new car warranties - Hawaii Legislative Reference Bureau

new car warranties - Hawaii Legislative Reference Bureau

NEW CAR
WARRANTIES
RICHARD F. KAHLE, JR.
Assistant Researcher
Report No. 1, 1972
i
Price $1.00
UNIVERSIV OF HAWAII
State Capitol
Honolulu, Hawaii 96813
FOREWORD
T h i s s t u d y of new c a r w a r r a n t i e s h a s been made i n r e s p o n s e
t o House R e s o l u t i o n 2 0 , which was adopted d u r i n g t h e Regular
S e s s i o n o f 1970.
The R e s o l u t i o n e x p r e s s e d concern w i t h t h e w a r r a n t y s e r v i c i n g
t h a t consumers w e r e r e c e i v i n g on t h e i r c a r s and t h e c o n d i t i o n o f
t h e cars d e l i v e r e d . The r e p o r t a t t e m p t s t o p i n p o i n t t h e r e a s o n s
f o r p o o r l y c o n d i t i o n e d c a r s and i n a d e q u a t e s e r v i c e and s u g g e s t s
p o s s i b l e s o l u t i o n s t o t h e problem.
To a g r e a t e x t e n t , t h i s r e p o r t c o u l d n o t have been completed
w i t h o u t t h e c o o p e r a t i o n and a s s i s t a n c e o f t h e new c a r d e a l e r s ;
M r . James Remedios, I n f o r m a t i o n s Systems, C i t y and County of
HonoLulu; and Miss J a n i c e LeDoux, Survey Research, U n i v e r s i t y
o f Hawaii.
I t i s hoped t h a t t h i s r e p o r t w i l l a i d t h e l e g i s l a t u r e
i n s o l v i n g some o f t h e problems o f new c a r w a r r a n t i e s .
Henry N. Kitamura
Director
This study of new car warranties shows that throughout the
nation, over a seven year period, 34.4 per cent of domestic car
buyers were dissatisfied with their cars upon delivery. For 1969
cars in Hawaii, that figure was higher at 45.5 per cent. A smaller
percentage of foreign car buyers are dissatisfied with their cars
with the national figure for 1970 being 20 per cent. (No comparable
figures are available for 1969.) The Hawaii rate for 1969 cars is
23.3 per cent. Although there are no national figures for dissatisfaction with the car as finally received after the correction
of predelivery defects, in Hawaii such dissatisfaction averaged
24.9 per cent for the domestic car buyers and 10 per cent for the
foreign car buyers.
In the area of warranty servicing, throughout the nation during
the period 1963 to 1970, 25 per cent of those persons asking for
warranty repairs were dissatisfied with such repairs. Nationally,
there are no separate figures for domestic and foreign cars. In
Hawaii, 23.8 per cent of domestic car owners and 17.5 per cent of
foreign car owners, or an average of 20.7 per cent, were dissatisfied
with the warranty repairs made on their 1969 cars.
The apparent reasons for such consumer dissatisfaction are set
forth in the report and possible solutions for relief of the consumer
are suggested.
iii
TABLE OF COXTEXTS
Page
.......................
. . . . . . . . . . . . . . . . . . . .
FOREWORD
SUMMARY
. INTRODUCTION . . . . . . . . . . . . . . . . . . . . .
P a r t I . H i s t o r y of W a r r a n t i e s . . . . . . . . . . .
I
............
.............
Selling Point . . . . . . .
Domestic Manufacturers
Foreign Manufacturers
P a r t I1
I1
. Warranties
.....................
P a r t I . Manufacturer and Consumer . . . . . . . . .
P a r t I1 . Manufacturer and D e a l e r R e l a t i o n s h i p s . . .
Predelivery Servicing . . . . . . . . . . . . .
Warranty Reimbursement . . . . . . . . . . . .
M a n u f a c t u r e r ' s Requirements Concerning
S e r v i c e Space . . . . . . . . . . . . . . .
M a n u f a c t u r e r ' s Aid t o Dealers . . . . . . . . .
. THE
WARRANTY
.
111 WARRANTY EXPERIENCE
Part
. WARRANTY
Part
.NATIONWIDE
.
I1 . D e a l e r Experience . .
Predelivery Servicing . .
Warranty Reimbursement .
Part I
IV
as a
.
Consumer Experience
..
I . Consumer Experience .
Predelivery Servicing . .
Warranty S e r v i c i n g . . .
Warranty Understanding .
EXPERIENCE
.STATE
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. . . . . . . .
...
. .
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. . .
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ii
iii
1
1
1
4
5
7
7
8
9
9
10
10
12
12
14
14
15
18
18
20
23
26
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. .. .. .. .. .. .. ..... .. .. .. .. .. .. ..
................
.
.
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Predelivery Servicing
Warranty Reimbursement. Policies. and
Procedures
a
Labor
Parts
b
c
Reimbursement Process Time
d
Replacement of Car
Warranty as a Sales Item
e
...
