Archived Copies of Warranty Week

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December 2002 to Today

Fifteenth Annual Product Warranty Report: All the metrics are down this year, including product sales. Some companies continue to cut their warranty expenses by huge amounts, producing better products with lower failure rates. But others are getting better at shifting more of their warranty expenses back onto their suppliers.

Commercial Service Contracts, Part 2: Though the terms extended warranty and service contract are used interchangeably, in a commercial setting a service contract can mean much more than an insurance-like agreement. It can include maintenance and product support, with a focus on response time and cost, and may have only incidental ties to the repair of defects or malfunctions.

January 18, 2018

Commercial Service Contract Association: Industry leaders have launched a new trade association for commercial service contracts, with the inaugural meeting scheduled for tomorrow morning. But unlike with product warranties, extended warranties, and protection plans aimed at the buyers of consumer goods, the boundaries of the commercial service contract industry are not as sharply defined.

January 11, 2018

The 80/20 Rule of Product Warranties: Almost 80% of all the warranty claims and accruals reported by U.S.-based companies come from only 20 companies. Upwards of 500 other manufacturers account for only 20% of the total. But the expenses of the largest warranty providers are also a higher share of their sales revenue.

November 16, 2017

Fourteenth Annual Product Warranty Report: Warranty expenses are down but sales are up, which means a lot of companies have learned how to improve their warranty processes, increase quality, and reduce costs. But the cost reductions have become less steady in recent years, as if there's no more progress to be made. Is that the case? Or is this merely a pause before the next breakthroughs arise?

WCM Preview, Part Two: Given that so much of the knowledge and wisdom in the warranty management profession is passed on verbally, this annual gathering of product protection industry experts is an unrivaled opportunity to hear both vendors and their customers tell the stories of their journeys.

WCM Preview, Part One: Given that so much of the knowledge and wisdom in the warranty management profession is passed on verbally, this annual gathering of product protection industry experts is an unrivaled opportunity to hear both vendors and their customers tell the stories of their journeys.

February 23, 2017

Service Contract Pricing: Appliances: While the typical appliance service contract costs roughly 14% to 16% of the price of the product it protects, there is an enormous amount of variation, depending on which administrator the retailer works with, how long the contract lasts, and whether the product is low end or top of the line.

February 9, 2017

Service Contract Pricing: Microwaves: Built like electronics but sold like an appliance, the microwave oven is a hybrid of two different product categories. And with service contracts costing almost 19% of the product's price on average, it also has one of the highest average costs of protection. And there's a big difference in the cost of protection plans for units priced at the high or the low end of the market.

February 2, 2017

Service Contract Pricing: Ranges: After looking at household appliances that clean clothes, wash dishes, and store food, we round out the major categories with a look at the classic range: a combination of a stove and an oven used to cook food. What do their service contracts cost? Does it vary by brand or product price?

January 26, 2017

Apple's Warranties & Service Contracts: Not only has the company grown into one of the world's largest product warranty providers, but it's also running one of the world's largest extended warranty programs. However, while iPhone sales were down by 12% in 2016, iPhone protection plan sales were down by even more. Is it the competition? Or are consumers buying fewer iPhone extended warranties from Apple?

December 15, 2016

Service Contract Pricing: Electronics: Though the overall average is 17%, there's a wide range of pricing variation based on the duration of coverage and the inclusion of accidental damage coverage. And then there are retailers and administrators that price high because they can. A simple shopping survey of product and protection plan prices reveals the difference.

December 8, 2016

Service Contract Pricing: SquareTrade: Next year, once Allstate completes its SquareTrade acquisition, we'll find out whether there's more value in its direct-to-consumers sales model or in its traditional retail relationships. But this year, though the company has a reputation for selling inexpensive product protection plans, we're finding that some of its retail partners are marking up prices significantly.

December 1, 2016

Service Contract Pricing: Laptops: Laptop service contracts, as a percentage of the price of the product they protect, are more expensive at the low end of the market and less expensive at the high end. But there is a very wide variation between the top and the bottom. Laptop service contracts can cost anywhere between 4% and 91% of the price of the computer.

