QUALITY AGREEMENT

QUALITY AGREEMENT
Between Seller:

and

MAGNETI MARELLI S.p.A., also on behalf of

its affiliates and subsidiaries

Seller Function Name Date Signature

QA Manager
MM Key Account
Manager

MM Function Name Date Signature

SDE
Commodity
Specialist / Buyer
SQA Commodity
Manager / SQA BL
Manager
Purchasing
Commodity Manager
/ Purchasing
Business Line
Manager
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CONTENT

1 - Introduction

2 - Non conformance costs & Liabilities

3 - Conformity to directives and regulations

4 - Audits

5 - Advanced Product Quality Planning (APQP)

6 - Production Part Approval Process (PPAP)

7 - Process control and Product monitoring / Process capabilities

8 - Failure Rate

9 -Traceability

10 - Failure Analysis Request (FAR) / Correctives Actions Request (CAR)

11 – Process Change Notification / PCN

12 - Archiving periods for relevant documents & records

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ANNEXES

§2 - Non conformance costs & Liabilities

A2.1 - Type of non Quality costs
A2.2 - Warranty responsibilities & costs management

§3 - Conformity to directives and regulations

A3.1 - List of Directives & Regulations
A3.2 - Declaration format & medium (IMDS)

§4 - Audits
A4.1 – Process Audit
A4.2 – One day production

§5 – Advanced Product Quality Planning

A5.1 – APQP tasks
A5.2 – Supplier Feasibility commitment form

§6 – Production Part Approval Process

A6.1 – Specific Buyer technical requests

§8 – Failure Rates
A8.1 – Quality performance indicators
A8.2 – Warranty and duration of warranty period
A8.3 – Guide lines for Controlled Shipping Level 1 – 2 – 3 (CSL)
A8.4 – Supplier Quality Breakthrough

§9 – Traceability
A9.1 – Requirements of traceability
A9.2 – Splits Lots
A9.3 – Limits of marking on the components
A9.4 – Packaging
A9.5 – Backward traceability
A9.6 – Traceability Format
A9.7 – Traceability during components’ development

§10 – Failure Analysis Request / Correctives Actions Request

A10.1 – 8D Standard form
A10.2 – Lead time for Failure Analysis
A10.3 – Samples for actions verification
A10.4 – Lot refusal

§11- Process Change Notification / PCN

A11.1 – Activity flow
A11.2 – PCN Notification
A11.3 – List of Major modification for each family class
A11.4 – Buyer interface for PCN notification & management

§12 – Archiving periods for relevant documents & records

A12.1 – Archiving Period
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Definition
In all text, following definition are used:
- _____ = Seller
- Buyer = Magneti Marelli
Seller and Buyer hereinafter jointly referred to as the Parties

1. Introduction
1.1 This quality agreement (hereinafter the “Quality Agreement”) describes the general quality rules
and commitments that the Seller and the Buyer have to apply for a successful partnership in order to
achieve the goal of zero defect in connection with the supply of Seller’s products (hereinafter the
“Products”). The application of these rules and commitments can be controlled by Buyer at any time.
Seller must apply, and ensure that its sub-suppliers and sub-contractors apply, all the rules as agreed
in this agreement.

1.2 Seller must continuously ensure and demonstrate a full commitment to work on effective plans for
continuous improvement, which is a key point to reach the 0 defect goal.

1.3 The Parties will additionally exchange some technical documents related to the Products, such as
specifications, data sheets, etc (hereinafter the “Specifications”.

1.5 The Products shall be suitable for automotive applications in the worldwide market. To support the
zero defect approach, Supplier needs to know the application environment (such as type of vehicle,
part of vehicle, temperature range, etc).

1.6 It is Buyer policy not to execute functional, visual and / or dimensional verification on in coming
supplied products, but to demand to Seller to work in self-certification and deliver under ‘Direct
Acceptance’ procedure. Even in case Buyer would decide to execute any functional, visual and / or
dimensional verification on in coming products, Seller remains in any case fully responsible for the
quality of the Products.

1.7 The cooperation in automotive business often requires the exchange of confidential information,
documentations and physical parts. Therefore when a Non-Disclosure-Agreement (NDA) is asked by
Buyer, Seller has to sign the submitted NDA.

2. Non Conformance Costs & Liabilities

2.1 In case of quality concern, the Parties will jointly cooperate in order to determine each Party’s
liability and all the related costs to be charged.

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2.2 Type of non quality costs, typical unit cost and automotive rules for calculation of warranty costs,
are described in the attachment “Non Conformance costs & Liabilities”.

2.3 Buyer keeps defective parts until the debit note is closed between Buyer and Seller, unless the
case of a pending legal action or suit between the Parties or unless otherwise agreed upon between
the Parties. After the closure of the debit note , parts are scrapped by Buyer at Seller’s costs unless
otherwise agreed upon between parties.

3. Conformity to directives and regulations

3.1 Seller must ensure to respect and to follow global worldwide and local rules, Directives and
Regulations that the Products and the final application of the Buyer must comply with, also by
providing documentation in the agreed format and medium.

Directives and Regulations, as well as the format and medium to be used, are listed, as a reference
which does not exclude the applicability of not listed Directives / Regulations, in the attachment
“Conformity to Directives and Regulations”.

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4. Audits
Quality System:

4.1 The quality system of the Seller has to be certified to ISO/TS 16949 by an external certified body.
The Seller must provide copy of certifications and each extension or removal. In other cases, a plan to
reach this certification must be provided.

In case of Companies not subjected to ISO/TS 16949, ISO 9001 certification is the minimum accepted
requirement.

Buyer requires Seller to source its products, in turn, from certified sub-Suppliers to at least ISO 9001
standard (to be intended as minimum requirement) and which operate in accordance with Automotive
quality requirements.

Sellers certified ISO 14001 are preferred. A plan to reach this certification must be provided if
certification is not yet reached.

Buyer also suggests Seller to apply rules according to OHSAS 18001.

For Seller that delivers a Software (SW) product or a component / module with SW embedded, Buyer
requires that Seller shows the maturity of its SW development process through a SW assessment
(according to Capability Maturity Model or SPICE standard), realised by an external certified body.
Buyer requires level 2 as minimum maturity level of Seller SW development process.

