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Ahead of the Curve Auto Supplier Blog

January 19, 2022

Stellantis Overhauls Terms and Conditions – What You Need to Know at a Glance

Stellantis, still referring to itself as “FCA,” recently issued new global and North American purchasing terms and conditions dated December 2021 (the “NA Terms”). The NA Terms are a rare, dramatic overhaul to an OEM’s standard terms and conditions. After relying on its 2010 terms for over a decade, and some smaller tweaks last year, FCA replaced 2021’s 26‑page set of terms with a 14‑page global set of terms and — for its North American suppliers — a 40-page North American-specific rider. The result is rewritten versions of almost every material aspect of FCA’s terms. 

This blog post briefly highlights some of the most important changes contained in the NA Terms. There are many more material changes than are noted below; and our comments are not intended to express any opinion regarding the enforceability or proper legal interpretation of the NA Terms. Given the wide-ranging impact of the NA Terms on FCA’s direct and indirect vendor relationships, suppliers doing business with FCA should contact a Warner Automotive Industry Group attorney to discuss the NA Terms, how they may be material to your business, and how best to mitigate any risks and respond or object to FCA accordingly. 

The NA Terms are structured around a “master agreement,” which FCA intends to govern the entire relationship between it and its suppliers. This means, according to FCA, that it can enter into a contract with its suppliers with or without a binding purchase order, and that suppliers are bound to both FCA’s global terms as well as its continent-specific addenda. Here are some of the notable provisions included in the NA Terms: 
 
  • Acceptance. FCA seeks to immediately apply the NA Terms to all of its existing supplier relationships, providing several ways that suppliers can intentionally, or perhaps even unintentionally, accept the NA Terms. One of the purported ways suppliers can accept the NA Terms is through FCA’s online “Supplier Portal” — a focus of the NA Terms. FCA purports to put suppliers on notice that they should always be aware of documents uploaded to FCA’s Supplier Portal because new policies and terms uploaded there are to be binding on suppliers. FCA also adds language to its terms attempting to reject any different or competing terms, and purports to waive any application of UCC 2‑207 altogether (the UCC’s so-called “battle of the forms” provision). See this earlier blog post regarding a 2020 federal court decision finding that under UCC 2-207, FCA’s terms did not necessarily govern FCA’s relationship with a supplier. 
  • Volume. The NA Terms attempt to increase FCA’s unilateral right to control product volume. FCA purports to reserve for itself the right to unilaterally adjust any and all quantities on issued releases, as well as unilaterally require a supplier to carry a certain volume of safety stock. At the same time, however, FCA states that it is “not obligated to order any goods or services contemplated by a purchase order,” and further disclaims that, unless stated otherwise, its supply relationships are not required to be exclusive. 
  • Quality/Warranty. Perhaps no section of the NA Terms received more of a makeover than the warranty provisions. Attempting to establish a new baseline, FCA purports to impose on its suppliers the obligation to make sure all sub-suppliers comply with all FCA specifications and policies. FCA also attempts to waive UCC 2‑607, which would otherwise prevent FCA from rejecting products after having received and accepted shipments. More generally, FCA attempts to expand the scope of its suppliers’ warranties. The NA Terms go as far as to state that suppliers are warranting their products for all uses contemplated by FCA and that the suppliers know FCA’s purpose and use for all products. According to FCA, suppliers also now warrant competitive pricing, a cost-efficient production process, and that their personnel have the proper training, experience and education. 
  • Pricing. The NA Terms require suppliers to immediately pass along any and all cost savings to FCA. 
  • Changes. FCA has attempted to extend its broad right to direct unilateral changes to any aspect of its purchases. Supplier’s already-limited rights to pricing relief with respect to such changes are now further restricted to verifiable and approved net out-of-pocket direct costs actually incurred by the supplier. The NA Terms also include unstated unilateral obligations for suppliers to promptly make suggested changes for product improvements or cost reductions (seemingly without limitation on scope or triggering conditions). 
  • Parts/Service. The NA Terms expand supplier obligations to provide serial production and post-production service parts, including broadened most-favored nations protections, additional technical, testing and sales support responsibilities, and explicit indemnification obligations. 
  • Payment. The NA Terms provide default payment terms of net 90 days. Factoring arrangements are now explicitly prohibited. And the NA Terms also strengthen FCA’s — and now its affiliates’ — unilateral right to withhold and setoff against payments without notice. 
  • Intellectual Property. The NA Terms address in much greater detail FCA’s and its suppliers’ rights with respect to intellectual property, including FCA’s right to use supplier background intellectual property upon the supplier’s breach, ownership and licensing rights to foreground intellectual property developed under the parties’ contract or otherwise relating to the subject goods or services, and supplier obligations with respect to FCA’s unilateral determination to produce or use goods or services in new countries. 
  • Data/Software. The NA Terms expand the definition of FCA-owned data (which cannot be used or disclosed for purposes other than as required for FCA) to explicitly include (i) Development Data and (ii) derivatives or improvements made by its suppliers and sub-suppliers. “Development Data” includes, in part, all data produced or collected from an FCA branded vehicle (including virtual test environments) and all data relating to any software. The NA Terms also increase supplier obligations (and certain limitations) with respect to software and data protection. 
  • Termination/Transition Support. The NA Terms attempt to extend FCA’s ability to terminate purchase orders with or without cause, shorten supplier cure periods while lengthening FCA’s own cure periods, further limit FCA’s liability upon termination, and include cross-default rights. Additionally, the NA Terms provide that suppliers will develop and execute at no cost to FCA a transition plan finalized in FCA’s reasonable discretion to ensure continuity and minimize adverse impacts to FCA. 
  • Remedies. The NA Terms purport to require suppliers to bring any and all claims whether known or unknown within one year of the date such claims first arose. The NA Terms also unilaterally provide that FCA is entitled to all of its costs (including accountants' and attorneys’ fees) if it is the prevailing party in any dispute. 
  • Directed Supply Relationships. The NA Terms enhance and greatly expand upon the obligations, roles and responsibilities of FCA’s direct suppliers (referred to in Section 34 as the “Assembler”) and any directed component suppliers (referred to as the “Directed Component Supplier”). For example, the Assembler must agree to the relevant directed supplier provision in the NA Terms, and FCA seeks the right to directly enforce the applicable contract against the Directed Component Supplier. 
  • Term. The NA Terms purport to expand the duration of any contract beyond the already expansive language in FCA’s prior terms. The NA Terms state that any purchase order that doesn’t contain an end date is deemed to be for the life of the program, it may extend across multiple vehicle programs as determined by FCA, and FCA may extend vehicle programs one or more times. In addition, if there is no outstanding purchase order under the existing contract for 90 days, the contract can be terminated with one-year’s notice. 
These provisions and more will no doubt be the focus of supply chain professionals in the coming months and years. Warner’s Automotive Industry Group is experienced in working with suppliers to react to and strategize accordingly. To continue a discussion of how these new terms may affect your organization, please contact Michael Brady, Dan Bonucchi, Adam Ratliff or your Warner Automotive Industry Group attorney.
 

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