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Manufacturers Look To Control Auto Warranty Costs

tech.jpgA somewhat new IBM technology helps auto manufacturers cut warranty expenses which are an over $14 billion cost to them annually. IBM’s plan goes beyond “keyword” searches and collects and analyzes data from many different information sources like repair records and blogs. Automotive companies worldwide face stiff competition as well as a difficult marketplace. To help stimulate growth automakers, particularly from the


United States
have resorted to deep discounts to stay competitive. Obviously this takes a toll on the profit margins. To counterbalance downward trends of their profit margins, many automakers are looking at new ways to control costs. Auto warranty coverage is one of the quickest growing areas of operating costs in the industry. In 2004, some industry experts estimated that warranty costs could exceed $45 billion worldwide. In the


United States
, auto warranties account for nearly 41 percent of all auto warranties industry wide. For the first time, in 2004 the number of recalled vehicles exceeded the total number of manufactured vehicles. One of the causes behind rising warranty costs and claims is the ever increasing complexity of the vehicles being built. Almost 40 percent of the value in a vehicle is tied up in the car’s software.  A car could have as many as 70 different processors that control everything from anti-lock brakes, automatic transmissions, cruise control, and fuel injection systems.  Controlling the costs of warranties has enormous benefits. Warranty costs can drag down profits of the automobile industry by over 3 percent. Automakers could lower their warranty costs by half and they would see their profits soar over 300 percent.

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Posted on Friday, January 18th, 2008 at 1:58 pm In Auto Warranty  


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