How Companies Are Responding

Feb. 11, 2006
While it's not unusual for manufacturers to encounter quality problems, the ways they respond to those issues varies. Some, in fact, are finding creative ways to hold suppliers responsible for their defects.

Deere & Co. Charges Back

At Deere & Co., for example, a total of $334 million in warranty claims -- close to half the total in 2004 -- arose from supplier parts defects. In the year since Deere began charging back its suppliers for the costs of their parts that failed prematurely under warranty, the tractor and heavy-equipment maker reported a drop in warranty costs of 17%, according to a Gartner Group case study. The program is voluntary; suppliers pay for warranty claims only if they agree the problem was their fault.

Identifying the source of quality problems, of course, is difficult. For one thing, some components have multiple suppliers, and it takes some careful detective work to track down the actual source of a failure or defect. Further complicating the issue, the case study points out, is that dealers often misdiagnose the cause of warranty claims. And sometimes parts fail due to customer abuse.

In Deere's case, careful analysis of warranty data enabled the company to identify the source of the defects. "About 45% of Deere's faulty parts that failed under warranty were from suppliers," notes Martin Piszczalski, principal analyst at Gartner Group who authored a case study on Deere's warranty cost chargeback program. "They are trying to improve quality by having the responsible parties fix the problems."

In his analysis of Deere's innovative program, Piszczalski's report recommends that manufacturers "exploit detailed warranty and genealogy data today to drive down warranty costs, and longer term to improve quality." At the same time, he suggests that suppliers "maintain complete records, including test results, lot numbers, etc., in order to defend against spurious warranty claims."

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Quality Takes A Beating

Volvo Compromises

Sometimes government regulatory agencies play a part in the way manufacturers handle product troubles, especially automotive ones. For example, in 1999 Volvo began manufacturing cars with an electronic throttle module (ETM), replacing a traditional mechanical throttle. Volvos built from 1999 to 2002 with electronic throttles failed often enough that Volvo notified dealers that it would pay for one ETM cleaning per customer. One estimate puts the number of cars with fault-prone ETMs at between 200,000 and 300,000 vehicles.

Because throttle failures often affect a vehicle's emissions performance, the California Air Resources Board (CARB) pressured the Swedish automaker to extend the warranty on the throttles from four years to 10 years, and from 50,000 miles to unlimited mileage. CARB also wanted Volvo to reimburse owners, some of whom had already paid as much as $1,000 to replace the throttles.

Volvo responded by extending the warranty on the ETM to 10 years or 200,000 miles, and offered a free ETM software upgrade. In a letter to owners, Volvo stated, "Symptoms that may be associated with this condition include uneven engine idle and/or the onset of 'limp home mode,' a condition that affects drivability potentially restricting maximum vehicle speed to between approximately 10 and 30 miles per hour." In a single year, it cost Volvo more than $13.5 million to replace or clean 27,200 throttles, or in some cases, to buy back cars as a goodwill gesture.

Chrysler Group Takes A Hard Line

Chrysler Group took a harder line, despite pressure from an independent automotive watchdog agency. The company had enough complaints of engine sludging problems from owners of cars with its 4-cylinder, 2.7-liter engine that the Center for Auto Safety (CAS) called on the automaker to extend warranties, which the company refused to do. The National Highway Traffic Safety Administration logged more than 400 complaints, and CAS reported more than 500 owners who claimed their engines seized up after just 40,000 to 80,000 miles.

Chrysler's view is that many of the owners of Concordes, Intrepids, Sebrings, and other models with these engines who complained of sludged engines are second or third owners, and that it's difficult to verify whether the cars in question received adequate maintenance, especially regular oil and filter changes. Also, the company points out that it built and sold more than 750,000 automobiles with this engine.

Still, for owners who could verify that they had followed the maintenance schedule, the company offered assistance. "There were some folks that were diligent about changing the oil who had a problem, and we helped them out financially," says a Chrysler Group spokesman. "But we have not seen a widespread problem of sludging with 2.7-liter engines. We still make the 2.7-liter engine, and it is performing well when taken care of."

Failing Chips Threaten Family Photos!

Sony Electronics got a quality short-circuit last October when the media began reporting failures of a host of consumer electronic products, including digital cameras, containing one of its imaging chips. Affecting the Sony Cyber-shot and CD Mavica cameras, the chip failure also affected a Sony handheld computer, Sony camcorders, and five other digital camera manufacturers' products.

The chip in question, which is used to convert light into an electronic signal, can fail in hot and humid environments. When that happens, the camera will display black images or distorted colors, both in the viewfinder and in the digital images.

Sony says the problem stems from a weak adhesive bond that holds the chip to the camera. "When the bonding of the sensor degrades, the result would be a distorted image or you would see nothing at all," says a spokesperson. The chip was installed in products built before March 2004.

"There is nothing wrong with the sensor, just the way it's attached to different products," she adds. Sony and the other digital camera makers say they will repair the products if the chip fails. A digital camera analyst speculated that the repair would be so complex, manufacturers may decide it's easier to give consumers a new camera instead.

Guns Too Dangerous For Cops!

Glock, an Austrian firearms manufacturer whose handguns have become popular with law enforcement agencies in the United States in recent years, suffered a quality misfire last year when the Los Angeles Police Department (LAPD) stopped using its model 21 semiautomatic.

LAPD reported more than 40 instances of misfires of the weapon during training at three firing ranges. The .45 caliber handgun is favored for its stopping power and accuracy. Despite a new trigger bar provided by Glock to fix the problem, the misfires continued, LAPD reported.

LAPD ordered the gun taken out of service, suggesting that 1,600 officers that had been using that model switch to other weapons, including other Glock models. Although Glock officials at the manufacturer's Smyrna, Ga., U.S. headquarters didn't respond to inquiries, the Los Angeles Police removed the gun from use because of "light strikes" -- instances when the loaded cartridge is struck by the firing pin but fails to discharge. Such a malfunction at a crime scene could place an officer's life in jeopardy.

Bacteria Invade UK Medicine Plant!

The biotech industry took a quality knockdown punch in late 2004 when Chiron, the nation's biggest manufacturer of flu vaccine, had its Liverpool, England plant shut down by the chief UK regulatory body, the Medicines and Healthcare Products Regulatory Agency.

The reason was a bacterial contamination in the plant that forced Chiron to destroy 52 million doses of Fluvirin -- half the total U.S. supply -- after 4 million doses were contaminated. The U.K. factory's license was reinstated in March, 2005.

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