Remanufacturing:

1
Remanufacturing

• Perspective of a Motor Vehicle Manufacturer

Jeanne Broad Director, Trade Policy General
Motors Corporation
2
Today Objectives

• Discuss the importance of remanufacturing to
  motor vehicle producers
• Distinguish remanufactured parts from used parts
• Applications of remanufactured parts
• Benefits of remanufactured parts
• Logistical issues
• Consider potential opportunities for Andean
  suppliers
• Recommended policies on treatment of
  remanufactured parts

3
Defining Remanufactured Parts

• Remanufactured parts must be distinguished from
  used or reconditioned parts
• Used or reconditioned parts are parts that are
  removed from a vehicle and put to use in a
  different vehicle, either as is or with the
  possibility of some cleaning and testing
• In contrast, remanufactured parts go through
  extensive processing and testing to meet the same
  quality standards as original equipment parts

4
Defining Remanufactured Parts

• Specifically, in remanufacturing
• Reclaimed cores are completely disassembled,
  with all worn or broken parts discarded
• Every component is completely cleaned and
  inspected, with the replacement of any component
  not meeting industry standards
• Renewal and repair processing may include
  welding, grinding, polishing, tapping,
  burnishing, sleeving, honing, re-soldering,
  rewinding, surface machining and plating
• Re-assembly uses a combination of new parts and
  recovered components tested to original equipment
  specifications to ensure proper fit and
  functionality

5
Defining Remanufactured Parts

• Approved remanufactured parts must meet the same
  quality and warranty specifications as new parts
• E.g., GMs warranty for a new Goodwrench engine
  or transmission is the same as a reman Goodwrench
  engine (36 months/ 100,000 miles)

6
Uses of Remanufactured Parts

• GM, Ford and DaimlerChrysler use remanufactured
  parts exclusively for warranty and aftermarket
  service applications
• Reman product does not compete against OEM parts!

7
Uses of Remanufactured Parts

• Manufactuers highest priority is in reman parts
  used in the vehicle applications required to
  operate the vehicle
• E.g., Engines, transmissions, drive train,
  starter, alternator, steering systems, brakes,
  suspension
• Especially important that manufacturers control
  the standards of these critical parts
• Other non-critical reman applications include
• Window regulators/motors, radios, air
  conditioning systems

8
Benefits of Remanufactured Parts

• Cost
• Remanufactured parts are less expensive during
  the new vehicle warranty period and, in some
  cases, less expensive than a major dealer repair
• Distribution and warehousing costs drive up the
  costs of aftermarket parts generally, may
  encourage the use of counterfeit parts or parts
  not meeting OEM specifications
• Reman parts offer a cost-effective alternative
  that promotes the use of quality controlled parts

9
Benefits of Remanufactured Parts

• Customer Satisfaction/Quality
• High quality reman units lower the cost of
  ownership for customers, improving the ownership
  experience
• Remaning promotes availability of service parts
  after the part itself goes out of production
• Remaning a unit allows manufacturers to improve
  the product even after it goes out of production

10
Benefits of Remanufactured Parts

• Environmental Benefits
• End use of vehicle parts and vehicle parts is a
  growing issue in many parts of the world
• The European Union and Japan now require
  manufacturers to reclaim end of life vehicles
• Remanufacturing allows the reclamation and
  reprocessing of used parts that would otherwise
  go to landfills
• Remanufacturing also captures 60 of the energy
  used in creating the original product
• Annual energy savings equivalent to 10.7 million
  barrels of crude oil

11
Opportunities for Andean Suppliers

• Reman operations could provide a profit
  opportunity for Andean suppliers
• Cost effective option for supply of service parts
  for Andean-produced vehicles
• Competitive strategy to fight counterfeit imports
• Reman operations provide local jobs
• Core recovery
• Processing
• Reman parts could promote sale of Andean-made
  products by improving customer ownership
  experience

12
Recommended Policies on Treatment of Reman Parts

• Remanufactured goods should receive the same duty
  preferences as new like goods, whether or not the
  goods were remanufactured by the original
  equipment manufacturer
• Permissible to require that
• Remanufactured goods be identified as such and
• Meet any standards applicable to new like goods

13
Recommended Policies on Treatment of Reman Parts

• Remanufactured goods means a good that
• Is entirely or partially comprised of recovered
  goods
• Has a similar life expectancy and meets the same
  performance standards as a new good and
• Enjoys a factory warranty similar to such a new
  good
• Support the right of governments to regulate the
  import of used vehicles parts

14
Recommended Policies on Treatment of Reman Parts

• To qualify remanufactured goods as originating
  goods, add cores and recovered goods to the
  list of goods wholly obtained in the chapter on
  rules of origin
• Cores means used goods, regardless or origin,
  suitable for use solely or principally in the
  production of recovered or remanufactured goods
  within the territory of one of the parties
• Recovered goods means materials in the form of
  individual parts that result from
• The complete or partial disassembly of used goods
  into individual parts and
• The cleaning, inspecting, or testing, and as
  necessary for improvement to sound working
  condition, one or more of the following processes
  (specify)