See and Avoid Saves Profits: The High Cost of Warranties
On average, it takes up to 120 days to recognize and correct a warranty problem in the auto industry, with each day costing up to $1 million in service, labor, parts and brand impact. The financially challenged Big Three automakers spent more than $4 billion in warranty claims during the first half of 2005 alone. With more than 16 million recalls last year, that means almost as many cars were recalled as sold in the United States.
Given the high production volumes, the complexity of the components and subassemblies, and the harsh conditions in which automobiles are used, it's inevitable that some defects or failures will occur. In fact, many auto industry executives consider warranty claims to be a fact of life.