October 27, 2016

Retail Product Warranties: Though it's not common, there are some retailers, primarily in the auto parts business, that provide their own product warranties above and beyond what the manufacturers offer, and report those expenses in their financial statements. But it's likely to become more common in other lines of business, as more manufacturers open their own retail outlets or sell directly to consumers online, and more retailers begin to sell their own brands.

August 18, 2016

Warranty & Corporate Inversions: Although warranty has an effect on taxes, the movement of a company's headquarters from a high-tax to a low-tax country doesn't seem to change its warranty claims or accrual rates. The merger of product lines has a much bigger effect, no matter what their nationality. But in at least one case, a company leaving the U.S. decided to cease complying with warranty reporting rules.

Solar Equipment Warranties: While product warranties that last for one or two decades are reassuring to buyers, they're not worth much unless funds are available to pay claims. That means betting on young startup companies eventually becoming old industry veterans. But who knows how reliable a system installed now will be in 10 or 20 years, and how much it will cost to repair or replace?

Medical & Scientific Equipment Warranty Report: Though product sales are down, warranty expenses are down by more. And while any equipment that uses lasers or X-rays has higher warranty expenses than units that don't, those manufacturers have cut their warranty costs significantly in the past decade.

Thirteenth Annual Product Warranty Report: As the latest charts clearly show, American manufacturers are spending less on warranty than they used to. But is it because of better products, less costly repairs, or fewer sales? Now that the 2015 warranty expense data collection is almost complete, it's time to figure out why claims and accruals are declining.

Appliance Protection Plans: When it's all counted together, a huge amount of money is being set aside to pay for product repairs. Manufacturers finance their warranties and consumers can purchase additional protection through either service contracts or home warranties. It all adds up to about $6.77 billion spent last year on protection plans.

January 28, 2016

Microsoft Complete & AmTrust: Rather than keeping it in-house as they added more hardware to their product line, the manufacturer partnered with an insurance company to launch a suite of protection plans globally. And as the insurance company learned to work at the same Internet speed as the manufacturer, it also learned to love completely new product categories for which there's no loss cost data to help them.

December 17, 2015

International Consumer Goods Warranties: One good reason that not much is ever written about the expense of covering consumer electronics with product warranties: costs generally aren't that high. Except for laptops and smartphones, the expense rates for most consumer electronic products are generally quite low. But there are some big gaps in the amount of warranty data that's available, outside of a handful of top industry brands.

Twelfth Annual Product Warranty Report: Warranty expenses are once again rising and so are the associated expense rates. Much of that has to do with the increased cost of passenger car recalls, and some of it is caused by the soaring sales of smartphones. But could it be that some of the most successful warranty cost-cutters have let things slip back a little recently?

Harnessing Big Data: As more "big data" sources become available, extended warranty administrators can expand from break/fix into highly customized offerings, preventative maintenance and product monitoring services. But first they will have to decide what data is both meaningful and reliable.

February 12, 2015

Apple's Warranty & AppleCare Programs: It's not the kind of thing the consumer advocates like to report, but one of the world's leading electronics manufacturers and retailers is giving its customers a break, paying more warranty claims, keeping extended warranty prices steady, and giving customers a better value proposition on their product protection plans.

October 30, 2014

Mid-Year Service Contract Report: Consumers will pay nearly $40 billion this year for product protection plans, despite the best efforts of the watchdogs who tell them not to. It's mostly for smartphones and passenger cars, though, because everything else is perceived to be disposable and not worth fixing.

October 9, 2014

Appliance & HVAC Warranties: Expenses are down in early 2014, partially because of lower product sales and partially because of effective cost-cutting programs. But GE is leaving the business and the other top manufacturers are among the best cost-cutters. So expenses are likely to keep falling.

September 18, 2014

Consumer Electronics Warranty Report: The traditional radio and TV makers are gone, and even laptops are giving way to smartphones. So it's no surprise to see the bulk of the industry's warranty expenses shift from Hi-Fi to Wi-Fi. But that expansion also drags in lots of business-to-business sales as well as heavily-exported product lines into the analysis.