Process Audits:

Every Process audit is executed according to ANFIA form and guide line (see Attachment to chapter 4:
“Audits”).

In case final Customer is asking for some specific quality requirements, these will be added to the
verification done during Process audit by Buyer.

4.2 Generally, Buyer audits should be done on the following cases:

a
“New Supplier” (initial evaluation of a new potential Seller)
b
“Start up process” (during product development, process industrialisation, PPAP phase )
c
« Steady process » (After SOP - Start Of Production - for regular and periodical monitoring
of production process, in case of problem, in case of PCN).

Buyer informs Seller for the audit minimum 4 weeks in advance, and with a short notice in case of any
problem.

Buyer may ask Seller to perform a self-evaluation according to Buyer reference Guide Line.

A corrective action plan is provided to Buyer for all questions with partially positive or negative
evaluation.
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The audit assessment to Sellers must reach the class “A”.

Only in case Seller is evaluated class “A” or class “B” (with score higher than 80 %), with a corrective
action plan approved by the Buyer, Seller can be used for new business attribution.

4.3 Buyer keeps the right to perform a verification of production capacity.

Buyer could ask Seller to perform a self-evaluation according to the Buyer reference Guide Line.

Reference form (“One Day Production”) and guide line are described in attachment “Audits”.

4.4 Audit type, participants and their functions are announced in time before the Audit.

4.5 The information exchanged during an audit is confidential. An Audit report shall not be shared or
passed to third parties without mutual agreement from all parties involved.

4.6 In agreement with Seller, Buyer has the right to perform an audit at sub-supplier or sub-contractor,
according to cases described in paragraph 4.2. Verification performed by Buyer does not substitute or
replace, in any case, the activities that Seller is in charge to apply. Seller is also responsible to
implement and follow up all the needed corrective action plans.

After the Audit:

4.7 A scoring and Audit report has to be provided. At the end of the audit a common wrap-up
discussion is done with the involved participants, to share and commit the strong and weak points and
the final result. A formal and official audit report is submitted from Buyer within 2 weeks after the end of
audit. The content of the report must be checked by both Parties before official diffusion.

Lead time for definition and diffusion of corrective action plan by Seller is 2 weeks after audit report
diffusion.

Sharing of Audits:

4.8 Buyer can share audit results with Parent Companies, controlled Companies, subsidiaries or Joint
Ventures.

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5. Advanced Product Quality Planning / APQP

5.1 APQP is a key element for new part introduction at the Buyer.
Following procedure applies during Products’ development by the Seller and, in any case, until the
Product is qualified by the Buyer.

Every time Seller wants to introduce a modification (including bug fixing) on a Product under
development, a formal change request must be notified in written form with updated documents
(including, but not limited to: data sheet, drawing, lay out, Facility information, SW release, etc.) to
Buyer R&D and Purchasing Interfaces. The product / process evolution history must be provided from
Seller together with each delivery of samples or prototypes.
Seller must track each change, by P/N modification, if the evolution has an impact on Form Fit and
Function 1 or in reliability.

Every modification proposed by Seller or Buyer shall be traced in an official document named “Supplier
Feasibility Commitment” (see form in attachment).

5.2 The Seller shall cooperate with Buyer upon request, to work on the System FMEA of the
application.

5.3 The Buyer demands an APQP for all new Products’ requests. The APQP is confidential information
and may be reviewed by Buyer on regular basis.

5.4 Requested APQP details have to be defined prior to sourcing with the Seller. The Parties shall
consider the necessary qualification path respecting the application requirements.

5.5 Starting from the APQP phase, Seller shall develop and apply all tasks, tests, firewall and
screening, in order to move towards 0 defect goal.
Starting point or minimum requirement are proposed by Buyer in relevant or dedicated documents, as
defined in attachment to chapter 6.

5.6 The Seller shall deliver the Products in suitable shipping packaging (and according to Buyer
requirements, when specified), in order to prevent damages and quality impairments.
In case the Products arrive at Buyer’s Facility with damaged packaging, the shipping is refused and
sent back to Seller.

1
Form is the shape, size, dimension, mass, weight and other visual parameters
which uniquely characterize an item. Fit is the ability of an item to physically interface
or interconnect with or become an integral part of another item. Finally, Function is the
action or actions that an item is designed to perform
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6. Production Part Approval Process / PPAP

6.1 The basis for PPAP is ISO/TS 16949 and PPAP manual AIAG (Automotive International Action
Group); the default PPAP level is “level 3” (as defined in AIAG), unless for different request given from
final Customer. The specific Buyer technical requests are described in the related attachment.

6.2 For Design and Process FMEA, the AIAG methodology is the reference standard, unless for
specific final Customer requirements.

6.3 According with ISO TS 16949, Seller Test equipment used for self-qualification test must be
certified according to all applicable Directives (for ex., Directives requirement for EMC test labs). In
alternative, Seller may use external accredited Laboratories for tests execution.

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7. Process Control and Product Monitoring / Process Capabilities

7.1 Seller must ensure that the process capabilities will satisfy automotive quality requirements to meet
the Zero Defect target. Seller must implement, on 100 % of mass production and in addition to standard
verifications, all checks as specified in the Buyer Norms.

For important characteristics, as they are defined by Buyer in the related documentation (such as
Products’ specifications, Product’s drawing, etc), or identified by Seller, Seller must measure Cpk and
ensure it within the agreed target, during qualification phase and during the whole mass production.
Otherwise, Seller must measure and control the critical characteristics on 100 % of delivered parts.
Finally, fool proof solutions have also to be adopted.

7.2 To monitor the quality level, specific methods have to be applied. Example: Statistical Process
Control - SPC, Statistical Bin Analysis - SBA, Statistical Bin Limit - SBL, Part Average Testing - PAT,
etc. have to be used during manufacturing at Seller’s facility.

Reference methodology for definition and implementation of SPC control is the AIAG standard.
Eventual additional Buyer technical requests are described in specific document diffused case by
case.

