2014 Supplier Associated Warranty Reduction Program Policies & Procedures. February, 2014

Transcription

1 2014 Supplier Associated Warranty Reduction Program Policies & Procedures February, 2014

2 Chrysler Program Overview Supplier program targets set as best performance of prior two years less corporate improvement rate. If the C/1000 measure at 15 MIS is above the target line, the supplier will share in the warranty cost, if the measure is below the target line, the supplier will share in the savings. Best of Last 2 years % Improvement 15% Internal Objective Rate Share cost 50% / 50% C/1000 Share savings 50% / 50% MCM credit CCM credit Evaluation Point Months of Production 2

3 Expected supplier actions Familiarize your company with the Supplier Associated Warranty Reduction Program (SAWRP) Implement a CQI-14 compliant process (TS Chrysler Customer Specific Requirement, see for CQI-14 manual) Review available warranty data from the following sources: Warranty Information System (WIS) - monthly Early Warranty Tracking (EWT) daily Quality Narrative Analyzer (QNA) as required Global Claims System (GCS) as required Dealer phone calls as required Visit the Parts Return Center regularly, obtain returned parts for analysis and respond to requests from QEC Warranty Specialists 3

4 Expected supplier actions (cont.) Facilitate warranty concern review and problem solving with cross functional groups Pursue resolution of Trouble-Not-Found issues (see CQI-14 NTF tool) Facilitate Lessons Learned sharing with Chrysler and supplier teams for new design continuous improvement Review Warranty performance internally with cross functional teams including your company s Senior Management 4

5 Major Exceptions Recalls Recovery will be managed using Chrysler case-based methodology Customer Satisfaction Notifications (CSNs) Rapid Response Transmittals (RRTs) Requires a manual recalculation of supplier s warranty 2010 and prior model year warranty Recovery will be managed using Chrysler case-based methodology, AWR 5

6 Major Exceptions Contractual agreements Current agreements remain in place and supersede this program Low warranty components Components with warranty levels below a specified threshold are exempt from this program 6

7 Specific Exceptions* Commodities with pre-defined, Chrysler-agreed warranty programs, e.g.: Tires Radios Windshields Non Encapsulated Glass Rear Window Glass Tempered Non-Encapsulated Paint Batteries Suppliers whose component(s) are part of an assembly that is typically serviced by replacing the entire assembly * Please refer to the table located on the Supplier Warranty Management website for the complete list 7

8 General Terms & Conditions for PO s issued PRIOR to September GENERAL WARRANTY. (a) Seller warrants that the goods or services will (i) comply with all specifications, drawings, descriptions or samples furnished and/or specified by Chrysler, (ii) be merchantable, and (iii) be free from defects in material and workmanship. Seller further warrants that all goods not designed by Chrysler will be fit and sufficient for the purposes intended. The warranty term will be coterminous with the warranty extended to Chrysler's customers by Chrysler. Seller's liability for a breach of the warranties given herein will be determined by Chrysler's analysis of a sample of parts against which claims are made that the parts are defective. Seller will participate in such analysis in accordance with Chrysler procedures. (b) Seller further warrants that on delivery Chrysler will receive good title to the goods and services, free and clear of all liens and encumbrances and that all goods and services will be free from any actual or claimed patent, copyright or trademark infringement. (c) These warranties are in addition to any warranties implied by law or otherwise made by Seller and will survive acceptance and payment by Chrysler. 8

9 General Terms & Conditions for PO s Issued AFTER September GENERAL WARRANTY. (a) Seller warrants that the goods or services will (i) comply with all performance standards and product characteristics, including without limitation specifications, drawings, descriptions or samples, furnished and/or specified by Chrysler, (ii) be merchantable, and (iii) be free from defects in material and workmanship. Seller further warrants that to the extent that Seller designs any goods, or Chrysler relies on Seller s expertise in any aspect of the design of the goods communicated by Seller to Chrysler, those goods will be fit and sufficient for the purposes intended. The warranty term will be coterminous with the warranty extended to Chrysler's customers by Chrysler on the date of the Order, or any other date agreed upon by Chrysler and Seller in the Order (except to the extent, prior to the commencement of initial volume production in connection with the applicable Request for Proposal, that Chrysler and Seller agree that the goods must meet quality or durability requirements for a longer term, in which case the warranty term will be such longer term). (b) Seller s liability for Chrysler s expense of reimbursing warranty claims made by Chrysler s dealers due to Seller s breach of Clause 8(a) hereof or any warranties implied by law or otherwise made by Seller shall be determined in accordance with the Supplier Associated Warranty Reduction Program Policies and Procedures or any successor program or policies as published on Chrysler s website (as referenced in Clause 1 hereof) on the date of the Order or on the date of any amendment to the Order. (c) Seller further warrants that Chrysler will receive good title upon delivery of goods, services, Tooling, fixtures, or equipment under this Order, free and clear of all liens and encumbrances and that all goods, services, Tooling, fixtures, or equipment will be free from any actual or claimed patent, copyright or trademark infringement. (d) These warranties are in addition to any warranties implied by law or otherwise made by Seller and will survive acceptance and payment by Chrysler. 9

