GM Will Lengthen Warranties - Rumourmill
09-06-06, 06:30 AM
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GM Will Lengthen Warranties - Rumourmill
GM Will Lengthen Warranties, Reduce Cash Incentives, People Say
By Jeff Green
Sept. 6 (Bloomberg) -- General Motors Corp., the world's largest automaker, will offer longer warranties on its vehicles in a bid to boost confidence in GM products, two people familiar with the plan said.
The extended warranties mark the next phase of an eight- month-old initiative to rely less on cash incentives to generate sales, said the people, who asked not to be named because details won't be announced until later today. GM spokeswoman Mary Henige had no comment.
``You can see gleanings of a cohesive strategy,'' said Jeremy Anwyl, president of Santa Monica, California-based Edmunds.com, which runs an auto-pricing Web site. ``They went through this repricing back in January, and they've kind of toughed it out this year without having any major incentives.''
Chief Executive Officer Rick Wagoner is trying to win back buyers after Toyota Motor Corp. and Hyundai Motor Corp. grabbed market share last year, contributing to GM's $10.6 billion loss. Smaller rebates and the popularity of models such as the Chevrolet Tahoe sport-utility vehicle helped GM post record revenue in the first half.
Most GM warranties run for three years or 36,000 miles, the industry standard. Detroit-based GM extended warranties to four years or 50,000 miles on all Buick models in 2005 to more closely match those at luxury brands such as Toyota's Lexus.
The people wouldn't give specifics on the length of the new warranties, the cost to GM or other details before the automaker's announcement.
Hints on the Web
Vice Chairman Bob Lutz hinted at a change in warranty policy in a Sept. 1 posting on GM's Fastlane Web log, an online diary that he and other GM executives have kept since January 2005.
``We absolutely need the consumer to have as much confidence in us as we have in ourselves,'' Lutz wrote. ``And we have some ideas about that to accomplish that; we'll have something more, something bigger, to say about it in the coming weeks.''
Four GM models topped their segments for durability compared with eight for Toyota in a study last month by J.D. Power & Associates of 3-year-old cars and trucks. Among GM brands, Buick and Cadillac had fewer problems than the industry, while Pontiac, GMC, Chevrolet and Hummer had more, the study found.
``GM has improved its quality, but not necessarily any faster than other players,'' said Chance Parker, executive director of product research at J.D. Power in Westlake Village, California. ``They have some models and makes that do well every year, but then that is tempered by some products that do terribly.''
Hyundai's Experience
Hyundai started offering a 10-year, 100,000-mile warranty on 1999 models after quality problems earlier in the decade. U.S. sales rose 82 percent to 164,190 from a year earlier, and Hyundai's 2005 sales reached 455,012.
``The 10-year warranty was a big part of Hyundai's turnaround,'' said Edmunds.com's Anwyl. ``That went a long way in reassuring people that not only could you save money on a decent car and you didn't have to worry about it breaking down. That was a powerful success.''
DaimlerChrysler AG's Chrysler, Mitsubishi Motors Corp., Suzuki Motor Corp. and Kia Motors Corp. also have used extended warranties as sales tools.
``Quality is hugely important,'' Lutz wrote in the Sept. 1 posting on the GM Web log. ``We have been doing a great job of raising our quality levels in the past five years, and it's high time people knew about it.''
Wagoner has said U.S. sales will fall this year as the automaker tries to wean consumers from incentives and cuts lower- profit sales to rental-car companies. GM sales dropped 12.2 percent through August while the company continued unveiling more than 20 new models.
GM in August posted its first gain in U.S. market share since January.
By Jeff Green
Sept. 6 (Bloomberg) -- General Motors Corp., the world's largest automaker, will offer longer warranties on its vehicles in a bid to boost confidence in GM products, two people familiar with the plan said.
The extended warranties mark the next phase of an eight- month-old initiative to rely less on cash incentives to generate sales, said the people, who asked not to be named because details won't be announced until later today. GM spokeswoman Mary Henige had no comment.
``You can see gleanings of a cohesive strategy,'' said Jeremy Anwyl, president of Santa Monica, California-based Edmunds.com, which runs an auto-pricing Web site. ``They went through this repricing back in January, and they've kind of toughed it out this year without having any major incentives.''
