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GM Issues New General Terms and Conditions

Sep 09, 2013

GM has re-written its general terms and conditions for suppliers.  These new terms and conditions will apply to all new contracts after July 15, 2013.

Following is a brief summary of some of the more significant changes.

  • Unique among vehicle manufacturers' terms and conditions, suppliers now warrant that goods (including, GM could assert, goods built to GM specifications) will never "pose an unreasonable risk to consumer or vehicle safety," including after the contract is expired or terminated. GM is effectively attempting to shift product liability risk for GM-designed goods to the supplier. This provision could present ongoing liability concerns that could diminish the enterprise valuation of automotive businesses.
  • Warranties remain in effect beyond their expiration date if documents incorporated by reference into the contract, such as quality standards or buyer specifications, would extend those warranties. Suppliers should be cautious about statements in such documents that might allow GM to assert that standard warranty terms are lengthened.
  • Technical or other information suppliers provide to GM or its affiliates is not subject to any confidentiality or non-disclosure obligation, unless an earlier confidentially agreement is entered into by the supplier and GM. Suppliers must now assess the information provided to GM and determine whether they should seek a separate confidentiality agreement.
  • The automatic right to compensation for the cost to make design and specification changes authorized by GM has been eliminated. Suppliers must now attempt to seek price adjustments for such changes.
  • While the new T&Cs; calls for GM and the supplier to negotiate price adjustments "reasonably" and in "good faith" GM retains the right to unilaterally, but equitably, adjust prices if discussions fail.
  • Suppliers have a duty, upon request, to provide information regarding the origins of materials contained in the products supplied, so that GM may comply with reporting requirements related to conflict minerals pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.
  • Suppliers are now responsible for ensuring that their own subcontractors and suppliers comply with GM's quality requirements and procedures.
  • Suppliers are required to notify GM of a variety of specific events or changes in status that may adversely affect their ability to perform under their contract with GM.
  • The new terms and conditions contain a completely revised section addressing intellectual property rights.
  • Changes to the force majeure clause include: removal of labor disruptions as a specifically-identified force majeure event, a requirement that suppliers notify GM of any force majeure event no more than 10 days after such event occurs, and allowing suppliers less time to provide adequate assurances to GM if requested.
  • The prior 90-day deadline for claiming costs resulting from GM's termination for convenience is eliminated.