.
.
V
.
.
. LEGISLATIVE ATTEMPTS TO SOLVE WARRANTY PROBLEM .
Part I . State Attempts . . . . . . . . . . . . . .
.............
...........
............
................
Part IS . Federal Attempts . . . . . . . . . . .
leli- Fry Servicing
crant Reimbursement
.rrant Requirements
-scellaneous
rt
.
Conclusions
28
29
29
29
30
30
30
31
31
31
32
33
34
34
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38
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39
40
.ttisfaction
~ o n s r Dissatisfaction
APPENDICES
A
.
1971 Pontiac Pre-Delivery Service and Adjustment
Checksheet
....................
B . Consumers Union Statistics . . . . . . . . . . . . . .
C . Questionnaire
....................
D . Statistics Derived from Questionnaire . . . . . . . .
46
47
50
55
CHAPTER I
INTRODCCTION
The f o l l o w i n g r e p o r t on new c a r w a r r a n t i e s i s s u b m i t t e d i n
r e s p o n s e t o House R e s o l u t i o n 20, p a s s e d d u r i n g t h e 1970 l e g i s l a t i v e
s e s s i o n . House R e s o l u t i o n 20 r e q u e s t e d t h e L e g i s l a t i v e R e f e r e n c e
B u r e a u t o c o n d u c t a comprehensive s t u d y on new c a r w a r r a n t i e s t h a t
a r e a v a i l a b l e t o t h e r e s i d e n t s o f Hawaii. The s t u d y i n c l u d e s a n
a n a l y s i s o f t h e i s s u e s i n v o l v e d and recommendations f o r l e g i s l a t i o n
t h a t w i l l e n a b l e a u t o m o b i l e owners i n Hawaii t o a v a i l themselves
o f m e a n i n g f u l p r o t e c t i o n under t h e i r w a r r a n t i e s .
During t h e Regular S e s s i o n o f 1971, t h e Bureau s u b m i t t e d a
p r o g r e s s r e p o r t on t h e s t u d y t o t h e l e g i s l a t u r e . T h i s r e p o r t
c o n c l u d e s o u r s t u d y o f new c a r w a r r a n t i e s .
Part I. History of Warranties
D o m s t i c Manufacturers
F o r t h i r t y y e a r s p r i o r t o the 1 9 6 1 model c a r year1 d o m e s t i c
m a n u f a c t u r e r s (Ford, G e n e r a l Motors, C h r y s l e r , and American Motors)
o f f e r e d a s i m p l e , s h o r t - t e r m w a r r a n t y on a l l new c a r s . The w a r r a n t y
on new c a r s i n c l u d e d g u a r a n t e e s a g a i n s t d e f e c t s i n m a t e r i a l and
workmanship f o r 90 d a y s o r 4,000 m i l e s , whichever o c c u r r e d f i r s t .
The
w a r r a n t y c o v e r e d a l l i t e m s i n t h e c a r , e x c e p t t i r e s which were
g u a r a n t e e d by t h e t i r e m a n ~ f a c t u r e r . ~During t h e p a s t t e n y e a r s ,
w a r r a n t y t e r m s and c o v e r a g e have been s u b j e c t t o numerous changes.
I n 1960, t h e f o u r d o m e s t i c m a n u f a c t u r e r s announced t h a t t h e
w a r r a n t y on 1 9 6 1 cars would be e x t e n d e d t o 12 months o r 12,000 m i l e s ,
w h i c h e v e r c a m f i r s t . The t e r m s , c o v e r a g e , and e x c l u s i o n s o f t h e
f o u r m a n u f a c t u r e r s ' w a r r a n t i e s were i d e n t i c a l a s a p p l i e d t o most
cars3 and became known a s t h e " b a s i c warranty".
The b a s i c w a r r a n t y
remained unchanged f o r t h e 1961 and 1962 cars and i s s t i l l i n u s e
today.
This b a s i c warranty covers a l l i t e m s i n the c a r , s u b j e c t to
t h e f o l l o w i n g e x c l u s i o n s : p a r t s and l a b o r c o n s i d e r e d t o b e p a r t o f
norma* maintenance o r p a r t s which need r e p l a c i n g o n l y b e c a u s e o f
wear.