10 General Terms & Conditions Clause Addition for PO s Issued PRIOR to September 2010 Emphasis Added (b) For all parts purchased for 2011 Model Year product & forward, the Seller s liability for Chrysler s expense of reimbursing warranty claims made by Chrysler s dealers due to Seller s breach of Clause 8(a) hereof or any warranties implied by law or otherwise made by Seller shall be determined in accordance with the Supplier Associated Warranty Reduction Program Policies and Procedures or any successor program or policies as published on Chrysler s website (accessed through Chrysler s Supplier Portal). Note: (b) is the replacement for section (b) of the currently published GT&C (a) refers to section (a) of the as published GT&C See previous slide for published GT&C s 10

11 Program Parameters Supplier Manufacturing Location Code / Local Commodity Code (SMLC/LCC) level in the Warranty Information System (WIS) If warranty level is below Chrysler s defined threshold level, the following methodology will apply: If the best of the prior two model years comparable warranty measure is <.05 C/1000, then the target will be set to.05 C/1000. Credit/debit will not occur if performance remains below.05 C/

12 WIS Parameters Select C/1000 after setting parameters 12

13 C/1000 Report Current C/ st Prior Comp 2 nd Prior Comp Best of 2 priors, establishes baseline warranty 13

14 Chrysler Target-setting Process Target Setting Formula: Best of two prior years C/1000 X (1 - Improvement Factor) = Target C/1000 Example SMLC LCC Comp C/1000 Target C/ B Warren 13AB Batteries Example uses a 12% improvement factor 12345C Holland 13AB Batteries

15 Target Appeals Suppliers may appeal Targets to address special circumstances Warranty Information System constraints Late LCC reassignments Product maturity Failure of Chrysler to react to supplier recommended corrective action Supplier submits appeal w/ detailed information Submitted to Quality & Warranty Programs group Appeal processed by cross-functional review board Supplier Quality (Quality & Warranty Programs) Warranty Recovery Group Appeals MUST be submitted prior to the launch of 13 MIS (November) data in WIS 15

16 2014 Model Year Process Timeline August 2013 Production July 2014 Nov MIS Warranty Information System Jan MIS (raw warranty data in EWT) Evaluation Period Target: Beat Achieved Missed 16

17 2014 Model Year Evaluation Period Details Model Year based January 2015, SMLC/LCC combinations will be evaluated to determine if targets have been met. SMLC/LCC combinations will contain data for vehicles that have been in service for 3 months over a 15 month period (3 MIS warranty is very stable after 15 months and will provide an accurate measure of performance to target) Vehicles launched prior to August will have a longer build / evaluation period 17

18 What Happens February 2015? Beats target Achieves target Misses target 18

19 Supplier Performance Beats Target C/ Warranty Program Example (Supplier exceeds target) Warranty Goal Setting IMPROVEMENT OBJECTIVE Warranty Performance 50% / 50% sharing of difference between actual and target Formula: (Target Actual) Share value = 50% x Target Savings Share Value applied to Net Warranty (excluding Mopar profit). Remainder of claims calculated monthly Increment Only 0.04 BASELINE TARGET ACTUAL

20 Supplier Beats Target Example 1. Determine improvement relative to Target 2. Apply 50% share factor 3. Estimate net actual warranty cost at Target Target warranty performance (C/1000) 0.20 Actual warranty performance (C/1000) Warranty improvement 0.08 Target warranty performance (C/1000) 0.20 Warranty improvement relative to Target 0.40 Sharing factor (50/50 split) x 50% Warranty share value 20.00% Target warranty performance 0.20 Actual warranty performance 0.12 Improvement scaling factor Net actual warranty cost (example) $ 12,000 Improvement scaling factor x Estimated net warranty cost at Target level $ 20, Calculate CCM MCMcredit Warranty share value x 20.00% MCM CCM credit $ 4,000 20

21 Warranty Recovery Cost Roll Up Methodology Warranty cost roll up methodology remains unchanged Seller to reimburse actual costs incurred to Chrysler, as determined by Chrysler. Costs to include Chrysler's warranty claim reimbursements to its dealerships for parts cost, dealership handling, and dealerships labor costs. Costs related to Mopar's handling of parts from suppliers to dealerships, excluding any Mopar profits. 21

22 Supplier Performance Achieves Target No warranty sharing This will be rare very few suppliers will achieve improvement exactly at Target level 22

23 Supplier Performance Misses Target 2011 Warranty Program Example (Supplier deteriorates) Formula: (Actual Target) Share value = 50% x Actual Warranty Performance Warranty Sharing 50% / 50% sharing of difference between actual and target Warranty Responsiblility Savings Share Value applied to Net Warranty (excluding Mopar profit). C/ Warranty Goal Setting Remainder of claims calculated monthly Supplier Increment Only IMPROVEMENT OBJECTIVE 0.2 BASELINE TARGET ACTUAL Chrysler