7.3 Seller applies Measurement System Analysis (MSA) according to AIAG reference standard, to
determine how much the variation within the measurement process contributes to overall process
variability, unless for specific final Customer requirements.

7.4 According with ISO TS 16949, during the production ramp up, Seller must ensure the quality of
parts with a re-enforced and enhanced control plan, in order to reduce the risk until quality performance
becomes stable and conform to Buyer goals. The re-enforced control plan must be provided to Buyer,
before the start of production, for approval.
Buyer may ask Seller for the presence of a technical support at the Buyer production Plant, in order to
support any technical or quality issue.

7.5 Seller must provide internal data about process control, on demand.

7.6 Any evolution of the control plan must be notified from Seller to Buyer and formally approved by the
Buyer.

7.7 Seller must plan and perform periodical re-qualification to guarantee the conformity to Buyer’s
specifications of the Products over the time.

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8. Failure Rates
8.1 The common goal of Buyer and Seller is to reach Zero Defect. PPM-rates in sense of upper limits
are intermediate milestones to reach the Zero Defect target.

8.2 Defects are measured in absolute or relative numbers (pieces or ppm and / or number of incident).
Seller must manage the Buyer rejects as well as the internal rejects through a structured data
collection. Data coming from internal rejects have to be used both to prevent any quality degradation at
Buyer side and to continuously work for quality improvement.

8.3 Buyer may consider a lot defective when two or more faulty Products with the same defect are
found at Buyer In Coming or on Buyer line.

8.4 For the failure rate evaluation all returned Products shall be used. Returned defects not caused by
the Seller are taken out of the Seller statistics.
8.5 Quality target are defined by Buyer every year and communicated to Seller for formal acceptance.
Performances are continuously monitored according to defined target.

8.6 Buyer diffuses the quality result in following cases:

1. upon Seller demand
2. on regular basis, according to specific agreement between Buyer and Seller
3. when the situation is degrading or out of target

In relation to case 3, based on the gravity of the situation, Buyer defines the type of intervention to be
made by the Seller, like: Seller action plan, meeting, Special Focus meeting, Supplier Quality
Breakthrough program, review of the business share, etc..

8.7 During Mass Production, the condition of ‘Direct Acceptance’ can be temporary suspended by
Buyer, because of specific problem or needs. In these cases, as soon as Seller receives notification of
‘Direct Acceptance’ suspension, Seller starts to deliver Products with the conformity declaration inside
the box, and identifies by an external label with “conformity declaration inside”.
This status is maintained until Buyer formally notifies the closing of temporary status.

8.8 A situation of crisis occurs in case of:

1. Buyer or Car Manufacturer production line stop or yield strongly impacted
2. service campaign or recall campaign
3. repetitive quality problem at Buyer or Car Manufacturer
4. repetitive Buyer complaint

In case of crisis, Buyer may require Seller to put in place a specific additional control, focused on the
critical problem that have not been filtered by Seller production process: Control Shipping Level 1,
Control Shipping Level 2 or Control Shipping Level 3 (CSL1, CSL2, CSL3).
Seller acts, on Buyer request, at Buyer Facility with technical people, in order to perform a sorting, or a
return of stocks, or a preliminary joint analysis.

The explanation of quality indicators used by Buyer, the Guide Line for CSL and the explanation of
structured improvement programs Supplier Quality Breakthrough, are described in the Attachment
“Failure Rates”.

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9. Traceability
The aim of traceability is to minimize the impact and consequences of quality concerns. Seller and
Buyer maintain an appropriate traceability data system.

Forward Trace: required information to identify already delivered suspect material, in order to minimize
the quantity, which needs to be caught as early as possible.
Backward Trace: required information to identify suspect source material and origin at Seller.

Detailed request are described in attachment “Traceability”.

In order to minimize the risks when Products have to be isolated or scrapped because of a quality
problem, Seller is responsible to apply and respect FIFO (First In First Out) and to plan the Products’
production in coherence with Buyer demand.

For electronic Products, target shelf life2 of series Products delivered to Buyer Facilities is 24 months,
starting from assembly date at Seller Facility. Seller shall clearly indicate assembly date on labels.
For all other family classes, the shelf life must be defined and agreed, case by case, between Seller
and Buyer.

For Products with expiration date3 (e.g. chemical components, led, etc.) it is required to have minimum 6
months of residual validity after the delivery to Buyer Facility.
Seller must correctly define the storage condition (Temperature, Humidity) if the parts are not
immediately shipped to Buyer.

The maximum time period to provide the traceability information shall be 1 working day from Buyer’s
request for Products which are not older than 2 years. Older information shall be available within 2
working days from Buyer’s request.
Any concerned traceability file shall be provided to Buyer on demand.

2
Shelf life is the allowable time for storage of a component inside its original packing under specified
ambient conditions, after which the component is no more usable
3
Expiry date is the date after which there is not the guarantee that the component maintains its
characteristics
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10. Failure Analysis Request (FAR) / Corrective Action Request

(CAR)
10.1 Defectives Products detected from Buyer or received from Carmaker are returned to the Seller for
analysis and root cause understanding. Buyer provides detailed information’s to Seller about all failure
mode, analysis results already performed. The Seller analyses all the returned parts and provides root
cause analysis for each one. Different returned quantities can be mutually agreed between Buyer and
Seller on specific cases (for example, for repetitive problem in the same lot).

In case Seller analysis shows result NTF (No Trouble Found) Seller is required to apply deeper tests
and investigations to finally confirm the NTF result.
In case Seller analysis shows that the Product has been probably damaged by Buyer or by final
Customer, Seller is required to provide maximum support and co-operation in joint analysis for final root
cause investigation and understanding.

10.2 The Buyer takes care to promptly return such Products or an evidence of the defect according to
the FAR defined process (location, condition, failure description, interfaces, etc). Seller and Buyer shall
cooperate in minimizing the shipping time of such Products until the final receipt by the Seller. For the
optimization of the processes and for the avoidance of additional damages which increase the difficulty
or make impossible to perform an analysis, the following can be agreed by the Parties:

1. to perform the analysis at Buyer Facility or directly at Car Maker Facility

2. different return conditions (e.g. on PCB or de-soldered components, on sub-assemblies, etc.).