The b a s i c w a r r a n t y d o e s n o t a p p l y t o v e h i c l e s s u b j e c t t o m i s u s e ,
n e g l i g e n c e , a l t e r a t i o n , a c c i d e n t , o r a l t e r a t i o n o f t h e odometer. 5
NEW CAR WARRANTIES
T i r e s a r e n o t c o v e r e d by t h e b a s i c w a r r a n t y , b u t by a s e p a r a t e t i r e
manufacturer's warranty. 6
I n 1962 C h r y s l e r proclaimed t h e "power t r a i n " w a r r a n t y which
w a s o f f e r e d i n a d d i t i o n t o t h e b a s i c w a r r a n t y . The power t r a i n of
a l l 1963 C h r y s l e r c a r s and t r u c k s was g u a r a n t e e d f o r 5 y e a r s o r
50,000 m i l e s , whichever came f i r s t . The power t r a i n w a r r a n t y
covered i t e m s s u c h a s t h e e n g i n e b l o c k , head and i n t e r n a l e n g i n e
p a r t s , w a t e r pump, t r a n s m i s s i o n , d r i v e s h a f t u n i v e r s a l j o i n t s , r e a r
a x l e , d i f f e r e n t i a l , and r e a r wheel b e a r i n g s . '
The power t r a i n
w a r r a n t y was n o t o f f e r e d on 1963 c a r s by Ford, General Motors, and
American Motors.
These companies, i n s t e a d , e x t e n d e d t h e i r b a s i c
w a r r a n t y t o 2 4 months o r 24,000 m i l e s , whichever came f i r s t . Between
1963 and 1 9 6 6 , w a r r a n t i e s remained e s s e n t i a l l y t h e same f o r a l l
domestic manufacturers.8
I n 1 9 6 6 Ford, General Motors, and American Motors a l l followed
C h r y s l e r ' s example and o f f e r e d a 5 y e a r s o r 50,000 m i l e s w a r r a n t y
on t h e power t r a i n of 1967 c a r s . Ford and General Motors went
e v e n f u r t h e r t h a n t h e 1963 C h r y s l e r power t r a i n w a r r a n t y and
e x t e n d e d t h e i r power t r a i n w a r r a n t y t o s t e e r i n g and s u s p e n s i o n
components. C h r y s l e r , i n 1966, f o l l o w e d Ford and General Motors by
expanding i t s power t r a i n w a r r a n t y t o s t e e r i n g and s u s p e n s i o n components
and a l s o e x t e n d e d i t s b a s i c w a r r a n t y t o 2 4 months o r 24,000 m i l e s ,
whichever came f i r s t . 9
U n t i l 1968, b o t h t h e b a s i c w a r r a n t y and t h e power t r a i n warranty
o f f e r e d by d o m e s t i c m a n u f a c t u r e r s were a v a i l a b l e t o t h e o r i g i n a l
owner o f t h e c a r . I n a d d i t i o n s u b s e q u e n t owners of t h e c a r r e c e i v e d
t h e b e n e f i t s o f b o t h w a r r a n t i e s , s o l o n g a s t h e w a r r a n t y had n o t
e x p i r e d due t o l a p s e o f t i m e o r mileage.
N o t i f i c a t i o n o f change i n
ownership was n o t r e q u i r e d , n o r was any f e e charged f o r t r a n s f e r
of t h e w a r r a n t y t o t h e s u b s e q u e n t owner.
I n 1 9 6 7 , d o m e s t i c m a n u f a c t u r e r s began t o r e d u c e t h e w a r r a n t y
p r o t e c t i o n t o o t h e r t h a n t h e o r i g i n a l owner. While r e t a i n i n g t h e
same terms and c o v e r a g e , C h r y s l e r ailowed i t s b a s i c w a r r a n t y t o be
t r a n s f e r r e d t o second owners o n l y and announced t h a t t h e power
t r a i n w a r r a n t y on t h e 1968 c a r s would n o t be t r a n s f e r a b l e . S u b s e q u e n t l y ,
t h i s announcement was changed t o a l l o w t n e p u r c h a s e of t h e unexpired
p o r t i o n o f t h e power t r a i n w a r r a n t y f o r $25 by t h e second owner.
Ford allowed a i l s u b s e q u e n t owners t o p u r c h a s e t h e unused p o r t i o n of
t l e b a s i c w a r r a n t y f o r $15, b u t r e s t r i c t e d p u r c h a s e o f t h e power
t r a i n w a r r a n t y t o second owners f o r a f e e o f $25. General Motors
allowed a f u l i t r a n s f e r o f b o t h t h e b a s i c and power t r a i n w a r r a n t y
d u r i n g t h e p e r i o d of t h e b a s i c w a r r a n t y w i t h f e e s of $2 and $25
r e s p e c t i v e l y . A f t e r t h e b a s i c w a r r a n t y had e x p i r e d , General Motors
r e s t r i c t e d t h e p u r c h a s e o f t h e u n e x p i r e d power t r a i n w a r r a n t y t o
t h e second owner f o r a f e e o f $25. Americm Motors allowed a?
