Reduced Accruals
Most of the top U.S.-based warranty providers managed to reduce their warranty costs last year.
The chart at the right compares the warranty accruals of the 50 biggest U.S.-based warranty providers in 2010 and 2009.
Warranty accruals are the amounts set aside as products are sold, in order to pay future warranty claims. They are measured in both millions of dollars and as a percentage of product sales.
Biggest Reductions
The companies at the top of the list have cut their accrual rates the most. Those at the bottom have increased their accrual rates by the most. Last year, 33 cut their accrual rates, 16 raised it, and one (Emerson Electric) kept it the same.
In 2010, the total amount of warranty accruals reported by all U.S.-based warranty providers grew by 6.5% to $22.8 billion, while the amount of claims paid fell by 7.5% to $23.6 billion.
Warranty Claims & Accruals |
Top 50 U.S.-based Warranty Providers:
Annual Changes in Warranty Costs,
Accrual Rates at Year-End 2010 vs. 2009
(in $ millions and as a percent of sales)
(ranked by annual change in accrual rates)
| Accruals | Accrual | Accruals | Accrual | |
| Made in | Rate on | Made in | Rate on | |
| Company | 2009 | 12/31/09 | 2010 | 12/31/10 |
| Microsoft Corp. | $148 | 2.1% | $82 | 0.5% |
| Paccar Inc. | $169 | 2.4% | $172 | 0.7% |
| Harris Corp. | $37 | 12% | $27 | 4.2% |
| Oshkosh Corp. | $54 | 0.8% | $72 | 0.5% |
| Garmin Ltd. | $165 | 5.6% | $93 | 3.5% |
| Eastman Kodak Co. | $88 | 3.2% | $54 | 2.0% |
| EMC Corp. | $146 | 1.6% | $120 | 1.1% |
| Terex Corp. | $101 | 2.5% | $75 | 1.7% |
| General Motors Co. | $2,667 | 3.4% | $3,204 | 2.4% |
| Caterpillar Inc. | $880 | 3.0% | $841 | 2.1% |
| Harley-Davidson Inc. | $51 | 1.3% | $37 | 0.9% |
| Johnson Controls Inc. | $257 | 1.0% | $250 | 0.7% |
| General Electric Co. | $780 | 1.0% | $583 | 0.8% |
| Jarden Corp. | $144 | 3.3% | $125 | 2.7% |
| Manitowoc Co. Inc. | $74 | 2.0% | $51 | 1.6% |
| Whirlpool Corp. | $396 | 3.0% | $349 | 2.5% |
| Cisco Systems Inc. | $381 | 1.5% | $471 | 1.3% |
| Ford Motor Co. | $1,561 | 1.5% | $1,522 | 1.3% |
| Applied Materials Inc. | $93 | 1.9% | $152 | 1.6% |
| TRW Automotive | $63 | 0.54% | $67 | 0.47% |
| Brunswick Corp. | $89 | 4.6% | $101 | 4.0% |
| Hewlett-Packard Co. | $2.701 | 3.6% | $2,689 | 3.2% |
| Mohawk Industries Inc. | $52 | 1.8% | $45 | 1.6% |
| Ingersoll-Rand | $258 | 2.2% | $245 | 1.9% |
| Cummins Inc. | $364 | 3.4% | $401 | 3.0% |
| Boeing Co. | $167 | 0.5% | $141 | 0.4% |
| Lennar Corp. | $29 | 1.0% | $25 | 0.9% |
| Seagate Technology | $246 | 2.0% | $180 | 1.9% |
| Danaher Corp. | $106 | 0.95% | $121 | 0.92% |
| Western Digital Corp. | $154 | 1.91% | $184 | 1.86% |
| IBM Corp. | $374 | 2.31% | $407 | 2.26% |
| Lexmark International | $84 | 9.0% | $94 | 8.8% |
| Dell Inc. | $995 | 2.32% | $1,146 | 2.31% |
| Emerson Electric Co. | $205 | 1.0% | $243 | 1.0% |
| Honeywell International | $188 | 0.79% | $214 | 0.81% |
| United Technologies | $400 | 1.07% | $440 | 1.14% |
| Nvidia Corp. | $220 | 0.15% | $197 | 0.16% |
| Textron Inc. | $174 | 1.7% | $189 | 1.8% |
| Diebold Inc. | $67 | 5.4% | $77 | 5.8% |
| Deere & Co. | $458 | 2.2% | $568 | 2.4% |
| AGCO Corp. | $142 | 2.1% | $164 | 2.4% |
| Eaton Corp. | $77 | 0.6% | $99 | 0.7% |
| A.O. Smith Corp. | $73 | 3.7% | $63 | 4.2% |
| Navistar International | $217 | 1.9% | $269 | 2.3% |
| L-3 Communications | $51 | 0.7% | $62 | 0.8% |
| PulteGroup Inc. | $34 | 0.9% | $54 | 1.2% |
| Motorola Solutions | $301 | 1.4% | $372 | 1.9% |
| Motorola Mobility Holdings | $209 | 1.9% | $323 | 2.8% |
| Apple Inc. | $303 | 1.0% | $1,151 | 1.6% |
| Stanley Black & Decker | $19 | 0.5% | $89 | 1.1% |
Source: Warranty Week from SEC data
1. Among the top warranty providers of past years, several are missing from this year's report, including Sun Microsystems; Nortel Networks; Black & Decker Corp.; Exide Technologies; Delphi Corp.; and Goodman Global Inc. Nortel and Delphi are in bankruptcy; Sun and Black & Decker have been acquired; Exide has discontinued reporting its warranty costs; and Goodman has gone back to private ownership.
