the costs incurred by GM if an issue arises that requires a recall. Specifically, the contract states that the parts supplied “will not, at any time (including after expiration or termination of this contract), pose an unreasonable risk to consumer or vehicle safety.”

Besides the recall implications, the new contract, which went into effect on July 15 of this year, seeks to make supplier’s information more readily available to GM. The supplier must give, upon request, “its most current income statements, balance sheets, cash-flow statements and supporting data … ” On top of this, the contract also states that suppliers must always ensure an uninterrupted 30-day supply of parts, barring a natural disaster or any other unforeseeable event.

                                                    SEE ALSO: Government to Take Tougher Stance on Recalls

This new contract comes in the wake of the National Highway Traffic Safety Administration announcing that it will be taking a tougher stance on recalls, specifically citing that even if a vehicle meets safety standard when it is first built, that does not mean that it won’t be subject to a recall later on.

[Source: Automotive News]