NEW CAR WARRANTIES
From 1961 t o 1968, a l l f o u r d o m e s t i c m a n u f a c t u r e r s , i n v a r y i n g
For
example, i n 1966, a l l m a n u f a c t u r e r s used language t o t h e e f f e c t
t h a t each new v e h i c l e o r p a r t t h e r e o f was g u a r a n t e e d t o be f r e e
from d e f e c t s i n m a t e r i a l o r workmanship.17
References t o t h e c a r
o r i t s p a r t s were dropped by Ford i n 1969 and t h e w a r r a n t y was
changed t o r e a d t h a t d e f e c t s would be r e p a i r e d o r r e p l a c e d . 1 8 In
t h e 1970 w a r r a n t i e s , General Motors, C h r y s l e r , and American Motors
adopted language s i m i l a r t o Ford.
P r e s e n t l y a l l d o m e s t i c manuf a c t u r e r s , e x c e p t Ford, s t a t e t h a t d e f e c t s w i l l b e r e p a i r e d o r
"Any a u t h o r i z e d d e a l e r " i s n o t
r e p l a c e d a t any a u t h o r i z e d d e a l e r . 1 9
used by Ford; i n s t e a d , Ford r e s t r i c t s r e p a i r s , w i t h e x c e p t i o n s , t o
the s e l l i n g dealer.
A d d i t i o n a l l y , i n 1970, Ford made i t s w a r r a n t y
a j o i n t o f f e r i n g from Ford and t h e s e l l i n g d e a l e r . 2 0
terms, g u a r a n t e e d t h a t t h e i r c a r s were f r e e from d e f e c t s .
F o r e i g n Manufacturers
Due t o t h e v a r i e t y of f o r e i g n c a r s b e i n g s o l d i n t h e S t a t e of
Hawaii, o n l y t h e t h r e e b e s t s e l l i n g c a r s were covered i n t h i s
While t h e r e have been
s t u d y - Datsun, Toyota, and Volkswagen.
s e v e r a l n a t i o n a l s t u d i e s on w a r r a n t i e s , none have covered t h e
f o r e i g n c a r m a n u f a c t u r e r s . A s t h e r e i s no e a s i l y a v a i l a b l e d a t a ,
t h e new c a r w a r r a n t i e s o f f e r e d by f o r e i g n m a n u f a c t u r e r s were o n l y
t r a c e d back t o 1 9 6 9 .
S i n c e 1969, b o t h Datsun (manufactured by Nissan Motor Company)
and Toyota have o f f e r e d a b a s i c w a r r a n t y o f 12 months o r 12,000
m i l e s , whichever comes f i r s t .
Volkswagen, on t h e o t h e r hand, h a s
o f f e r e d a w a r r a n t y o f 2 4 months o r 24,000 m i l e s , whichever comes
first.
None o f t h e f o r e i g n m a n u f a c t u r e r s have o f f e r e d a s p e c i a l
power t r a i n w a r r a n t y such a s t h a t of t h e domestic m a n u f a c t u r e r s .
I n a d d i t i o n t o t h e m a n u f a c t u r e r ' s w a r r a n t y , i n 1971, Datsun of
Hawaii o f f e r e d an a d d i t i o n a l w a r r a n t y of 1 2 months o r 12,000 m i l e s ,
whichever came f i r s t - t h u s w a r r a n t i n g t h e c a r f o r 24 months o r
24,000 m i l e s .
T h i s a d d i t i o n a l w a r r a n t y i s a d e a l e r w a r r a n t y and
i s p r e s e n t l y b e i n g o f f e r e d o n l y t o p u r c h a s e r s on t h e i s l a n d of Oahu.
The b a s i c w a r r a n t y o f f e r e d by f o r e i g n m a n u f a c t u r e r s i s s i m i l a r
t o t h a t o f f e r e d by t h e d o m e s t i c m a n u f a c t u r e r s i n t h a t i t c o v e r s
t h e e n t i r e car, subject t o l i s t e d exclusions.
The e x c l u s i o n s ,
w h i l e v a r y i n g between t h e m a n u f a c t u r e r s , a r e s i m i l a r t o t h o s e s e t
f o r t h f o r domestic manufacturers.
The w a r r a n t i e s f o r Toyota and
Volkswagen i n c l u d e b o t h t i r e s and b a t t e r y , w h i l e t h a t o f Datsun
e x c l u d e s t i r e s and b a t t e r y b u t t h e m a n u f a c t u r e r ' s waxranty on t h e
t i r e s and b a t t e r y i s p a s s e d on t o t h e consumer.
The w a r r a n t i e s o f t h e f o r e i g n m a n u f a c t u r e r s use language
s i m i l a r t o t h a t used by domestic m a n u f a c t u r e r s .
That i s , a l l
t h r e e f o r e i g n m a n u f a c t u r e r s s t a t e t h a t t h e v e h i c l e i s f r e e from
INTRODUCTION
d e f e c t s i n m a t e r i a l and workmanship and t h a t t h e m a n u f a c t u r e r ' s
o b l i g a t i o n i s l i m i t e d t o r e p a i r i n o r r e p l a c i n g p a r t s a t an
a u t h o r i z e d d e a l e r without charge.