10.3 Standard analysis flow shall meet the FAR cycle time of the Buyer. The respect of defined lead
time is a key point in order to minimise the impact on Buyer and Car Maker line. In case the analysis
needs additional efforts and time (verification, preparation, physical analysis, etc.) the Seller informs
immediately and provides regular updates and estimated completion date. In case the defective
Product has been detected on Buyer line, Seller is responsible to define containment actions (e.g.
sorting, lot replacing, etc.) in 1 day from problem notification. The risk analysis is also required in order
to quantify the impact at Buyer Facility, final Customer facility and on the field.

10.4 The standard analysis answer required is based on 8D report (see Attachment to chapter 10
“Failure Analysis Request (FAR) / Corrective Action Request (CAR)”) to define the Product problem,
analysis flow, root cause, correctives and preventives actions. All these key milestones are tracked
and periodically reviewed until the complete 8D is closed and agreed by both Parties. Specific goals
may be determined between Buyer and Seller.

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11. Process Change Notifications / PCN

Following procedure applies only to Products already qualified by the Buyer.

The Seller shall provide the Buyer with the Products using the manufacturing processes, equipment
and location as released for series production by the Buyer. In case of any Product/process change,
the Buyer needs to be notified in written way for prior Buyer’s approval. The notification has to be sent
to the official Buyer Interface (see Attachment to chapter 11 “Process Change Notifications / PCN”).

A written Buyer approval is mandatory prior to delivery of changed Products . Seller must track each
modification and the first 3 deliveries to each Buyer site, after PCN approval, must be identified in the
delivery documentation and packaging.

11.1 A PCN request must be communicated in written way, in advance to the intended date of
implementation in order to take into account the qualification effort on Buyer side and final Customer
approval; typical timing required are the following:
a. preliminary feedback, from Buyer to Seller, within 30 working days from receipt of written
notification; Buyer’s feedback consists in the requests of samples and documentation, or in
the refusal of the proposed PCN
b. typical timing for Buyer validation is 26 weeks, starting from availability of all Seller requested
Initial Samples and documentation at Buyer Facilities
c. typical timing for the start of final Customer’s validation can vary between 26 and 52 weeks,
starting from availability of all Seller requested Initial Samples and documentation at Buyer
Facilities.
d. typical timing for final Customer validation is 36 weeks from the start of final Customer’s
validation.

Above timing refer to a PCN approved at the first trial.

The detailed PCN activity flow, the related timing, as well as the detailed information requested, are
described in the attachment “Product Change Notification“ A11.1.

A missing reply from Buyer to points a - b – c – d cannot be considered as an acceptance of the

change.

11.2 Buyer evaluation and approval is needed for each major modification (see list in the attachment
“Product Process Change Notification”).
All PCN types, not listed in the attachment, are reputed minor modifications; for minor modifications,
Seller is requested to send, for information, written notification to Buyer, together with proof of no
impact on Form Fit and Function4 or on reliability; then Seller can start in production without needs for
Buyer approval.
Buyer reserves the right to ask Seller to re-classify a notified PCN from minor to major.

4
Form is the shape, size, dimension, mass, weight and other visual parameters
which uniquely characterize an item. Fit is the ability of an item to physically interface
or interconnect with or become an integral part of another item. Finally, Function is the
action or actions that an item is designed to perform
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In case Buyer discovers the implementation of a major PCN without Buyer approval, Buyer shall
consider the possibility to put Seller in New Business Hold condition.

11.3 Seller covers the validation costs sustained by Buyer, for any PCN, upon evidence provided by
Buyer.

12. Archiving periods for relevant document and records

12.1 The attachment “Archiving periods for relevant documents and records” defines the list of
documents for which archiving period is required and the relevant time limit. Eventual differences
about the time limit requested by the final Customer are communicated case by case from Buyer to
Seller.

The destruction of quality records after defined archiving period has to be ruled.

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Attachment to chapter 2
Non Conformance costs & Liabilities
A2.1 Type of non quality costs
The following list provides the typical non conformance quality costs; different non quality costs, not
listed here, may be submitted and commonly agreed with Seller, when needed (for example, all costs
supported to recover the production line to the normal situation):

Type of cost Unit reference cost Comments

Penalty for F.A.R. 200 euro / F.A.R. This is the amount that covers F.A.R.
management management activities:
Or - Time for preliminary analysis
- Time for preparation of technical
100 euro / F.A.R. (in documentation to explain the
case involved Buyer problem
Plant is located in - Shipment preparation
Asia or in South of - FAR notification
America) - Supplier monitoring
- Analysis of 8D report
- Evaluation of effectiveness of
corrective actions
Labour cost for Sorting 33 euro / h each
Operator The value gives an indicative cost. The
Labour cost for rework 33 euro / h each exact value is communicated, on needs,
at Buyer Line Operator from each Buyer site, in accordance with
Labour cost to manage 33 euro / h each the hourly cost valid for the Buyer Plant
suspected lots and Operator Country
parts in the Warehouse
Penalty for Warehouse 25 Euro / sqm each Daily cost of Warehouse space
occupancy day occupancy by suspected or rejected lots
waiting for Seller intervention.
The value gives an indicative cost. The
exact value is communicated, on needs,
from each Buyer site, in accordance with
the hourly cost valid for the Buyer Plant
Country
Additional screenings N/A It can vary according to the type of
(time & tools) at Buyer screening, as the price depends from the
Facility before to tools that could be needed. The specific
deliver to final price is defined by the involved Buyer
Customer Plant
Scrap of not re-usable N/A Cost can vary according to the type of
parts Buyer product.
Buyer Production Line N/A Cost can vary according to the type of
stop Buyer line, products and Facility.
Special transportation N/A It can vary for each transportation
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Type of cost Unit reference cost Comments

