It is impossible to be in the Automotive Industry and not be involved in, aware of, concerned about or otherwise thinking about recalls. But as a supplier, what are you doing now to be ready for what many feel is the inevitable call from your customers or the government? What are you doing to prepare? In our recent white paper, Auto Suppliers Prepare for Barrage of Recalls, we address just this basic question.

Auto Suppliers Prepare for Barrage of RecallsFor example, did you know that a supplier may have an independent defect reporting obligation? That is right. While the OEM’s have that obligation, on original equipment supplier may also have that very same reporting obligation to the National Highway Traffic Safety Administration (NHTSA). When NHTSA is involved, suppliers need to make sure that they consult their contracts with both their customers and suppliers for provisions addressing potential recall obligations. They also need to consider protecting their confidentiality over documents provided to NHTSA. These obligations have become more acute and important as the U.S. Department of Justice (DOJ) has taken an active role by investigating recalls for criminal liability.

Of course, not only must suppliers address NHTSA and DOJ investigations, but the mass of warranty claims and expected civil litigation should be anticipated also. Warranty risk management is an essential part of any best practices for a supplier. Suppliers should make sure that their contracts have clear specifications and disclaimers as a first line of defense. Additionally, they need to document product testing, monitor dealer repair codes, have clear and defined protocols for claims, and take additional steps on the front side of these problems to limit the potential downside – an ounce of prevention in this instance is worth many pounds of cure.

Finally, make sure to prepare for litigation. Manage your company, your team and your documents. Suppliers should avoid public statements, especially of substance. Outside counsel should be retained to assist with litigation holds. Key documents to defend the company should be preserved. Importantly, collect physical specimens. Suppliers often do not have access to failed parts – they end up lost at dealers or through the chain of returns. Having such parts can be crucial to determining the root cause of problems.

These topics and more are explored in more detail in our recent white paper, Auto Suppliers Prepare for Barrage of Recalls.