GM Shifts Financial Burden From Returns to Suppliers

GM has taken on a new purchasing contract that gives the automaker an opportunity to recover costs spent on safety returns from suppliers that provided defective details. 

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

Besides the return implications, the fresh contract, which effected on July 15 of this year, seeks to make supplier’s information more readily available to GM. The supplier must provide, upon request, ”its most current income statements, balance sheets, cash-flow statements and supporting data … ” Moreover, the contract also states that suppliers must always ensure an uninterrupted 30-day supply of details, barring a natural disaster or any other unforeseeable event.

This fresh contract comes in the wake of the National Highway Traffic Safety Administration informing that it will be taking a tougher stance on returns, specifically citing that even if a car meets safety standard when it is first constructed, that does not mean that it won’t be subject to a return later on.