Eleventh Annual Product Warranty Report: While some manufacturers are having trouble with product reliability, others are seeing their warranty expenses rise simply because they're selling more product than ever before. Case in point: the new holder of the title of world's largest warranty provider.

Aerospace & Appliance Warranties: From airplanes to air conditioners, each industry has a typical cost of warranty based on the product it makes and what kind of customer it attracts. Business-to-business products such as airplanes have lower expense rates than consumer-facing products such as home appliances.

February 6, 2014

Computer Warranty Report: Traditional laptop and hard drive sales are declining, while smartphone and solid state storage sales soar. However, the change in product mix is raising warranty costs for some manufacturers such as Apple.

January 23, 2014

New Leaf Service Contracts: Smaller retailers looking to sell service contracts usually had to choose between running the program themselves or selling another company's self-insured product. Now, there's a company trying to make it as easy as possible for small retailers to sell fully-insured service contracts.

November 7, 2013

Warranty Cost Reduction: Billions of dollars have been saved in the past decade as American manufacturers find ways to reduce their warranty expenses. Now we're naming names and showing the decline in charts that measure warranty expenses as a percentage of product sales.

Consumer Electronic Warranties: The top companies don't have very high warranty expense rates. Outside of laptops and smartphones, their product warranties aren't all that costly. So perhaps warranty claims and repair costs are not a big deal for most consumer electronics companies

Power Generation Equipment Warranties: Harnessing multiple energy sources from coal to solar, the makers of electrical power generating equipment are a diverse bunch. While much of what they make also fits into other product categories such as automotive, appliances or semiconductors, this week we've brought them all together.

Warranty Accounting Standards: Out with the old and in with the new. FIN 45 for product warranties and TB 90-1 for extended warranties have been replaced by the Accounting Standards Codification, a vast yet easy-to-navigate unification of all GAAP standards.

February 7, 2013

Dell's Extended Warranties: Though its hardware sales have flattened, the importance of Dell's extended warranty program continues to rise. While a few years ago it was twice as large as the product warranty operation, now it's four times larger. And it accounts for a rising percentage of the company's total revenue.

January 24, 2013

Warranty Marksmen, Part 1: Given the average duration of a company's product warranties and the predicted repair cost, a company should be able to accurately estimate how much they need to set aside. But some companies are better at it than others.

November 29, 2012

Most Improved Warranty Metrics, Part 1: While many companies manage to reduce the percentage of revenue they spend on warranty, some do it better than others. Rising sales helps. So does building a better product. And then some companies are merely returning to normal after ending a "warranty excursion."

October 11, 2012

Computer Supplier Warranties: Unlike in the automotive industry, computer makers are not trying to reduce their warranty expenses by shifting more of the burden onto suppliers. Instead, both OEMs and suppliers are reducing their costs by increasing product reliability.

September 27, 2012

Automotive Warranty Metrics: While the major OEMs have made great strides with their warranty cost reduction programs and with efforts to use warranty data to improve product reliability, their suppliers are struggling to get back to where they were before the recession hit.

September 13, 2012

Apple's Warranty Data: Warranty expenses began a swift climb at the end of 2009. But so did product sales, as the Mac and iPod gave way to the iPhone and iPad. And so, the share of total revenue spent on warranty didn't soar.

September 6, 2012

Consumer Electronics Warranties: Most of the best-known brands are imports. Most of the domestic brands are made by computer, appliance or telecom companies. Most of the emphasis is on sales of service contracts. So how can we analyze just the product warranty expenses of U.S.-based consumer electronics manufacturers?

January 26, 2012

Solar Warranties, Part 2: How the manufacturers of photovoltaic systems themselves explain the risks and metrics behind their product warranties, and how a few are securing warranty insurance to help reduce those risks.

December 8, 2011

Warranty Acquisitions: Big companies are buying smaller companies all the time. But then they have to merge their product lines, combine their warranty reserves, and publish all the details. Divestitures, meanwhile, also happen once in a while, but not as often as entire companies are sold as a single unit.

October 20, 2011

Mid-Year Warranty Report: The good news continues into the first half of 2011, with massive warranty cost reductions extending their streak into a ninth straight year. With sales finally getting back to normal, product reliability has never been better, and repair costs have never been lower than they are now.