31
F o r e i g n m a n u f a c t u r e r s a l s o r e q u i r e maintenance o f t h e v e h i c l e
a t r e g u l a r i n t e r v a l s and proof t h e r e o f i n c a s e o f a w a r r a n t y c l a i m .
I n a d d i t i o n t o r e q u i r i n g p r o o f o f maintenance, i n 1969, Volkswagen
a l s o r e q u i r e d a y e a r 1 v a l i d a t i o n by t h e d e a l e r t h a t s u c h m a i n t e n a n c e was performed. 2T T h i s v a l i d a t i o n r e q u i r e m e n t was d i s c o n t i n u e d
a f t e r 1969.
Part 11. Warranties as a Selling Point
The r e a s o n f o r t h e e x t e n s i o n o f t h e b a s i c w a r r a n t y and t h e
a d d i t i o n o f t h e power t r a i n w a r r a n t y i n 1962 is t h e c o m p e t i t i v e
a s p e c t s of new c a r s e l l i n g . I n 1960, t h e n a t i o n was i n a
r e c e s s i o n and new c a r s a l e s had s t a r t e d t o s l i p . T h i s l e d t o t h e
announcement o f t h e e x t e n d e d b a s i c w a r r a n t y by a l l major d o m e s t i c
new c a r m a n u f a c t u r e r s . 2 3 S a l e s c o n t i n u e d t o d r o p i n 1 9 6 1 , b u t i n
1962 b o t h General Motors and Ford began s e l l i n g more new c a r s t h a n
i n a n y p e r i o d o t h e r t h a n 1955, t h e boom y e a r f o r new c a r s a l e s .
C h r y s l e r ' s s a l e s , had n o t s u b s t a n t i a l l y i n c r e a s e d i n 1961 and 1962
and i t s s h a r e o f t h e market had d e c r e a s e d by almost 5 p e r c e n t .
T h i s l e d t o t h e i n t r o d u c t i o n by C h r y s l e r o f t h e 5 y e a r s o r 50,000
m i l e s power t r a i n w a r r a n t y on i t s 1963 c a r s . C h r y s l e r changed i t s
a d v e r t i s i n g campaign t o c e n t e r on i t s new w a r r a n t y and i n 1963
C h r y s l e r ' s new c a r s a l e s i n c r e a s e d by 4 0 p e r c e n t . 2 4 By 1966,
C h r y s l e r ' s s h a r e o f t h e new car market had i n c r e a s e d from 9 . 6 p e r
c e n t i n 1962 t o 15.4 p e r c e n t w i t h p r o d u c t i o n o f t w i c e a s many
c a r s t h a n i n 1963.25
The r e a s o n f o r C h r y s l e r ' s i n t r o d u c t i o n o f t h e power t r a i n
w a r r a n t y can b e g a t h e r e d from t h e f o l l o w i n g e x c e r p t from t h e
Chrysler-Plymouth S e r v i c e Manager's S o c i e t y Meeting Guide o f
December, 1964:
I ' m s u r e y o u ' v e wondered from t i m e t o t i m e j u s t
why C h r y s l e r C o r p o r a t i o n came o u t w i t h t h e 5/50 Warranty
and C e r t i f i e d Car C a r e . . .and y o u ' v e probably come up w i t h
some p r e t t y i n t e r e s t i n g answers, t o o : We a l l know t h a t t h e
C o r p o r a t i o n had c o n f i d e n c e i n t h e e n g i n e e r i n g and
production q u a l i t y they p u t i n every c a r . . .or they
c o u l d n ' t a f f o r d t o g i v e t h i s o u t s t a n d i n g Warranty!
But when you b o i l i t a11 down, t h e r e ' s o n l y o
ne
r e a s o n f o r 5/50 and C e r t i f i e d Car Care - and t h a t r e a s o n
i s s i m p l e . . . t o SELL CAE~S:~~
NEW CAR WARRANTIES
I n 1966, t h e o t h e r t h r e e d o m e s t i c m a n u f a c t u r e r s adopted t h e
power t r a i n w a r r a n t y and t h e y i n t u r n a d v e r t i s e d t h i s f a c t ,
although not as extensively as did Chrysler.
A s i m i l a r w a r r a n t y o f f e r i n g may be found i n an a d v e r t i s e m e n t
by Datsun o f Hawaii.
fiatsun h a s extended t h e m a n u f a c t u r e r ' s
12 months o r 12,000 m i l e s w a r r a n t y by a n o t h e r 1 2 months and 12,000
m i l e s i n o r d e r t o g i v e a 24 months o r 24,000 m i l e s w a r r a n t y . The
a d d i t i o n i s b e i n g p a i d f o r by Datsun of Hawaii and n o t t h e manufacturer.27
The l a t e s t a t t e m p t t o s e l l c a r s through t h e u s e o f w a r r a n t i e s
may b e s e e n i n American Plotor's a d v e r t i s e m e n t i n t r o d u c i n g t h e
"Guaranteed Car".
