Can suppliers handle autonomous-era exposure?


Originally published in Automotive News

By Daron Gifford

Like all new technologies, autonomous cars are under constant scrutiny. Companies that make them are beginning to understand this and learning to accept the risks.

Parts makers, however, have not.

For those that make the parts that go in the autonomous cars, now is the time to prepare — protect your brand, address product liability questions and start thinking about the financial implications of your parts being in autonomous vehicles.

This year’s fatal crash in Arizona involving a pedestrian and a self-driving Uber was believed to have been the first but certainly won’t be the last death attributed to an autonomous car, and the implications for parts makers have yet to be determined.

For instance, while the preliminary investigation determined that Uber had turned off some of the self-driving technology, a sensor manufacturer could still find itself in the spotlight and in legal trouble, similar to what happened to Japan’s Takata Corp. after a number of fatalities were linked to its airbags.

Few, if any, car parts makers are prepared for the kind of negative media onslaught that hit Takata, which ultimately filed for bankruptcy last year. That’s because few small parts suppliers have ever faced the kind of negative attention that comes with headline-making accidents.

Self-driving technology will likely change that.

Considering the inevitability of accidents involving autonomous cars, all parts makers should create crisis management plans to prepare for potential fallout. These plans are a routine part of business at large high-profile corporations elsewhere in the transportation sector, such as auto manufacturers and airlines, but are less common at smaller supplier companies.

Assumed liability

The issue of self-driving cars and safety may be, to some in the industry, surprising because autonomous vehicles are often touted as the solution to the traffic accidents currently caused by the error-prone humans behind the wheel. But safer or not, even autonomous vehicles cannot yet entirely eliminate the risk of injury or death on the road, especially in the complex, real-world environment of other vehicles and pedestrians.

And that fact will dramatically change the relationship between automakers, parts suppliers and the end users who “drive” these vehicles.

By the very nature of its technology, a self-driving car and its parts suppliers will likely take on the liability that in many cases in the past would have been attributed entirely or in part to the driver in the case of an accident.

The risks drivers protect themselves against by purchasing auto insurance will eventually fall to the underlying makers of the vehicle, requiring them to take additional steps to address their own liabilities.

This could be in the form of new corporate insurance policies for automakers and parts suppliers, or even new financial requirements to set aside reserve funds in the event of legal action. Whatever happens, this represents a new world of risk for suppliers.

Get ahead

But there is much opportunity here as well.

As parts makers become increasingly involved with autonomous vehicle testing, they will be better able to perfect their components alongside the automakers that are using them. This more proactive approach to liability is a better use of resources than simply reacting to a media firestorm after disaster strikes and should lead to better system and component designs over time.

Another way for parts makers to get ahead of the curve would be investing in an area that few are exploring currently: data analytics.

As software becomes a larger part of vehicle operation, decisions on everything from technical issues to ethical dilemmas will be based on artificial intelligence, machine learning and advanced algorithms.

For parts makers, this represents an opportunity to finally leverage the power of data to improve their products and develop new functionality.

Like it or not, the autonomous age is changing the game for the entire automotive industry. This is the time to prepare for this change and lay the groundwork for growth.

Daron Gifford is the automotive industry consulting leader at the accounting firm and consultancy Plante Moran in Detroit.