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A Better Partnership

Ahead of the Curve Auto Supplier Blog

April 19, 2017

Flipping the Script: Turning Added Risk into an Opportunity for Suppliers of Driverless Vehicle Systems

As though automotive suppliers haven’t seen their risk increase enough over the past few years, the introduction of driverless car tech threatens to add even more risk to the supplier plate for a number of reasons. 
Automated driving components, by definition, reduce or supplant the human driver’s role in any given accident, leaving more responsibility to allocate to the OEM and component or software suppliers. And while many assume that this won’t affect the ultimate liability of suppliers because the introduction of automated vehicles will result in far less accidents overall, that isn’t a foregone conclusion.
Indeed, suppliers face the serious risk that, despite some experts’ predictions, the number of vehicle accidents likely will not immediately decrease, as less-than-fully-driverless cars pose some unique and uncertain dangers of their own. Not only that, but they will still have to share the road with traditional cars and their human drivers, making for a complicated liability situation.
Further raising the stakes for suppliers, improved technology and data analytics will also assist in pinpointing the cause(s) of a given crash, which will probably increase the likelihood of a single part-maker bearing the accident liability.
Combine all of these factors, and it’s a recipe for substantially increased liability for suppliers.  But, suppliers don’t need to accept this as their fate. With driverless vehicles now the name of the game and new entrants from the tech world, the auto industry is rapidly changing. Supply chain relationships are too, with traditional top-down relationships giving way to increased collaboration and partnerships.
The path is clear for suppliers of high-tech automated driving components to switch up how they negotiate with OEMs. Instead of doing things the same way that they always have, suppliers with “game-changing” technology should use their leverage to require their OEM customers to indemnify them from third-party claims. The supplier, rather than being responsible for any costs and damages associated with claims related to its components, can place liability for component defects squarely on the OEM’s shoulders.
OEMs, for their part, may even be eager to make that concession in an effort to beat the competition to market, a competitive approach that is not unheard of: at least one OEM indemnified its Tier 1 supplier in the 1980s in the race to have airbags in all new vehicle models. 
Given the prevailing uncertainty surrounding the safety and liability aspects of automated vehicles, it is important for suppliers to protect themselves from unnecessary risk and liability. The impending disruption in the automotive industry presents the opportunity for suppliers of “must-have” technology to do precisely that.
To learn more about strategies to protect your company from the added liability that is likely to come with the arrival of automated vehicles, please contact a member of the Warner Norcross Automotive Industry Group.

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