October 6, 2011

Warranty Software Acquisition: Engineering wants to talk to warranty and so does manufacturing. And warranty needs user manuals and parts from them. No single company's software can make them all talk to each other, not even a CAD/CAM company like PTC. So it bought warranty software company 4CS to round out its product line.

September 15, 2011

Sports Equipment Warranties: Though the uniforms and hats might be apparel, the equipment used for many team sports and outdoor activities carries product warranties. More importantly, the companies making the gear manage those warranties with accruals and warranty reserve funds, just like any other manufacturer.

Aerospace Warranty Report: While the airframe makers and their suppliers pay out roughly the same percentage of product revenue for warranty claims, they keep very different levels of reserves. The airframe makers keep a balance equal to four years of claims, while their suppliers keep half as much in their warranty reserve funds.

Aerospace Warranties: Unlike most other industries, aviation product manufacturers didn't see radical changes in their warranty costs during the recession. Yes, there were plenty of ups and downs, but they tended to be tied to new product cycles rather than to the economy.

November 5, 2010

Computer Warranty
Claims & Accruals: No news is good news as the computer industry's top warranty providers turn in predictable warranty expense reports. Despite economic turmoil, new product launches and multiple recent acquisitions, claims and accrual rates just aren't changing much.

September 16, 2010

Additive Product Warranties: They may have found a loophole that allowed them to evade most service contract industry rules, but they couldn't escape the wrath of the customers they swindled, the regulators they duped, or the competitors their antics tarnished. Now a consensus is forming around the idea that everybody should play under the same set of rules.

Design for Warranty: Products can be designed so that not only can they be fixed faster, but also so they can be fixed by customers themselves. Given that labor is the major component of warranty claims, product designs that plan for customer self-repairs can cut costs.

Vehicle Service Contract Industry: Consumers seem to prefer the term extended warranty. But industry professionals prefer the term service contract, even when they work for companies with the word warranty in their name. The problem is, there are at least three dozen other terms used to describe the product. Or is it a service? A service product?

January 21, 2010

Appliance & Building Material Warranties: We conclude our mid-year product warranty report with a look at the supplier side of the homebuilding industry, where we find at least one group paying more for warranty claims this year than they did last year.

October 22, 2009

Lifetime Warranties: Companies are free to define a lifetime any way they wish, but they have to be clear about their rules and their exclusions. Some issue the warranty to just the first owner of the product. Others qualify it with words such as reasonable or useful. And some high-tech companies spell out a policy under which the warranty's lifetime will end after sales cease and spare parts run out.

August 13, 2009

Warranty Service Providers: It's all mixed up. Retailers are selling products under their own brand names and manufacturers are selling their own service contracts. Bankruptcies have exposed how precarious product warranties can be, while insurance has demonstrated how extended warranties can survive even a liquidation. Perhaps it's time for OEMs to think about partnering with administrators and insurance companies?

OEM Extended Warranties: Working with a manufacturer to sell service contracts is a little different from working with a retailer. The OEMs need more help with sales and marketing, and they want more failure data analysis to help them with product quality and parts planning. They'll also need just as much help as the retailers with risk management, compliance, and regulatory issues.

Warranty Insurance: Properly insured and administered, an extended warranty can survive the bankruptcy of a retailer, dealer, or manufacturer. And in cases where customers doubt the survivability of a manufacturer's product warranties, insurance can reduce uncertainty and build confidence. Could this also work in Detroit?

Annual Warranty Totals & Averages: While claims were up slightly in 2008, both warranty reserves and accruals actually plunged last year. And as sales fall, the percentage of product revenue spent on claims has risen. With no less than 21 charts, we detail the industry totals and averages for the past six years.

Warranty Optimization Workshops: Warranty data analysis can help you understand where you've been and where you're going. But can it also help you choose the right way to get there? At pre-conference workshops next month, two leading warranty optimization companies plan to show how both product warranty and service contract programs can benefit from the careful use of analytics.

February 12, 2009

The Value of Warranty Expertise: Is warranty management merely a clerical skill, or is there more to it than just paperwork? Some see warranty as not only a leading indicator of product quality but also a major chance to impress a customer. However, that conversation can only take place if the warranty professional is trained to do more than merely process and pay claims.

