GM (Again) Revises Its Terms and Conditions, This Time in Response to Continued Supplier Concerns

In July 2013, GM rolled out major changes to its general terms and conditions for its contracts, imposing the most extensive changes for its suppliers in several decades. On this blog, we covered the changes and extensively analyzed the revised terms. A number of the provisions which GM imposed last July significantly altered the status quo. Many suppliers viewed the changes as improperly extending warranty obligations and audit rights while at the same time limiting suppliers’ intellectual property rights.

Apparently in response to months of criticism by individual companies and a number of supplier trade organizations, GM announced last week that it was rolling back some of the more objectionable provisions.

Specifically, in its Warranty provision, GM is removing the sentence that caused much consternation: “…Seller warrants and guarantees that the goods covered by this Contract will not, at any time (including after expiration or termination of this contract), pose an unreasonable risk to consumer or vehicle safety.” The concern with this provision had been that it unreasonably expanded warranties indefinitely and essentially created a perpetual “no recall” warranty.

GM is also striking in its entirety the Duty to Inform and Notify provision, a provision that appeared for the first time in the new terms and conditions in July. This broad provision included a duty on the supplier to notify GM of its own defective design or deficiencies in specifications.

GM is also revising its Audit Rights provision so that it is more limited in scope. The July version gave GM broad access to suppliers’ income statements, balance sheets, and cash flow statements. The obvious concern was that GM was usurping confidential and proprietary information. The more tailored version limits audit rights “solely for the purpose of auditing Seller’s compliance with the terms if [the] Contract” and brings it more in line with audit rights provisions found in other OEM terms and conditions.

The broad IP rights that were seemingly granted in the July version of the Background Intellectual Property Rights provision, have now been revised to grant these license rights in the event of a supplier being unable or unwilling to deliver its goods or services. The revisions also addresses the concern that GM’s IP license was previously not limited to the goods/services covered by the particular contract.

GM has also narrowed the scope of its protection against what it previously referred to as “Supply Interruptions.” The July version required suppliers to notify GM of “any foreseeable or anticipated event or circumstance” that could interrupt or delay supplier’s performance under the contract. This provision was narrowed to notice of any “labor disruption.”

While these revisions may take some of the sting out of the fact that GM did not seek input from its suppliers or provide any advance notice before issuing its extensive changes it is worth noting that GM still has not removed some of the more onerous provisions in its terms and conditions concerning, for example, termination and competitiveness. Notwithstanding, the changes GM announced last week address many of the primary concerns suppliers had concerning GM’s revamped warranty provisions, and might help to mend some of the ill-will generated by GM in July 2013.