The a d v e r t i s e m e n t c l o s e s w i t h t h e s t a t e m e n t ,
" S i n c e w e ' r e g i v i n g American car-buyers e x a c t l y what t h e y s a y
t h e y want, we s h o u l d s e l l more c a r s t h a n we've e v e r s o l d b e f o r e . " 2 8
The w a r r a n t y s a l e s r a c e between t h e m a n u f a c t u r e r s h a s been
very c o s t l y t o t h e manufacturers.
This high c o s t , i n t u r n , has
l e d t o t h e r e d u c t i o n i n w a r r a n t y t e r m s as evidenced by t h e 1 9 6 9 ,
1970, and 1971 w a r r a n t y o f f e r i n g s . Except f o r C h r y s l e r , t h e
i n d u s t r y had a w a r r a n t y c o s t o f between $50 and $60 p e r 1966 model
car.
I n 1 9 6 7 , t h e f i r s t y e a r Ford i s s u e d t h e power t r a i n w a r r a n t y ,
F o r d ' s e s t i m a t e d w a r r a n t y c o s t f o r 1967 models was between $110
and $120 p e r c a r .
To some e x t e n t t h e i n c r e a s e d c o s t was due
t o consumer awareness o f t h e w a r r a n t i e s , i n f l a t i o n , changes i n
mechanics' compensation and f l a t r a t e s , and i n c r e a s e d complexity
of t h e c a r s involved.
But a s u b s t a n t i a l p o r t i o n o f t h e i n c r e a s e
w a s due t o t h e p a p e r work r e q u i r e d f o r p r o c e s s i n g w a r r a n t y c l a i m s
and t h e number of a d d i t i o n a l y e a r s t h a t a m a n u f a c t u r e r and d e a l e r
i s r e s p o n s i b l e f o r a c a r . 2 9 For i n s t a n c e , t h o s e c a r s s o l d i n
1967 h a v e a v a l i d power t r a i n w a r r a n t y u n t i l 1972.
The i n c r e a s e d l e n g t h of t h e w a r r a n t i e s h a s c r e a t e d a heavy
b u r d e n on t h e d e a l e r who must s e r v i c e t h e c a r s .
I n some c a s e s ,
t h i s has caused much d e a l e r and consumer d i s s a t i s f a c t i o n which w i l l
b e d i s c u s s e d i n C h a p t e r s I11 and I V .
CHAPTER 11
THE \VARRASTY
Part I. Manufacturer and Consumer
Automobile w a r r a n t i e s are e x p r e s s w a r r a n t i e s o f f e r e d d i r e c t l y
by t h e m a n u f a c t u r e r t o t h e consumer. The w a r r a n t y i s l i m i t e d i n
i t s terms and d i s c l a i m s b o t h t h e e x p r e s s and i m p l i e d w a r r a n t i e s o f
t h e Uniform Commercial Code and any o t h e r i m p l i e d w a r r a n t i e s t h a t
m i g h t a r i s e d u r i n g t h e c o u r s e o f d e a l i n g . 1 The new c a r w a r r a n t y
makes c e r t a i n promises t o t h e consumer and c r e a t e s c e r t a i n d u t i e s
and r e s p o n s i b i l i t i e s f o r f h e d e a l e r . The w a r r a n t y makes t h e
e x p r e s s promise o f r e p a i r o r r e p l a c e m e n t o f d e f e c t i v e p a r t s o r
workmanship. The remainder o f t h e new c a r w a r r a n t y is d e v o t e d
t o l i m i t i n g t h e m a n u f a c t u r e r ' s and d e a l e r ' s exposure t o l i a b i l i t y .
L i m i t s are p l a c e d on t h e t i m e and m i l e a g e o f a v e h i c l e d u r i n g which
t h e w a r r a n t y is e x t e n d e d . The m a n u f a c t u r e r ' s l i a b i l i t y f o r r e p a i r
o f t h e v e h i c l e and t h e o w n e r ' s remedies f o r such r e p a i r a r e l i m i t e d
t o a n a u t h o r i z e d d e a l e r , o r i n t h e c a s e o f Ford t o t h e s e l l i n g
d e a l e r . I f t h e Ford owner, however, h a s moved o u t o f t h e v i c i n i t y
o f t h e s e l l i n g d e a l e r he may go t o t h e d e a l e r n e a r e s t him.2 A s
p o s i t e d i n C h a p t e r I t h e w a r r a n t i e s e x c l u d e c e r t a i n p a r t s , comp o n e n t s , o r maintenance from c o v e r a g e .