to final Customer
Parts replacement (at 0 N/A Cost charged by final Customer to
Km) manage replacement of faulty parts
detected on his Line.
Cost can vary according to Customer and
Buyer product
Final Customer N/A Cost can vary according to the type of
Production Line stop final Customer line, products and Facility.
Warranty costs N/A See chapter A2.2
Service campaign and N/A Activity carried out, from final Customer /
Recall campaign Buyer or Third acknowledged Party, to
recover a critical quality concern on all
parts potentially impacted:
- on vehicle before to deliver to
Dealer: Service campaign
- on field: recall campaign
Cost can vary according to Customer and
Buyer product
Special packaging to N/A It can vary for each transportation. The
send back the parts specific price is defined by the involved
Buyer Plant
Shipment cost for parts Seller is normally responsible to organise the shipment back of
analysis parts to analyse and to take in charge the related shipment costs.
In all other cases, Buyer has the right to charge Seller for
shipment costs, which may change according to type of product
and transportation conditions.
Emergency audit or a. 1500 euro Audit or visit to Seller Facility due to a
visit to Seller Facility b. 2500 euro critical quality concern / process
degradation
a. Seller Facility in the same continent of
Auditor Facility (max 2 people)
b. Seller Facility in a different continent of
Auditor Facility (max 2 people)
Additional analysis for N/A Technical analysis done internally by the
root cause Buyer or trough external Laboratories.
investigation Cost can vary according to the type of
analysis
Problem management 40 Euro / h each Engineer cost to support the problem
Engineer solving analysis.
The value gives an indicative cost. The
exact value is communicated, on needs,
from each Buyer site, in accordance with
the hourly cost valid for the Buyer Plant
Country

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A2.2 Warranty responsibilities & costs management

Calculation of warranty responsibilities

Each Car Maker has Dealer networks that manage intervention on field.
Due to extension of world market, Car Maker ships back for analysis to Buyer only parts collected in a
restricted area that he defined as significant .

Parts received from field are systematically analyzed by Buyer technical experts in order to identify the
failure responsibility.
The percentage of returned parts recognized under Buyer responsibility is defined as the Buyer
Technical Factor. Technical Factor is then applied by the Car Maker to the whole amount of
interventions in the world market.

If defectiveness is due to supplied components, Buyer starts up the failure analysis process with Seller.

Whenever the Seller recognizes the responsibility of the claimed parts, Buyer calculates the related
Seller Technical Factor. Seller Technical Factor is then applied to the whole amount of interventions in
the world market and represents the Seller performance on warranty.

Technical Factor calculation may be done within a period that is calculated as follows =
= Duration of warranty + 6 months due to potential delay introduced by the global Automotive supply
chain

In special cases, Car Maker may decide to send back 100 % of substituted parts (so called Field
Management activities).

Calculation of warranty costs under Seller responsibility

For each intervention in warranty, the unit intervention cost is constituted by:
- cost of the spare part (means Buyer product) replaced
- labor cost for substitution at Dealer
- additional costs (logistic costs for parts shipping to Dealer, handling fee, etc.)
The total warranty costs for a fixed period are calculated as the unit intervention cost multiplied by the
total number of interventions in the world market.

The total warranty cost under Seller responsibility is equal to the total Buyer warranty cost multiplied by
the Seller Technical Factor. Seller refunds the Buyer according to this calculation.

Buyer provides to Seller all relevant information’s to allow the charge back calculation of warranty
costs.

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Attachment to chapter 3
Conformity to Directives and Regulations
A3.1 List of Directives and Regulations
Seller must ensure compliance to following Directive and Regulations, including any subsequent update
and Decision:

• European Directive 2000/53/EC “End of Life Vehicles” about the content of heavy metals
(Cadmium (Cd), Chromium VI (Cr VI), Mercury (Hg), Lead (Pb))
• Commission Decision 2008/689/CE “Amending Annex II of Directive 2000/53/EC”
• European Directive 2003/11/EC “Amending for the 24th time Council Directive 76/769/EEC
relating to restrictions on the marketing and use of certain dangerous substances and
preparations”
• The supplied part has been verified according to GADSL reference list (“Global Automotive
Declarable Substance List”) [*]
• Information on IMDS declaration, whenever the supplied part contains declarable substances
included on the GADSL reference list
• Commission Decision 2003/138/EC “Establishing component and material coding standards for
vehicles pursuant to Directive 2000/53/EC”

[*] The GADSL reference list is shown at following Internet address:

http://www.Gadsl.org

• REACH Regulation EC/1907/2006 “Registration, Evaluation, Authorisation and restriction of

Chemical substances”
o Seller must provide needed documents to ensure and demonstrate the compliance with
every REACH implementation step and related deadline
o For each supplied component, Seller must identify the related REACH category
(substance, preparation, article) and send the documentation as defined by REACH
o If Seller Legal Entity is located outside from European Community and Seller sells
substances, preparations or articles to Buyer Facility located in Europe, Seller must
nominate a unique European Representative for registration.

Automotive Industry Guide Line on REACH is available at:

http://www.acea.be/reach

• European Directive 1999/5/CE of the “European Parliament and of the Council of 9 March 1999,
on radio equipment and telecommunications terminal equipment and the mutual recognition of
their conformity”
• Commission Directive 2004/104/EC adapting to technical progress Council Directive
72/245/EEC relating to the radio interference (electromagnetic compatibility) of vehicles and
amending Directive 70/156/EEC on the approximation of the laws of the member states relating
to the type – approval of motor vehicles and their trailers

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In addition to this list, Seller is required to be continuously aware about any new or additional applicable
Directive or Regulation (ROHS evolution, other Directives, etc.).

A3.2 Declaration format and medium (electronic file)

The IMDS declaration, with requirements as defined above, is given by Seller by publishing on IMDS
data base:

http://www.mdsystem.com

by referring to Buyer component code.

This declaration must be sent to relate MM Division, by using the appropriate MM ID Number that is
communicated by Buyer.

In addition, Seller must fill the standard Buyer IMDS form (“Conformity Declaration Form”).

MM Conformity
Declaration Form

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Attachment to chapter 4
AUDITS

A4.1 Process audit – Form and Guide Line (electronic files)

ANFIA check list rel ANFIA user manual

03

A4.2 One Day Production – Form and Guide Line (electronic file)

1DP form and guide

line

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Attachment to chapter 5
Advanced Product Quality Planning
A5.1 APQP
APQP is the planning of the component development tasks, which must be accomplished by Buyer and
Seller to achieve the quality goals.

