Evolution of the automotive sector evolving safety and liability Financier Worldwide – Financier Worldwide

FW: What key liability considerations do automotive companies need to make when evaluating product safety concerns from inception through to development and commercialisation?

Richter: When evaluating product safety concerns under German law, automotive companies must keep in mind strict liability under the Product Liability Act and fault-based producer liability in civil law, obligations under public law in accordance with the Product Safety Act and the Market Surveillance Regulation (EU) 2019/1020, and criminal liability. Manufacturers are obliged to organise their operations in such a way that, as a matter of principle, only safe products are placed on the market and, wherever a source of danger arises due to faulty manufacturing, to ensure that as far as possible this does not come to fruition. Manufacturers therefore have a duty of care both when the product is placed on the market and after it has been placed on the market. Automotive companies need to consider four categories of possible defects: design defects, manufacturing defects, instructional defects and product observation defects. In this context, the general safety expectations are of enormous importance.

Hoffmann: To meet the general safety expectations, it is essential that automotive companies at least comply with the statutory product requirements and the relevant technical standards. In particular, ISO 26262 should be mentioned here, but original equipment manufacturers (OEMs) regularly demand that their suppliers comply with this standard. However, technical standards like ISO 26262 only represent a minimum standard. Compliance with technical standards is therefore not necessarily sufficient to exclude liability. This applies, for example, if the technical development or scientific findings have gone beyond the standards or if hazards have become apparent during use of the product which have not yet been taken into account in the standards. The manufacturer is liable if the defect was recognisable and avoidable during construction. Hence, we recommend that automotive companies adopt active product safety management that goes beyond compliance with statutory product requirements and technical standards.

FW: To what extent are you seeing original equipment manufacturers (OEMs) requesting that their suppliers designate product safety representatives in order to minimise risks during the development and production process?

Richter: The requirement to appoint a product safety representative (PSR) usually comes from contractual obligations with OEMs. German OEMs began requiring appointment of a PSR throughout the supply chain several years ago. Such requirements often refer to chapter 4.3.2 of the International Automotive Task Force (IATF) 16949, which allows further customer-specific requirements for the quality management system. Since the approach has met with the approval of the German Association of the Automotive Industry (VDA), the VDA recommends the designation of a PSR in its VDA Red Volume Product Integrity, which was published for the first time in November 2018. In the latest volume, published March 2021, the VDA specifies the role as product safety and conformity representative (PSCR). According to the VDA, the aim is to create a communication network both in-house and throughout the automotive supply chain that serves to exchange early warnings and lessons learned.

Hoffmann: With this in mind, more OEMs are requesting that their suppliers designate a PSR. For example, some OEMs stipulate in their purchasing terms and conditions that, in order to ensure product safety and avoid product liability cases regarding goods, the seller must appoint a product safety officer in its company for each production location and designate this individual as the key contact in the business-to-business portal supplier database before the first delivery. Other OEMs continue to leave this to the suppliers. However, there are also suppliers that demand appointment of a PSR from their sub-suppliers. According to the quality requirements of a major German tier 1 supplier, for instance, a PSR must be available at all production sites of tier 2 suppliers that produce for the tier 1 supplier. So, the requirement to appoint a PSR is becoming increasingly significant in the automotive supply chain.

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Evolution of the automotive sector evolving safety and liability Financier Worldwide - Financier Worldwide