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 accrual rates of the 50 biggest U.S.-based product warranty providers in 2012 against their accrual rates in 2011. Those with the biggest decreases are increasing product reliability and cutting repair costs the most.
Warranty accruals are the amounts set aside as products are sold, in order to pay future warranty claims. When that expense is reduced, the benefit goes right to a company’s bottom line.
Biggest Reductions
The companies at the top of the list have cut their accrual rates the most. In 2012, the total amount of warranty accruals reported by all U.S.-based warranty providers declined by just a little bit to $24.7 billion. But for large companies such as GE, United Technologies, Caterpillar, Ford, Deere, Whirlpool and HP, the savings were much greater.
Warranty Claims & Accruals in Financial Statements:Most Improved, 2012 vs 2011 |
Annual Changes in Warranty Costs,
Accrual Rates at Year-End 2012 vs. 2011
(in $ millions and as a percent of sales)
(ranked by annual change in accrual rates)
| Accruals | 2012 | vs | |
| Made in | Accrual | 2011 | |
| Company | 2012 | Rate | Rate |
| FMC Technologies Inc. | $26 | 0.40% | 0.80% |
| Dana Holding Corp. | $20 | 0.30% | 0.50% |
| Nvidia Corp. | $7.10 | 0.10% | 0.20% |
| General Electric Co. | $611 | 0.80% | 1.40% |
| Hovnanian Enterprises | $31 | 2.20% | 3.40% |
| Juniper Networks Inc. | $32 | 1.00% | 1.50% |
| Terex Corp. | $55 | 0.80% | 1.20% |
| United Technologies | $325 | 0.80% | 1.20% |
| BorgWarner Inc. | $34 | 0.50% | 0.70% |
| Wabco Holdings Inc. | $27 | 1.10% | 1.50% |
| A.O. Smith Corp. | $54 | 2.80% | 3.80% |
| Ingersoll-Rand plc | $150 | 1.20% | 1.60% |
| Applied Materials Inc. | $107 | 1.20% | 1.60% |
| Flowserve Corp. | $29 | 0.60% | 0.80% |
| Manitowoc Co. Inc. | $57 | 1.50% | 1.80% |
| Oshkosh Corp. | $56 | 0.60% | 0.70% |
| Polaris Industries Inc. | $46 | 1.70% | 2.10% |
| Caterpillar Inc. | $1,089 | 1.70% | 2.10% |
| Hyster-Yale Materials | $30 | 1.20% | 1.50% |
| AGCO Corp. | $185 | 1.90% | 2.20% |
| Rockwell Automation | $34 | 0.60% | 0.70% |
| Eaton Corp. plc | $85 | 0.50% | 0.60% |
| Ford Motor Co. | $1,885 | 1.50% | 1.70% |
| Pentair Ltd. | $56 | 1.30% | 1.40% |
| Deere & Co. | $666 | 2.00% | 2.30% |
| B/E Aerospace Inc. | $38 | 2.00% | 2.20% |
| General Dynamics Corp. | $91 | 1.30% | 1.50% |
| PulteGroup Inc. | $46 | 1.00% | 1.10% |
| Whirlpool Corp. | $303 | 2.20% | 2.40% |
| Stanley Black & Decker | $86 | 0.80% | 0.90% |
| Xylem Inc. | $32 | 0.80% | 0.90% |
| Toro Co. | $38 | 2.00% | 2.20% |
| Hewlett-Packard Co. | $2,249 | 2.90% | 3.10% |
| Lennox International Inc. | $25 | 0.85% | 0.92% |
| Sherwin Williams Co. | $29 | 1.00% | 1.10% |
| NVR Inc. | $41 | 1.30% | 1.40% |
| KLA-Tencor Corp. | $48 | 1.90% | 2.00% |
| NACCO Industries Inc. | $21 | 1.20% | 1.30% |
| Advance Auto Parts Inc. | $41 | 0.66% | 0.70% |
| Coherent Inc. | $29 | 3.20% | 3.30% |
| Netgear Inc. | $62 | 4.90% | 5.10% |
| Western Digital Corp. | $175 | 1.15% | 1.20% |
| Trimble Navigation Ltd. | $22 | 1.10% | 1.10% |
| Honeywell International | $196 | 0.66% | 0.69% |
| Paccar Inc. | $305 | 1.90% | 2.00% |
| Advanced Micro Devices | $38 | 0.52% | 0.53% |
| D.R. Horton Inc. | $20 | 0.40% | 0.50% |
| IBM Corp. | $394 | 2.20% | 2.30% |
| Dover Corp. | $35 | 0.43% | 0.44% |
| Varian Medical Systems | $59 | 2.40% | 2.50% |
Source: Warranty Week from SEC data
Warranty Periods by Brand, Make & ModelAutomotive WarrantiesComputer Warranties
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