DEARBORN, MI — From brake-shoe linings made from shredded grass to fully assembled counterfeit engines, imitation parts are becoming a serious issue for auto makers, their suppliers and their dealers.
Counterfeit parts have become so pervasive, the automotive industry has trouble determining the full impact.
That's what Tom Strohm, general director-marketing for General Motors Corp.'s Service and Parts Operations tells members of the Motor & Equipment Manufacturers Assn. (MEMA) gathered here to address the issue.
Criminal organizations and sometimes even “legitimate” companies manufacture and package imitation parts passed off as genuine.
The parts often are produced in foreign countries and shipped to the U.S. and other markets where unscrupulous distributors sell them to independent repair shops and stores at a much lower price.
“We really don't know how big this problem is,” says Strohm.
Analysts estimate counterfeit automotive parts cost the industry at least $12 billion a year worldwide in lost sales, $3 billion in the U.S. alone.
That doesn't include the damage caused to the brand name or goodwill a company has built up. Counterfeit parts in many cases are defective and certainly not covered by warranty.
In North America, GM typically doesn't have many problems with its dealers purchasing counterfeit parts, Jan Stanton, GM's senior investigator-global security and economic development and enterprise services, tells Ward's.
“Our dealers here tend to purchase from GM-authorized suppliers,” she says. “In the cases where they have purchased bad parts, they have done so unknowingly.”
Dealers, though, bear the brunt of poor customer satisfaction and lost part sales caused by the imitation parts.
The Federal Trade Commission, in 1995, estimated counterfeit parts cost the U.S. 210,000 automotive manufacturing jobs.
The problem presents not only an industry-wide economic challenge but also a safety hazard for consumers who end up using defective products. In one example cited, a family of seven in Nigeria was killed when their counterfeit brakes failed.
There are indications that counterfeit operations help fund terrorist organizations, Strohm says.
GM spends a lot of time educating dealers and other companies that purchase and sell its parts how to discern between what's genuine and what's fake.
A significantly lower price is one sign of a counterfeit product. Other giveaways are poor labeling and packaging that often have misspellings or other variations.
But counterfeiters are becoming increasingly savvy, says Strohm. The products are priced just below genuine parts, making them less noticeable. Also, many counterfeiters now have sophisticated packaging and labeling operations.
In some cases, the imitation parts are remarkably like the original. Jason Bonin, vice president-business development and lighting technology for Hella North America Inc. recounts how one company copied some of Hella's products.
“They came to us with the product and proposed to do a joint venture based on their ability to have a reduced infrastructure,” he says.
But dealers and retailers should evaluate the quality of the parts being purchased. Often, there are variations in size, color, shape or texture that could indicate a part is fake. There also may be installation problems with counterfeit parts.
Auto makers and suppliers are learning to be vigilant in protecting their property. Both GM and Ford Motor Co. have teams of investigators that do nothing but hunt down counterfeit operations.
GM has shut down more than 400 operations worldwide since 1984. Federal Mogul, a parts supplier, recently established a counterfeit parts fighting team.
Ford Parts Brand Protection Team, along with local authorities, recently raided an Eastern European company that was manufacturing bogus Ford parts.