Is General Motors' Warranty Roll-back Risky Business?

General Motors sent out a memo to dealers last week, saying it planned to cut the powertrain warranty coverage. The letter, which has been reported upon in numerous places, says the roll-back reduces visits under its free maintenance program for Chevrolet, Buick and GMC vehicles, starting with 2016 model-year vehicles. Also downgraded is the five-year, 100,000-mile powertrain warranty. It is being cut to five or 60,000 miles. GM will reduce the number of service visits under its two-year, 24,000-mile Chevrolet Complete Care, GMC Pro Grade Protection and Experience Buick Protection maintenance programs from four years to two. 

I'm on thin ice talking about this because I am about as qualified to address the intricacies of warranty, financing and insurance as I am to explain how to do an angioplasty. But, from a consumer's point of view, this is an interesting thing to ponder. For those who don't know or remember, Hyundai, in the late '90s, desperately needed something to convince Americans that its cars weren't the makeshift tin cans they used to be. The automaker put its money where its mouth was with a 10-year, 100,000 mile warranty. That set a high bar, and during the intervening years, as Hyundai vehicles became a greater and greater threat, and the quality differences between brands narrowed, automakers all upped their warranty game. 

General Motors says research shows that free maintenance and warranty aren't high on the purchase consideration list, and that the savings will go into other retail programs "that our consumers have told us they value more than these." I would very much like to learn more about that. But I'm iffy about the purchase-consideration claim. I have to look up the J.D. Power numbers from last year on this, but I cannot be easily convinced that warranty doesn't move the needle. I'm pretty sure J.D. Power's PIN (Power Information Network) data will back me up on this. 

And I certainly don't think a super-generous warranty package is needle-neutral for a company that has been trying to shake off recall news, even if it pertains to older vehicles and doesn't directly speak to the quality of current product. The recalls are, however, still generating news copy. And while a five-year 60,000 powertrain warranty is decent, why roll back a program that serves as proxy for quality and durability, and is a statement by the brand that it is willing to stand by its products at a level nearing the most generous powertrain warranties out there. Hyundai still has bragging rights on that with, its 10year/100,000 mile limited powertrain warranty, not to mention its secondary-owner coverage, which is five-years and 60,000 miles. 

In the best of worlds, I mean the best, a warranty package roll-back will either have no effect at all on purchase consideration, or — who knows — it might even be a dealer talking point, if the dealer is a really good at talking: "Our vehicles are so squared away we just don't need it. People didn't come back after the first maintenance visit." Maybe, statistically, that's the case for General Motors. If so, can a rollback be saving GM that much money? If there has been a decline in the number of consumers who use the program after the first visit, what's the cost in keeping it on the Monroney sticker?

2 comments about "Is General Motors' Warranty Roll-back Risky Business? ".
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  1. Mike Anderson from CSS, March 17, 2015 at 11:19 a.m.

    Some good points here, Mr. Greenberg. Warranties have not been a notable competitive advantage in recent years because they have been so commonplace as to lack distinction (thanks, Hyundai). We may learn that while commonplace warranties are not a motivator, less-than-commonplace coverage could serve as a de-motivator. Time, and consumers, will tell.

    Also worth watching: Whether competitors choose to announce any warranty advantage to consumers... or whether they will follow GM's cost-cutting example.

  2. Karl Greenberg from MediaPost, March 18, 2015 at 1:25 a.m.

    good point. I hate to say it but I think GM had to find savings because of pressure from activist investors whose mouthpiece is wearing the proverbial golden leash.

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