APQP must be shared by the Buyer SQA and the Seller and be periodically monitored by Buyer SQA.

APQP consists in a list of tasks. According to component criticises, Buyer decides what tasks must be
applied and monitored on the involved component.

The list of potential tasks is the following one:

1. Technical documentation
2. Feasibility study
3. Capitalisation of experience
4. Design & Component validation program
5. Sub-suppliers PPAP schedule
6. Design Validation
7. Component validation
8. Design FMEA
9. Component and process key characteristics
10. Initial capability studies
11. package
12. Lot traceability plan
13. Process flow chart
14. Process FMEA
15. Control plan
16. safe launch plan
17. Gage, tooling and equipment
18. PPAP submission
19. 1 Day Production
20. Production Process Audit
21. Start Of Production

Seller must formally commit to APQP demand and apply it according to defined schedule.
It is Seller responsibility to participate in a proactive way to the deployment of the APQP tasks.

A5.2 Supplier Feasibility Commitment Form

Feasibility
commitment

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Attachment to chapter 6
Production Part Approval Process
A6.1 Specific Buyer Technical Requests
Specific Buyer requests are defined inside the Buyer Norm issued for the different component families.

Seller must formally accept the Buyer Norm as it is a part of the contract between Buyer and Seller.

Hereafter the list of Buyer Norms; this list is not exhaustive. Each Buyer Plant communicates to Seller
the specific reference Norms:

Electronic components

MM AL AEC Q100/Q101/Q200
CP 599 “Quality Requirements for electronic products”
SQA Manual 001
MM PWT AEC Q100/Q101/Q200
MM SE SE 130 000 0 G last revision

Led – relays, buzzer & speaker SE 130 000 0 G last revision

PCBA IPC A 610 level 3 “Acceptability of electronic assembly”

Printed Circuit Board

MM PWT 000 59 396.A1 “pcb general requirements and

specifications”
MM SE SE 130 000 3 G last revision

Displays (LCD, LCD COG, TFT) SE 130 000 2 G last revision

Stepper motor PM20 SE 130 000 1 G last revision

Cosmetic parts SE 010 000 0 G last revision

AL Quality Procedure No. 577 last revision

Parts for Cofap MMCofap Supplier’s Manual

Seller must comply with these Norms and with all eventual prescriptions as defined in the Buyer
specification or drawing.

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Attachment to chapter 8
Failure Rates
A8.1 Quality performance indicators

Quality performance indicators that Buyer may use to monitor Seller, are defined as follows:

- In Coming number of incident: number of times material with quality problem is

returned to Seller
- In Coming percentage of rejected parts: total quantity of parts returned to Seller, being
parts of a defective lot (therefore the quantity may include also parts not defective), in
relation to total number of supplied parts
- MM Manufacturing (or MM End Of Line) number of incident: number of incident issued
for Buyer production line rejects
- MM Manufacturing (or MM End Of Line) ppm: number of rejected parts from Buyer
production process, in relation to total number of supplied parts
- 0 Km number of incident: number of incident for final Customer line rejects
- 0 Km ppm: number of rejected parts from Customer production line, in relation to total
number of supplied parts
- Warranty number of issues: number of incident for field rejects returned during the
year
- Warranty number of physical returned parts: actual number of field rejects returned to
Seller during the year. These parts come from Dealer chosen as reference from final
Customer, to monitor warranty performance, and represent a subset of the entire
market.

The definition of incident may differ across the product classes.

Please note that the total Seller warranty performance has to be calculated by doing a projection of the
parts returned and under Seller responsibility, over the total number of substituted parts on the entire
market (see details in attachment to chapter 2).

A8.2 Warranty and Duration of warranty period

Warranty duration is defined into GPA.

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A8.3 Guide Lines for Controlled Shipping Level 1 – 2 – 3

(CSL 1 – 2 – 3)
Controlled Shipping Levels are articulated in three different levels: CSL1, CSL2, CSL3. These levels
differentiate according to the gravity and repetitions of non-conformities detected in the supplies.
According to that, Buyer may decide to assign directly CSL2 or CSL3 without passing through CSL1.

According to what stated in this document, the occurrences of CSL2/CSL3 require the Seller to appoint
a qualified third-party Certified Body (Service Provider or Service Company), that must be validated by
the Buyer.

CSL’s have to be extended to all the parts that are produced using the same process that originated the
non-conformity.
For the whole duration of the CSL, self-certification status is lost; therefore, Seller must send, together
with each delivered lot, the CQC (Conformity Quality Certification) that contains the result of all
controlled characteristics.

Until CSL is applied, Seller must carry out supplementary activities on 100% of produced parts, by
implementing additional and dedicated testing or checks, with trained operators. In case 100%
checks cannot be carried out (e.g.: destructive tests, …), a reinforced frequency for these activities
must be agreed with Buyer.
Seller shall identify the checked parts by use of appropriate identification marks, on the component and
on the external packaging, unless for different agreement with Buyer.

Buyer reserves the right to perform, in any moment, control on checked parts.

Additional measures are foreseen in case of CSL2 and CSL3.

In case of CSL2, Seller must appoint a qualified third-party Certified Body that defines and carries out,
in a dedicated area, the required activity.

CSL3 applies, in addition to CSL2, in case Seller demonstrates its inadequacy to problem solving and
defect eradication.
In case of CSL3, Seller must appoint a qualified third-party Certified Body that, besides all the activities
required in a CSL2, provides the necessary support to the Seller, overall the entire process, for root
cause and corrective action definition and defect eradication.

Buyer is regularly informed about the progress of CSL2 / CSL3, by the third-party Certified Body.

Buyer assigns the level of CSL by taking in consideration following criteria:

• The evidence of one or more product key properties out of tolerance involves the immediate
opening of a CSL1 in order to protect the Buyer Factory.
• The detection, at the Buyer Factory, of non-conformities on a characteristic already in CSL1
status generates the opening of a CSL2 for the concerned properties.
• In case Seller is not able to solve the causes that generated the non-conformities, a CSL3 is
applied.