Although t h e m a n u f a c t u r e r ' s e x p r e s s w a r r a n t y c o v e r s t h e r e p a i r
o r r e p l a c e m e n t o f d e f e c t i v e p a r t s o r workmanship, t h e w a r r a n t y
document g i v e n t o t h e consumer d o e s n o t mention how t h e w a r r a n t y
w i l l be applied t o a p a r t i c u l a r item with a d e f e c t . A l l manufacturers
have e x t e n s i v e p r o c e d u r e s t h a t must b e followed i n p r o c e s s i n g a
c l a i m under a w a r r a n t y . B a s i c a l l y , t h e p r o c e d u r e s e s t a b l i s h e d
by t h e m a n u f a c t u r e r a r e i n much more d e t a i l t h a n a consumer sees
i n h i s one page w a r r a n t y .
Some examples o f such p r o c e d u r e s and
services are:
( I f D e f e c t s i n a c a r ' s p a i n t , g l a s s , c a r b u r e t o r , o r en i n e
v a l v e s , might a p p e a r t o be covered by t h e w a r r a n t y ? and
s u b j e c t t o immediate r e p a i r o r r e p l a c e m e n t by any author i z e d d e a l e r . But w a r r a n t y c l a i m s f o r t h e s e i t e m s may
n o t be a c t e d upon by t h e d e a l e r w i t h o u t t h e a p p r o v a l
of t h e d e a l e r ' s zone manager. The zone manager i s a n
o v e r s e e r f o r t h e m a n u f a c t u r e r t o whom t h e d e a l e r may
go f o r h e l p o r a u t h o r i z a t i o n s . No p a i n t r e p a i r may be
made 60 d a y s a f t e r s a l e o f t h e c a r w i t h o u t p r i o r zone
approval. F u r t h e r , a l l g l a s s replacement r e q u i r e s p r i o r
a u t h o r i z a t i o n no m a t t e r when i t o c c u r s , and t h e r e p l a c e ment o f c a r b u r e t o r n e e d l e s and s e a t s a l s o r e q u i r e s
p r i o r zone a u t h o r i z a t i o n . d Such a u t h o r i z a t i o n may he in
NEW CAR W A R M T I E S
writing, or by telephone, or in the case of one local
General Motors dealer, by a zone inspector who is
available once a week.
(2)
A service provided but not mentioned in the warranty
is towing charges. General Motors will pay towing
charges if (1) the vehicle cannot be driven, (2) the
necessity for towing results from the vehicle being
inoperable due to a defect that is covered by the
warranty, ( 3 ) the towing charges are reasonable, and
( 4 ) zone approval has been ~ b t a i n e d . ~
(3)
Other services may even be provided which appear to
be subject to the exclusions listed in the warranty.
Decorative bright metal trim is excluded from the
warranty if the replacement or repair is necessitated
because of normal wear or exposure. The determination
of such wear or exposure is made by the dealer and
if he determines that replacement is not due to wear or
exposure, then the dealer may replace such part under
the warranty with prior zone approval.6
The above examples illustrate that although warranties are
supposed to provide some protection to the consumer, they, in
fact, may be.rendered ineffectual through detailed policy and
procedural manuals which are not freely available to the consumer.
Furthermore, these manuals appear to be written by the manufacturers
more for their own self-protection than for assistance to the
consumer in providing warranty services.
Part 11. Manufacturer and Dealer Relationships
While the manufacturer offers the warranty to the consumer,
it is the dealer who must service the consumer and perform under
the warranty. Dealers are given extensive instructions by the
manufacturers in the policies and procedures that must be followed
in (1) inspecting and preparing new cars for delivery to the
purchaser, (2) honoring warranties, and (3) processing claims for
reimbursement from the manufacturers for work performed under
the warranty.7
The importance of good service and customer satisfaction to
the reputation of the manufacturer and to the business of the
dealer is stressed in manufacturers' manuals. Dealers are
informed that they are to perform conscientiously and fairly under
the warranty.
THE WARRANTY
predelivery Servicinq
A l l c a r s must b e p l a c e d i n c o n d i t i o n f o r d e l i v e r y t o t h e
consumer. Thus, p r i o r t o t h e sale o f a car, the d e a l e r is r e q u i r e d
t o p e r f o r m e x t e n s i v e p r e d e l i v e r y s e r v i c i n g and i n s p e c t i o n .
For
example, P o n t i a c d e a l e r s must perform s i x t y - o n e s e p a r a t e s e r v i c e
and i n s p e c t i o n f u n c t i o n s . These r e q u i r e m e n t s may be found i n t h e
1 9 7 0 P o n t i a c p r e d e l i v e r y s e r v i c e and a d j u s t m e n t check s h e e t i n Appendix A .