January 15, 2009

Sports Equipment Warranties: Everything from StairMasters to snowmobiles carries product warranties, and cost their manufacturers a significant amount of money for warranty work. But compared to the billions spent by GM, HP and others, it's easy to overlook their corner of the warranty industry.

December 11, 2008

Security Equipment Warranties: Although big ticket military contracts don't usually include what we'd call product warranties, the maker so numerous other products that help protect people and property do pay claims and maintain warranty reserves. What follows are snapshots of the past six years of warranty expenditures for four of the market leaders in their respective corners of the security marketplace.

December 5, 2008

Warranty Cost Cutting: The warranty reserve balance rises and falls, along with claims and accruals, in reaction to changes in sales volumes and product quality. But merely measuring the balance doesn't provide as much insight as does using it to measure a company's capacity to pay claims.

November 26, 2008

Warranty Software: SigmaQuest debuts a new root cause analysis module that helps manufacturers reduce the scope of product recalls and cut warranty costs. It's also priced by the month and uses a Web interface to reduce the cost, time and effort needed to begin using it.

November 6, 2008

Warranty Management: Value and price are affected by product quality, which can be measured by fluctuations in warranty cost. But warranty is too often treated as merely a cost that must be reduced, without heeding its link to quality, price, and ultimately profits. And warranty is very different from accounting in that a big part of the job is using probability functions to predict the future.

October 16, 2008

Green Warranties, Part Two: While product warranties are focused on repairs at the beginning of a product's life, anti-pollution efforts aim to reduce energy usage over the full life of a product while recycling efforts are focused on waste disposal at the end of a product's useful life.

Five-Year Warranty Trends, Part Four: Warranty costs as a percentage of sales have remained rather stable since 2003. But while some industries are always below the overall average, others are always above it. And that depends not only on the product being made but also on the maker's spot in the supply chain.

Camcorder Shopping: All the major brands except Canon give only 90-day warranties on labor, making extended warranties an attractive add-on. But there are numerous small brands that give the full year on both labor and parts. Meanwhile, extended warranties are priced low by some retailers, while a few try to get more for the protection plan than they do for the product it covers.

December 5, 2007

Warranty Management: Warranty management for manufacturing and sales organizations is becoming an intense focus area. Warranty spending by US-based companies surpasses the Gross Domestic Product of some nations. But warranty is an avoidable cost, if managed efficiently and judiciously. As warranty also involves customers directly, the larger imperative of organizational image is at risk. A prelude to warranty management is information stability, consistency and transparency.

The Chief Information Officer plays a pivotal role to iron out the initial impediments before laying out a smooth track for warranty management in any enterprise. This article brings out the different sources of warranty data, a collaboration model for warranty data, the business dynamics of multiple stakeholders with respect to warranty management and displays ways to assess and improve warranty information maturity.

November 14, 2007

Changing the Way We Think About Warranty Management: Warranty is a critical element of new product strategy. It not only provides assurance to customers, but also serves as a very effective promotional tool. A change in the approach to warranty management is needed so that warranty related decisions are made in the context of the product life cycle and take into account the interaction between warranty and other decision variables. This new strategic approach is similar to that which has transformed supply chain management over the last 10 to 15 years.

Worldwide Computer Warranties: Thanks to exact data for U.S. product warranties and good data for worldwide market shares, we can estimate a worldwide figure of $12.3 billion for IT hardware warranties and $4.9 billion for PC warranties. With mobile phones, however, the precision drops because so much of the industry is based in Asia and Europe, where warranty data remains relatively scarce.

HVAC, Appliance & Building Material Warranties: Since so many manufacturers straddle the plumbing, appliance, and HVAC industries, we're profiling them together. But warranty occurs at very different rates for each product type. And some of the most expensive products from a warranty point of view seem to be small kitchen and personal grooming appliances.

Automotive Warranties: Thanks to reduced warranty expenses at GM, claims were up only slightly for the auto industry in 2006. With four years of data in hand, it's now possible to calculate typical claims rates by product or vehicle type. And while warranty expenses for some are on a downward trend, others have seen costs rise.