Warranty Periods by Brand, Make & ModelAutomotive WarrantiesComputer Warranties
Consumer Electronics Warranties |
Vehicle Service Contract Market: |
Auto manufacturers, insurance companies and third party administrators carve up a $11.175 billion pie.There are three types of administrators:
Vehicle Service Contract Administrators |
Auto |
 |
Warranty Conferences Exceed Expectations of Planners
| The ASQ's seminar on "Lean Quality: The Coming Revolution in Reducing Warranty Expense." sells out early as industry professionals look for ways to employ text mining in warranty claims analysis. | ALG Associates' Warranty Chain Management conference in San Francisco brought 215 people to a Fisherman's Wharf hotel to hear from the top warranty executives of Hewlett-Packard, IBM, ServiceBench, NEW, the SCIC, Magoo's Automotive Consultants, and numerous others. | The AIAG's Early Warning Standards conference drew 337 automotive warranty professionals to a suburban Detroit location for a one-day seminar on the use of warranty data to detect and prevent defects faster. |
Report on Product Warranties
Jetliner Warranties:
In the good old days, the airlines and aviation parts manufacturers already swamped by regulatory paperwork had little time for the additional bother of warranty claims. But in an era of falling revenue and rising costs, warranty has suddenly become very important to both operators and their suppliers.
As with so many facets of life, in aviation there is the era before Sept. 11, and then there is the downturn and recovery that followed. Commercial airlines have always veered from booms to busts, and the manufacturers have seen tough times too. But the one-two-three combination punches the aviation industry suffered in the past few years from terrorism, epidemics and war produced the sharpest downturn in the hundred-year history of their industry. Cutting costs became a matter of survival, which put the spotlight on the cost of repairs and spare parts, and ultimately, warranty.
Business Jet Warranties:
Unlike the airlines, the owners of corporate jets expect the white glove treatment from manufacturers. While they'll gladly bring their jets to an authorized service center for warranty work, they'll never try to do their own repairs. And while they expect their planes to be fixed fast, they'll almost never have their own spare parts on hand.
Warranty work in the corporate jet world is completely different from warranty work within the airlines. Corporate jet owners are not expected to keep their own set of spare parts; airlines are. Corporate jet owners rarely fix their own planes; airlines typically run their own service center.
Skatepark Warranties:
Whether they're made of steel, plywood, plastic, or paper, the ramps and rails installed in skateboard parks are sold with a warranty. But whether the warranty lasts for a year or 20 years seems to have more to do with marketing than the strength of the materials used.
Skateboard parks, like the patrons who use them, push materials such as steel, plastic and wood to the very edge of their abilities. What passes for normal wear and tear in the skatepark industry would elsewhere be called product abuse. Yet many manufacturers in the industry are able to warrant their products for 15 or 20 years.
Stadium Warranties:
Like any other large construction project, sports stadiums come with product warranties. Just because there's no warranty registration card in the box doesn't mean that the builders don't face warranty claims from stadium owners.
One reason product warranties might not be commonly associated with sports stadiums is the fact that most of the buildings are so old that they're now well past their warranty periods. But in the past decade numerous U.S. cities have opened brand new baseball or football stadiums.
Turf Warranties:
In some of North America's largest sports stadiums, the grass is always greener, thanks to AstroTurf and its successors. Unlike the sods it replaces, an artificial sports surface comes with an eight-year warranty.
Back in the 1960s, when outdoor sports such as American football and baseball first began moving indoors into domed stadiums, who would have predicted that artificial sports surfaces would become big business not only for their makers, but also for their lawyers?
Yet here we are, almost 38 years after the first game played upon AstroTurf, and the top two companies in the artificial turf industry are fighting just as hard in the courtroom as they do on the field of play.
On Feb. 13, SRI Sports Inc., also known as Southwest Recreational Industries Inc., filed for bankruptcy protection from its creditors, throwing the AstroTurf market into turmoil. A Canadian company called FieldTurf Inc., which has traded lawsuits with SRI for years, now looks to take over as market leader.
Only two other manufacturers have a toe-hold in the major leagues. A small company called Sportfield LLC provided the RealGrass Synthetic Turf System used by the Dallas Cowboys, and a Canadian company called Sportexe provided the new Momentum Turf System used at M&T Bank Stadium, home of the Baltimore Ravens.
All told, 12 NFL football teams play in 11 stadiums covered with an artificial surface. Four MLB baseball teams play on artificial turf.
The remaining 20 professional football teams play on natural grass, as do 26 of the 30 professional baseball teams.
Dell Cuts Product Warranty Cost, |
