US: no sales impact is expected from GM’s decision to reduce warranties image

Last week the largest US automaker and third biggest in the world announced it would give up its former warranty strategy for Chevrolet and GMC vehicles sold on the internal market.

The Chevrolet and GMC brands will cease to offer a five-year/100, 000 miles powertrain warranty, instead replaced with one that still offers a five-year period, but with mileage reduced to 60,000. Many dealers say the current warranty offer, in play since 2007, fell off the customer radar and was just a marketing gimmick for the company’s best-selling volume brands in the US. Some dealers said they tried – without much success – to use it as a selling point against the better-viewed Asian and European brands (most of them offer the same 60,000-mile warranty). Analysts say that even if it was very low on the customer radar, having a better powertrain remained a useful feature. Today, the vast majority of GM clients believe the company offers models with better quality and reliability than it did eight years ago, but those who remain uncertain could have been persuaded by the larger coverage.

While GM claimed that any cost savings from the warranty reduction – coupled with the reduction of some offers of free maintenance – would be “immaterial” and if present, the money would be reinvested in new features and technologies. Nevertheless, the company’s warranty claims and recalls related costs soared last year after steadily dropping between 2010 and 2013. For the dealers meanwhile, having a lower factory warranty represents another source of revenue – the customers might still want a reassuring warranty and at an additional cost extending packages will be offered directly through the retail network.

Via Automotive News