Product Warranty Claims, 2003-2006: Signs are emerging that suggest a peak in warranty spending by American manufacturers. Is it better management? Shorter warranties? Or could it be nothing more than sales rising faster than costs? With four years of data to examine, there's evidence for each scenario.

Product Warranty Spending: With most of the third quarter financial reports behind us, it's looking like warranty spending is up only slightly in 2006. But the changes at some of the top warranty providers are very large, in both dollar and percentage terms.

December 12, 2006

Warranty Management: The Next Frontier in Cost Reduction and Product Quality Improvement? A new approach for exploiting warranty data offers manufacturing organizations a means of quickly finding and fixing product failures.

October 3, 2006

Disk Drive Warranties: As our warranty tour continues, we've finally found a product segment for which warranties vary tremendously from one company to the next. And competitive marketing strategies seem to matter more than either product specs or price.

August 22, 2006

Ford's Powertrain Warranties: How does a carmaker get people talking about product quality and confidence? By lengthening the warranty on the engine and transmission. But it didn't work so well for Chrysler, so why should it work for Ford?

Auto Warranty vs. Quality: Does the total cost of warranty have any correlation to product quality? Based on the worldwide claims rates seen for the top five carmakers and quality data collected in the U.S. by J.D. Power and Associates, one does seem to be related to the other.

Warranty Legal Solutions: So often warranty cost reduction efforts are focused on either the product or the process. But what about the warranty itself? At the WCM Conference, an attorney explained how the right choice of words can limit liability and reduce warranty cost.

Product Warranty Trends: 2005 is shaping up to be a $27 billion year for the warranty industry, though claims still represent only 1.7% of sales. More than a dozen companies have cut their claims rates. Some manufacturers, however, have seen their claims rates soar into the danger zone.

January 10, 2006

Warranty Webinar: Early warning systems allow manufacturers to detect emerging issues before they become major liabilities. In a roundtable discussion, experts suggest the best strategies for implementing these systems, and how to use them to reduce warranty cost, boost product quality, and increase customer satisfaction.

October 4, 2005

Top 50 Warranty Providers: While 20 saw declines in the percentage of revenue spent on warranty claims, all but 12 paid out more claims in dollars during the first half of 2005. Rising product sales made the difference.

August 30, 2005

Warranty Laws: Though the federal government has been quiet, there are plenty of laws and regulations governing product warranties and service contracts at the state level.

Warranty Registrations: A digital marketing communications company named MediaKube is adapting Sony's CD-ROM technology to warranty and product registration applications.

Fixing Things: The best way to measure performance is not just by counting the number of failures or adding up the warranty costs. A better alternative is to measure how the product consumes energy to perform each of its functions, and how successfully it avoids failures caused by energy lost to friction, vibrations, or heat. In short, it's a restatement of the second law of thermodynamics.

Warranty Reserves: How much is enough? Given a company's industry and the nature of its product warranties, how much should be kept in the warranty reserve fund? The funding decisions of 700 CFOs provide some insights.

Warranty Conference,
Part Two: Members of the AIAG detailed their effort to create an early warning system that uses new warranty data communications standards to improve product quality.

Product Warranty Trends: Manufacturers seem to pack their end-of-year reports with as much warranty expense as they can find, creating a kind of step function in the quarterly data.

January 11, 2005

Product Warranty Providers: Gateway holds onto the title of most improved for 2003-2004, but almost three-quarters of the top 50 manufacturers are seeing their warranty claims rates decline year over year.

January 5, 2005

The SAFE Guys: As with manufacturer's product warranties, the extended warranty industry is huge yet easy to take for granted. Two industry experts explain why they left the comfort of the insurance business to open their own extended warranty consultancy.

September 28, 2004

Warranty Promotions: Once an afterthought for both manufacturers and customers, warranty is becoming the simplest way to express the quality of a product. Lengthened warranties, which began as a bid for market share by certain auto importers, are now spreading to computers and home electronics.

September 21, 2004

Seagate's 5-yr. Warranties: Is it a bold marketing move that will increase sales? Or is five years a bit too long for a product in such a fast-changing industry?