Chief Executive Officer Rick Wagoner is trying to win back buyers after Toyota Motor Corp. and Hyundai Motor Corp. grabbed market share last year, contributing to GM's $10.6 billion loss. Smaller rebates and the popularity of models such as the Chevrolet Tahoe sport-utility vehicle helped GM post record revenue in the first half.
Most GM warranties run for three years or 36,000 miles, the industry standard. Detroit-based GM extended warranties to four years or 50,000 miles on all Buick models in 2005 to more closely match those at luxury brands such as Toyota's Lexus.
The people wouldn't give specifics on the length of the new warranties, the cost to GM or other details before the automaker's announcement.
Hints on the Web
Vice Chairman Bob Lutz hinted at a change in warranty policy in a Sept. 1 posting on GM's Fastlane Web log, an online diary that he and other GM executives have kept since January 2005.
``We absolutely need the consumer to have as much confidence in us as we have in ourselves,'' Lutz wrote. ``And we have some ideas about that to accomplish that; we'll have something more, something bigger, to say about it in the coming weeks.''
Four GM models topped their segments for durability compared with eight for Toyota in a study last month by J.D. Power & Associates of 3-year-old cars and trucks. Among GM brands, Buick and Cadillac had fewer problems than the industry, while Pontiac, GMC, Chevrolet and Hummer had more, the study found.
``GM has improved its quality, but not necessarily any faster than other players,'' said Chance Parker, executive director of product research at J.D. Power in Westlake Village, California. ``They have some models and makes that do well every year, but then that is tempered by some products that do terribly.''
Hyundai's Experience
Hyundai started offering a 10-year, 100,000-mile warranty on 1999 models after quality problems earlier in the decade. U.S. sales rose 82 percent to 164,190 from a year earlier, and Hyundai's 2005 sales reached 455,012.
``The 10-year warranty was a big part of Hyundai's turnaround,'' said Edmunds.com's Anwyl. ``That went a long way in reassuring people that not only could you save money on a decent car and you didn't have to worry about it breaking down. That was a powerful success.''
DaimlerChrysler AG's Chrysler, Mitsubishi Motors Corp., Suzuki Motor Corp. and Kia Motors Corp. also have used extended warranties as sales tools.
``Quality is hugely important,'' Lutz wrote in the Sept. 1 posting on the GM Web log. ``We have been doing a great job of raising our quality levels in the past five years, and it's high time people knew about it.''
Wagoner has said U.S. sales will fall this year as the automaker tries to wean consumers from incentives and cuts lower- profit sales to rental-car companies. GM sales dropped 12.2 percent through August while the company continued unveiling more than 20 new models.
GM in August posted its first gain in U.S. market share since January.
09-06-06, 11:42 AM
#4
Lexus Fanatic
Hyundai started offering a 10-year, 100,000-mile warranty on 1999 models after quality problems earlier in the decade. U.S. sales rose 82 percent to 164,190 from a year earlier, and Hyundai's 2005 sales reached 455,012.
``The 10-year warranty was a big part of Hyundai's turnaround,'' said Edmunds.com's Anwyl. ``That went a long way in reassuring people that not only could you save money on a decent car and you didn't have to worry about it breaking down. That was a powerful success.''
``The 10-year warranty was a big part of Hyundai's turnaround,'' said Edmunds.com's Anwyl. ``That went a long way in reassuring people that not only could you save money on a decent car and you didn't have to worry about it breaking down. That was a powerful success.''
Yes, I know I have talked a lot in CL about recent Hyundais and Kias and how much they have improved...to the point where they now exceed many Japanese nameplates.....but that was not based on a warranty. That was based on what I actually saw and experienced driving and reviewing new Hyundais and Kia and shopping with other people for new ones.
Same with GM. They can put anything they want to down on paper...including a warranty twice as long as Hyundai's, if they want......but the proof is in the pudding, not the paper.
Of course, I'm not criticizing a move like that.......the longer the warranty, the better off the customer is, regardless of how well or how shoddily the car is built. But my point is that quality and reputation is not just something you advertise on paper...it has to be earned.
Last edited by mmarshall; 09-06-06 at 11:45 AM.
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