Becoming an Automotive Supplier—Proceed with Caution

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In past articles about PCBs for the automotive industry, we've discussed topics such as applications and quality systems requirements for becoming an automotive PCB supplier. Possibly further fueling a growing desire in our industry towards participating in this sector have been further technology advancements in automobiles, as well as a tear in Tesla's stock price and headlines.

Sales dollars in the automotive industry are traditionally very sexy, top-line numbers, but a nice bottom line has often been an evasive target, as evidenced by the slew of automotive supplier bankruptcies in the past 10–15 years. Fortunately, the past five years have shown a tremendous recovery in the industry, leaving most participants with positive income and much stronger balance sheets. This is yet another carrot to becoming an automotive supplier.

Before you make that plunge to becoming an automotive supplier, we need to talk about liabilities. In our industry, the liabilities for shipping bad boards are generally limited to a range of a) replacing or b) crediting out the bare boards to pay for the assembly (parts and labor) that was affected. Historically, this has been the case for automotive applications, as well. It’s been my feeling that since the OEMs have beaten down pricing so badly over the past 20 years, they generally bore most of the costs of warranty claims.

That’s been changing in the past 3–6 years, as OEMs are under tremendous pressure to keep growing their bottom lines. Warranty reimbursement claims have been one method of achieving improved fiscal performance. Car manufacturers have pushed liabilities to their Tier 1 suppliers who have in turn pushed it on down the line. So if you supply a bad circuit board or assembly, you may have to pay for the installed part. Not only that, you may have to pay for the new part to be installed—and we all know how expensive dealer labor is.

My story goes back a few years, but it is, if anything, even more relevant today with the increasing number of recalls by automakers.

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Editor's Note: This article originally appeared in the September 2015 issue of The PCB Magazine.