Auto suppliers signing new contracts with General Motors Co. are seeing a curveball: a contract provision that makes suppliers liable for half of GM's warranty costs.
The provision could put suppliers collectively on the hook for more than $1 billion in annual warranty costs. GM expects to owe $3.1 billion for policy, product warranty and recall campaign liabilities in 2010 and another $3.2 billion in 2011, according to its most recent 10-K filed with the U.S. Securities and Exchange Commission.
GM announced the new policy in mid-April and began to roll out the program to suppliers in North America.
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