History repeats: Chrysler ups the warranty and gets suckered again
Chrysler dealers wanted the company to provide a better warranty, and the company has responded.
It is offering a lifetime warranty on the powertrain of all Chrysler vehicles. The warranty applies only to the original purchaser and requires an free-of-charge inspection every five years at a dealer.
The winner is:
The new “lifetime” warranty will be supported by an extensive ad campaign. The campaign will be somewhat different for each Chyrsler brand, but “lifetime” will be a key word in all of the campaigns. The warranty is not transferable. If the vehicle is sold, the warranty reverts to the 3 year, 36,000 mile warrant previously offered on Chrysler vehicles.
Extensive warranties have been one of the techniques automakers have used in the past to offset reputations for poor quality.
Previously, the magic number has been 100,000 miles, the warranty Hyundai offered on its vehicles after quality problems put its reputation in the doghouse. Other automakers have expanded their coverage to include longer “bumper to bumper” coverage.
But increasing warranty coverage has a checkered history, especially at Chrysler.
In the 1960’s, faced again with declining sales and a reputation for shoddy construction, Chrysler was the first to offer a “5 year, 50,000 mile” warranty. Other automakers did not match that warranty and Chrysler took a bath on it financially, without a significant bump in sales.
It turned out to be a disaster because the cars were still built poorly. For that reason, sales didn’t go up. But costs to the company went through the roof because they were covering work that previously would have been the responsibility of the poor unfortunate sap that had bought the car. The company eventually abandoned the warranty, and went back to matching that of its competitors.
According to published reports, the new Chrysler warranty is a response by the company to demands of its dealers, who also wanted the company to funnel more money into local advertising. Chrysler, it is said, is trying to mend relations with its dealers, after stuffing their lots full of 2006 models that no one would buy, but upon which the dealers had to pay interest to the banks financing their floor plans.
This is not a good sign.
Thirty years ago, most of the business in a dealer’s shop was paid for by the customer, for cars required frequent maintenance.
But that’s not the case today.
Today, much of the shop income comes from warranty work, paid for by the manufacturer.
So, it’s no wonder Chrysler dealers want a better warranty.
It means more money in their pocket.
And more money not in Chrysler’s pocket.
Round one to the dealers.