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Buyer officially notifies to Seller the intention to open a CSL and specifies following information’s:
- level of CSL to apply
- involved component or family
- reason for CSL application

In case of CLS2 or CSL3, Seller must notify, in 24 h from Buyer demand, the identified Third-Party
Certified Body, for Buyer approval.

In 5 days from Buyer demand, Seller and Buyer must agree the modalities for CSL execution (CSL
location, acceptability criteria, eventual adapted logistic or production flow chart, Seller interface).

Seller must inform its Quality System Certifying Body of the application of the CSL2/CSL3, within 5
working days from the reception of Buyer notification. This information must be sent in copy also to the
Buyer, for reference.

CSL has a minimum duration of 5 weeks, unless for different requirement from Buyer.

Condition for CSL closure are:

a. 0 defect, at CSL control and at Buyer Facility, for all CSL duration
b. positive result of process audit at Seller Facility, to verify the implementation and effectiveness
of corrective action
c. Buyer approval to close the CSL

The non respect of one of these conditions impacts on the duration of the CSL, or in the change of CSL
applied level.

In case of negative result, despite of all CSL activities, Buyer shall consider the possibility to put Seller
in New Business Hold condition.

A8.4 Supplier Quality Breakthrough

Buyer Supplier Quality Breakthrough program (SQB) is a structured program designed to re-focus the
Seller by addressing detailed root cause analysis, removing all the potential and systematic causes that
have lead to deterioration in delivered quality to Buyer plants and to final Customers and also to
guarantee the experience capitalization on the new project under development.

SQB program is regular data driven process that requires immediate, significant, measurable and
sustainable improvements in quality.

The SQB program consists in the constant monitoring of Key Performance Indicators defined by Buyer.
The Seller presents on monthly basis, during specific meetings, its performance for each KPI identified.
The program is also quarterly presented to the Buyer Executive Committee during Buyer internal
Management meetings.

The exit criteria from SQB program are defined and communicated as soon as an SQB program is
launched.
In case of negative result, despite of all SQB activities, Buyer shall consider the possibility to put Seller
in New Business Hold condition.
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Attachment to chapter 9
Traceability
A9.1 Requirements for traceability
Traceability requires an appropriate choice of following items:
• Customer Part Number: identifies Buyer part number and/or Buyer specification number
• Supplier Part Number: identifies Seller ordering code
• Reel / Tube Lot Number: identifies single packaging unit
• Date Code: Year & Week of Assembly (typical format: yyww), days can be added (yymmdd)
• Trace Code: individual code which allows a trace of wafer, assembly and test lot and must be
linked to the date code

Traceability needs per family class

Class Customer P/N Supplier P/N Date Code Trace Code
IC packaged Packaging Packaging + Packaging + Seller Data base (**)
Component Component
Passive Packaging Packaging Packaging Seller Data base (**)
led Packaging Packaging Packaging + Seller Data base (**)
component (*)
Plastic Packaging + Packaging Packaging + Seller Data base (**)
moulding component (*) Component
Mechanic part Packaging + Packaging Packaging + Seller Data base (**)
component (*) component (*)
Electro- Packaging Packaging + Packaging + Seller Data base (**)
mechanical Component Component
Printed Circuit Packaging + Packaging Packaging + Seller Data base (**)
Board Component Component
LCD Packaging Packaging + Packaging + Seller Data base (**)
Component Component
LCD chip on Packaging Packaging + Packaging + Seller Data base (**)
glass Component Component
TFT Packaging + Packaging + Packaging + Seller Data base (**)
Component Component Component
Sub-contractor Packaging + Packaging + Packaging + Seller Data base (**)
(PCBA) Component component (*) Component
Radio Packaging + Packaging + Packaging + Seller Data base (**)
Component Component (*) Component
CD Driver Packaging + Packaging + Packaging + Seller Data base (**)
Component Component Component
GSM Packaging + Packaging + Packaging + Seller Data base (**)
Component Component Component
Hard Disk Packaging + Packaging + Packaging + Seller Data base (**)
Drive Component Component Component
Telematic Packaging + Packaging Packaging + Seller Data base (**)
front-face Component Component
Stepper motor Packaging + Packaging + Packaging + Seller Data base (**)
Component Component Component

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Traceability needs per family class

Serigraphy and Packaging + Packaging + Packaging + Seller Data base (**)
esthetical Component (*) Component (*) component (*)
finishing
Raw material Packaging Packaging Packaging Seller Data base (**)
Chemical Packaging packaging Packaging Seller Data base (**)

(*) In case traceability at component cannot be fulfilled, Seller must ask for dispensation agreement
(**) Seller Data Base must traces every Seller process, raw materials and sub-process.

Notes
- Mechanic parts includes pressure die casting, screws, silver box, LCD box, clips, etc.
- Electromechanical includes connectors, lamps, switches, relays, SIM card, buzzer, etc.
- Sub-contractors concerns the electronic assembly process
- Esthetical finishing includes stamping operations (on needles, logos, etc.), painting process (of
buttons, etc.), flockage, glasses, ring, etc.

A9.2 Split lots

If production requires to split lots for processing, those new sub-lots will be traced as separate lots and
not be mixed again. One lot per packing unit is required with one exception: in order to facilitate
deliveries of full packing units, it is allowed to use the subsequent lot to complete the packing units (e.g.
reel). A maximum of 2 trace codes per packing unit (for example: reel, tray, tube, etc.) is required.

A9.3 Limits for marking on the component

For components without sufficient marking possibilities on the component itself (bare die, small
package size, moulding parts, etc.) the data on the unit packing label are applicable.

A9.4 Packing
Traceability information is visible on the label of the packing (Box, Drypack…).

A9.5 Backward traceability

Backward traceability requires as minimum information the part number and additional
information like trace code, lot number or date code and lot dimension.

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A9.6 Traceability format

Format for traceability information (bar code, alpha numeric code, etc.) are defined in agreement
between Seller and Buyer.

