The last 18 months have been challenging for most industries, and the automotive industry has been particularly hard hit. A shortage of semiconductors and supply chain chaos led to several manufacturers halting production, while others scaled back and waited for the proverbial dust to settle. McKinsey reports that the industry is accelerating out of the turn on its return to the next normal, but the lessons from the global pandemic won’t soon be forgotten.
And that lesson for automotive manufacturers and professionals working in and around the industry is best boiled down to the adage, « the only constant is change. » The goal now is to keep our eyes on what’s next and prepare for the inevitable fluctuations.
An Alarming Uptick in U.S. Auto Warranty Expenses
Warranty managers should take particular note of Warranty Week’s Mid-Year U.S. Auto Warranty Expenses report, which shows that warranty claim rates and accrual rates were on a rollercoaster ride across 2020 and 2021.
Warranty accruals and accrual rates have been particularly spikey and challenging for GM and Ford, driven by a few high-profile recalls. According to the Warranty Week report, Ford’s annual report references « a $610 million charge in our fourth quarter 2020 results for a field service action related to three million Takata airbag inflators, » as well as accruals for future warranty and field service action costs. A clear indication that they’re anticipating more of the same.
The airbag recall and its impact on warranty costs were also part of GM’s annual reporting, which makes reference to « an accrual of $1.1 billion, which represents our current estimate of the expected costs of complying with the recall related to the Takata passenger-side inflators in certain GMT900 vehicles, which are full-size pickup trucks and SUVs. »
Service Lifecycle Management Helps to Insulate Your Business Against Warranty Cost Fluctuations
The Ford and GM warranty cost and accrual trends demonstrate that even the biggest automotive manufacturers are not immune to the uncontrollable and unexpected—whether that be a recall or global pandemic. What the numbers in this report don’t adequately capture is the impact these challenges have on end customers as well, and the potential negative hit it creates for the brand.
Better Service Lifecycle Management can help to mitigate some of these challenges, both in warranty management and across the service lifecycle by connecting OEMs, customers, channel partners, and suppliers to support the post-sale service processes. A Service Lifecycle Management solution can help with:
- More efficient management of field service implementation when a problem like a recall occurs, helping to ensure parts availability and first-time fixes.
- More efficient supplier recovery in recall situations.
- Better backend capabilities to improve and orchestrate insights, forecasting, and corrective action.
- And perhaps most importantly, faster and friendlier communication with customers.
Syncron helps maximize and optimize Service Lifecycle Management and Warranty Management for the automotive industry. Check out our free, on-demand webcasts for insights on these topics from the Syncron team, industry experts, and leading analysts.