Setting Warranty Policy for Products That Generate Annuity Streams: Most warranty-management analysis concerns warranty as cost, the effect of warranty on customer satisfaction, or the signaling impact of warranty on customers. This article describes a study where the focus was not on the product under warranty, but rather on the effect that warranty length might have on the sales of related peripherals and supplies. These sales generate annuity streams for the manufacturer as long as the product remains in operation. However, cost savings from a shorter warranty period must be weighed against potential lost profit from reduced annuity streams. A shorter warranty policy might cause products to drop out of active use sooner, and the cost savings from a shorter warranty policy therefore might be outweighed by the lost annuity profits.

Warranty in Europe: As a major part of consumer protection, warranty has a high priority in the policy of the European Commission. Consumers are protected by mandatory warranty periods of two years, by legal instruments to guarantee access to the aftermarket for automotive spare parts and by stringent rules for product safety. However, increasing warranty costs in the automotive industry may indicate that the reality of product quality has not yet met the requirements of those legal rules. A warranty industry association is needed to satisfy consumers and to reduce these tremendous costs.

Declining Warranty Claims: In both dollar amounts and as a percentage of product sales, warranty claims took a steep dive during the first quarter of 2004. Was it caused by cyclical factors? Was it due to rising sales? Or has there been a product quality improvement?

Warranty Claims Rates: In both the automotive and computer industries, the OEM -- the brand name on the product -- is frequently left holding the bag when it comes time to pay warranty claims. As the latest data shows, their suppliers usually see much lower warranty claims rates.

Warranty Reserves: While the average manufacturer spends 1.9% of product revenue on warranty claims and keeps a little over a year's worth of funds in reserve, each industry is different. Computer manufacturers and automakers fund their warranty programs at different levels than telecom or aerospace manufacturers. But in any group, as with any trend, there's always the odd man out.

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. Two examples follow, from Seattle and Houston.

February 17, 2004

Reducing Warranty Claims: Sometimes a company focuses its engineering talent on a manufacturing problem that once solved, results in soaring product quality improvements and plummeting warranty costs. Other times, a company gets lucky as product families mature and installed bases age themselves out of warranty.

February 3, 2004

Warranty in the Air, Sea, and Ground: Compliance with FASB FIN 45 rules concerning product warranty disclosures has spread tremendously in just the first two quarters of 2003, making it possible to find ranges and averages for warranty accrual and claims rates in numerous market segments. In addition to the automotive and IT industry sectors detailed in the past two issues, here are charts for six more market segments.

September 29, 2003

GM's Warranty Reserves: Both GM and Ford made sizeable withdrawals from their reserve funds during the second quarter. GM cited increased product quality. But analysts said the move lowered earnings quality. Ford said nothing, and nothing was said. What's behind the changes of estimate?

August 18, 2003

Warranty Services: While most of the service providers in the warranty industry focus exclusively upon the sale and administration of extended service plans, a handful of intrepid companies have outsourced product warranty claims processing for manufacturers in the consumer electronics industry, where repairs can be performed by any of tens of thousands of service centers.

August 11, 2003

Warranty Software: In the automotive market, sooner or later virtually every software package has to interact with warranty data. And why not? Warranty is a $9 billion activity for vehicle manufacturers, with a direct impact on the bottom line. It's also one of the best available measures of a product's quality and reliability, and it could be as useful to the engineers as it already is to the accountants.

Warranties in the HVAC/R Industry: As temperatures climb, so does the need for air conditioner and refrigerator repairs. But even in the cold winter months, HVAC/R vendors spent an average of 1.9% of product sales to satisfy warranty claims, according to recently filed financial statements.

More Details on the Top U.S. Warranty Spenders: Readers ask for the warranty cost of the 40 largest, with 85% of total warranty spending, to be retabulated on the basis of warranted product revenue only.

Windfall for Warranty Managers: FASB requires U.S. manufacturers to include never-before-seen details on product warranty costs and reserve fund balances.

HP Integrates the Compaq Product Line, and Unites its Warranty and Service Upgrade Options. But extended warranty revenue isn't what it could be, and buyers facing too many choices may instead be choosing to do nothing.

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