A9.7 Traceability during component development

For samples and parts delivered during product development, before Start Of Production, Seller is
required to provide also following additional traceability information:
- detail if the production process used to realise the parts is or not the final one
- detail if the tools used to realise the parts are or not the definitive ones
- detail the use allowed for parts delivered (e.g. prototypes for functional test, initial samples, first
delivery for mass production, etc.)
- detail the reference Customer specification or drawing (when applicable)
- under Buyer request, Seller shall provide preliminary samples with unique identification number per
each unit

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Attachment to chapter 10
Failure Analysis Request and Corrective Action Report

A10.1 8D standard form (electronic file)

The document in attachment is the Buyer 8D standard form:
- in case Seller has not its own standard, Buyer asks Seller to use the Buyer form
- in case Seller has its own standard, Seller is not forced to use the Buyer form, if the Seller form
is clear and suitable with Buyer needs

MM standard 8D
report form

A10.2 Lead Time for failure analysis

Lead Time (in working days) for detected problems and faulty parts analysis is defined according to
following 4 steps:
- containment action (1 day, starting from FAR notification): define and implement containment
action
- preliminary analysis (3 days, starting from parts or technical information receipt): preliminary
root cause analysis
- final analysis (10 days, starting from parts or technical information receipt): final root cause
identification and finalisation of corrective action plan
- problem fixing (40 days max, starting from parts or technical information receipt),
implementation and validation of corrective actions

A10.3 samples for actions verification

In order to validate corrective actions, Buyer has the right to ask for some samples.

A10.4 Lot refusal

In case of lot refusal, Seller is requested to apply sorting or lot replacement within 24 hours from Buyer
Notification. In most critical cases, where there is the risk for production stop, Buyer may decide to
immediately implement some sorting activities on parts, which related costs will be charged to Seller.

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Attachment to chapter 11
Process Change Notifications / PCN

A11.1 Activity flow

Send PCN and preliminary data

by the Seller

typically Preliminary impact analysis by

30 working days the Buyer

Request for samples and

documentation

Samples and documentation

availability

Seller documentation Seller line Audit Typically

evaluation (when applicable)
26 to 52
Typically
weeks
26 weeks Final Customer start
of validation
Buyer internal tests
Final Customer test, Typically
evaluation and
approval 36 weeks
OK ?
Y N

Approved Refused

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A11.2 PCN Notification form (electronic file)

PCN notification form

A11.3 List of major modification for each class

- Changes listed in Annex A of Jedec Standard JESD46

Active Components - Test site transfer
- Embedded firmware
- Assembly site
- Materials
- Process Flow
- Drawing /Datasheet /Specifications change
Passive Components - Plating of external pins
Electromechanical - Test flow
Passive Displays - Appearance, colour
- Marking
- New process equipment
- Packing / Shipping / Labeling /Storage Conditions
- Carrier dimensions
- Change of Plant
- Change on Material (Base Material, Solder Resist,
Undercoat/Overcoat, Copper, Finishing, Conductive Ink)
Printed Circuit Boards
- Change on Process (Equipment, Parameter, Method)
- Change on Logistic Conditions
- Use of Subcontractor
- Manufacturing site
- Materials
- Technology
- Process Flow
Plastic - Drawing /Datasheet /Specifications change
Mechanic - Finishing
Connectors - Test flow
- Appearance, colour
- Retooling
- Packing / Shipping / Labeling/ Storage Conditions
- Subcontractor
Modules - Changes listed in section "Plastic/ Mechanic/ Connectors"
Sub Assemblies - SW change

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A11.4 Buyer interface for PCN notification and management

(minor / major)

Electronic components
PCN Manager
(active and passive)
Non-electronic components
Local Buyer + local R&D (specific people to be defined case by
shipped to only one MM
case according to supplied component and local organisation)
plant
Non-electronic components
shipped to 2 or more MM PCN Manager
plants

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Attachment to chapter 12
Archiving period for quality relevant documents and records
A12.1 Archiving period
Following table defines the archiving period per each type of document.
In case Seller delivers components with safety requirement, the Time Limit is 15 years, starting from
the End of Life of Buyer production, for all documents.

Type of document Time limit

MANAGEMENT
Reports to Top Management 3 years
Management review reports 3 years
DESIGN & VALIDATION
Component specifications and drawings 15 years from End of Life of Buyer production
Design Validation reports 15 years from End of Life of Buyer production
Cosmetic approval reports 5 years from End of Life of Buyer production
PPAP documents 3 years from End of Life of Buyer production
Buyer specifications 15 years from End of Life of Buyer production
Additional requirement specific for SW product or components with SW embedded
SW source code 15 years from End of Life of Buyer production
Configuration Management reports 15 years from End of Life of Buyer production
PROCESS
Testing specifications 15 years from End of Life of Buyer production
Tool inspection reports 3 years
Buyer approval to Start of Production 3 years
Capability evaluation reports 3 years from End of Life of Buyer production
Special characteristics records 15 years from End of Life of Buyer production
Test and inspection records 15 years from End of Life of Buyer production
Rework records 3 years
Traceability of component and process 3 years from End of Life of Buyer production
(for calibrated tools) Measurement and Test Laboratory 3 years
Certifications
Tool calibration records Document application plus 1 year from tool
obsolescence
Maintenance records 3 years
COMPONENT
Component & process modifications 15 years from End of Life of Buyer production
Component description and configuration 3 years from End of Life of Buyer production
QUALITY
Quality targets Document application
Quality and Conformity Certifications 3 years from End of Life of Buyer production
Internal quality audit reports and corrective action plans 3 years
Buyer audit reports and corrective action plans 3 years
Records on quality performances 3 years
8D reports 3 years
Risk analysis 3 years
Waiver application 3 years
Quality action plans 3 years
PURCHASING & SUPPLIER QUALITY (Tier-2 Suppliers)
Purchasing contracts and attachments All the period of business relationship
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Type of document Time limit

between Seller and Tier-2 Supplier including
warranty period
Quality Contract and attachments All the period of business relationship
between Seller and Tier-2 Supplier including
warranty period
Quality target Quality targets’ term of validity
Audit plans 3 years
Audit reports and corrective action plans 3 years
Failure Analysis Request and related 8D reports / action 3 years
plans

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