24 Supplier Misses Target Example 1. Determine deterioration relative to Target 2. Apply 50% share factor Actual warranty performance (C/1000) 1.20 Target warranty performance (C/1000) Warranty deterioration 1.00 Actual warranty performance (C/1000) 1.20 Warranty deterioration relative to Target Sharing factor (50/50 split) x 50% Warranty share value 41.67% 3. Calculate Debit Net actual warranty cost (example) $ 12,000 Warranty share value x 41.67% Debit $ 5,000 24

25 Credit / Debit Process 1. Evaluated model year warranty claim data captured for each supplier SMLC/LCC level 15 MIS January Evaluation results applied to claim data 3. Credit or debit processed by Warranty Recovery Group Warranty Recovery Group will notify supplier prior to issuing debit Billing Detail Review Not technically an appeal but a billing review. The intent is to advise suppliers prior to being debited for the model year s cumulative billing, the option to review the billing for system errors, e.g. I am being billed for a part that I do not supply to Chrysler. Upon processing of the SAWRP debit, s will communicate to the suppliers, significant details of the debit that will occur 10 business days after notification. The supplier has 8 business days to submit for a review. All of the links and instructions are on the . Once a review is submitted by the supplier any debit processing will be halted until the supplier s concern can be reviewed by Chrysler. 4. Subsequent dealer warranty claims submitted to Chrysler will be processed monthly applying the factor determined at 15 MIS for duration of warranty period 25

26 Warranty Cost Sharing Warranty sharing Is not subject to appeal Will occur automatically (credit or debit) at the base 5 supplier code level after the 15 month evaluation period until warranty expires Will be administered by the Chrysler Warranty Recovery Group Accelerated Warranty Recovery (AWR) does not apply to suppliers in the Warranty Reduction Program 26

27 Spike Appeal Chrysler or supplier may only appeal an individual SMLC/LCC combination for relief from warranty spikes felt to be solely one party s responsibility The spike threshold is a warranty level 5x greater than the best of 2 prior years Aggrieved party submits written appeal w/ detailed information Submitted to Quality & Warranty Programs group (sqwarr@chrysler.com) Appeal is reviewed by SAWRP Administration If accepted, SMLC/LCC removed from SAWRP and Warranty Recovery Group initiates a manual recovery case Appeals MUST be submitted no later than 7 days after 15 MIS (January) data is launched in WIS 27

28 Removal of SMLC/LCC from SAWRP Removal of an SMLC/LCC combination from SAWRP will result in the combination being sent to the Warranty Recovery Group for manual, case based recovery processing. 28

29 What About New Technology New technology introduction of product not previously offered on Chrysler vehicles? e.g.: Electronic brakes Active cruise control Collision avoidance systems First year of introduction will be handled by setting a target agreed to by both parties Contact Quality & Warranty Programs (sqwarr@chrysler.com) 29

30 What About New Vehicle Segments New supplier for a new vehicle segment (e.g. FIAT 500)? First year of introduction will be handled by setting a target based upon the historical performance of the Local Commodity Code Contact Supplier Quality Operations (sqwarr@chrysler.com) 30

31 What About Directed Source Parts Here are definitions for Directed Source Parts: Consignment: Chrysler picks up the parts from the sub-tier supplier, delivers them to the end item supplier, and manages inventory. Warranty is assigned to the sub-tier supplier (consignor). Module Pay As Built: Chrysler has a purchase order with the sub-tier supplier, creates a mirror of the purchase order with the end item supplier for releases and payments, end item supplier manages scheduling/logistics/inventory of sub-tier supplier. Warranty is assigned to the sub-tier supplier. All other informal directed source parts: Warranty is assigned to the end item supplier. 31

32 What About NTF NTF? Will not be removed from warranty as it is included in all prior year evaluation periods (This approach negates impact of NTF on warranty measure NTF levels typically do not vary from year-to-year) 32

33 What If I Have an Idea to Improve Warranty? I have an idea to improve warranty and Chrysler s not reactive? Contact Quality & Warranty Programs (sqwarr@chrysler.com) Provide detailed information (who, what, where, when) regarding the recommendation and how it will help you achieve your targets 33

34 What If I Have an Idea Requiring Investment? I have an idea to improve warranty and it requires investment to meet target (e.g. Chrysler Call Center)? Necessity determined on a case-by-case basis Business case submission required If warranty problem resolution justifies the investment required to meet target, Chrysler will share (50/50) the cost 34

35 Additional Information For questions regarding program administration and measurement: Contact the Quality & Warranty Programs Department via the Supplier Warranty Management web page Contact Us link or by sending an directly to For questions regarding billing: Contact the Warranty Recovery Department by sending an directly to 35