I n making the p r e d e l i v e r y s e r v i c e s and a d j u s t m e n t s , t h e
d e a l e r may be reimbursed by t h e m a n u f a c t u r e r f o r p a r t s and l a b o r
involved i n replacing defective p a r t s during predelivery servicing.8
The g e n e r a l p r a c t i c e , however, i s t o p a s s on t o t h e consumer i n t h e
s u g g e s t e d r e t a i l p r i c e a l l p r e d e l i v e r y s e r v i c i n g made a t t h e d e a l e r ' s
e x p e n s e . The s u g g e s t e d r e t a i l p r i c e may i n c l u d e c o s t s v a r y i n g between
$50 t o $150 f o r p r e d e l i v e r y s e r v i c i n g , depending on the model and
t y p e of c a r . I n 1971, General M3tors i n s t i t u t e d a reimbursement
program f o r i t s d e a l e r s on a s l i d i n g s c a l e based on t h e t y p e and model
o f the c a r s e r v i c e d . Thus, i n a d d i t i o n t o o b t a i n i n g some r e t u r n f o r
p r e d e l i v e r y s e r v i c i n g from t h e consumer, t h e G e n e r a l Motors d e a l e r
a l s o r e c e i v e d reimbursement from t h e m a n u f a c t u r e r . 9
W a r r a n t y Reimbursement
S i n c e t h e w a r r a n t y o f f e r e d by t h e m a n u f a c t u r e r p l a c e s t h e
b u r d e n of s e r v i c e upon t h e d e a l e r , the d e a l e r s a r e reimbursed f o r
w o r k done under t h e w a r r a n t y . D e a l e r s a r e reimbursed f o r p a r t s
r e p l a c e d under t h e w a r r a n t y a t t h e n e t cost o f p a r t s t o the d e a l e r ,
p l u s 25 p e r c e n t . T h i s reimbursement r a t e i s g e n e r a l l y t r u e f o r
b o t h d o m e s t i c and f o r e i g n m a n u f a c t u r e r s . 1 0
The d e a l e r i s reimbursed f o r t h e l a b o r i n v o l v e d i n making a
w a r r a n t y c o r r e c t i o n a t t h e dealer's w a r r a n t y l a b o r r a t e by b o t h
f o r e i g n and d o m e s t i c m a n u f a c t u r e r s . C h r y s l e r , f o r example, d e t e r m i n e s
t h e d e a l e r ' s w a r r a n t y l a b o r r a t e which i s 220 p e r c e n t o f t h e m e c h a n i c s '
a v e r a g e h o u r l y wage p l u s 150 p e r c e n t o f t h e d e a l e r ' s p o r t i o n o f
t h e c o s t f o r t h e f o l l o w i n g a l l o w a b l e f r i n g e b e n e f i t s f o r t h e mechanics:
p a i d v a c a t i o n ; pay i n l i e u o f v a c a t i o n ; h o l i d a y pay; s i c k pay;
s e p a r a t i o n allowance; h o s p i t a l insurance; r e t i r e m e n t o r pension p l a n ;
u n i f o r m s and l a u n d r y ; and group l i f e i n s u r a n c e . T h i s formula
d e t e r m i n e s t h e w a r r a n t y l a b o r r a t e whenever t h e w a r r a n t y l a b o r
r a t e d o e s n o t exceed t h e d e a l e r ' s s t a t e d customer r e t a i l l a b o r
c h a r g e . 1 1 The rate o f d e a l e r reimbursement i s s u b j e c t t o change
a s t h e d e a l e r ' s e x p e n s e s change and a s s u c h changes are a c c e p t e a by
t h e manufacturer
.
The d e a l e r ' s reimbursement i s sometimes l i m i t e d by t h e use o f
F l a t r a t e t i m e i s based on t h e m a n u f a c t u r e r ' s
a " f l a t rate time".
s t u d y which d e t e r m i n e s t h e t i m e w i t h i n which a mechanic, w i t h an
NEW CAR WARRANTIES
a v e r a g e mechanical a p t i t u d e working a t a normal r a t e o f s p e e d ,
t a k e s t o perform a r e p a i r o p e r a t i o n . The t i m e t a k e n t o perform
t h e r e p a i r a l s o includes t h e manufacturer's determination of a
r e a s o n a b l e t i m e a l l o w a n c e f o r d i a g n o s i s o f t h e r e p a i r problem.
Thus, a mechanic may t a k e f i f t e e n o r f o r t y - f i v e m i n u t e s on a
r e p a i r job which, under t h e f l a t r a t e t i m e , i s d e t e r m i n e d t o
r e q u i r e one-half hour.
Whether t h e mechanic r e q u i r e s f i f t e e n
o r f o r t y - f i v e m i n u t e s , t h e d e a l e r i s reimbursed f o r o n l y t h e
f l a t r a t e t i m e o f one-half hour.12
M a n u f a c t u r e r ' s Requirements Concerning S e r v i c e Space
As p a r t o f t h e i r f r a n c h i s e w i t h m a n u f a c t u r e r s , d e a l e r s a r e
r e q u i r e d t o have s u f f i c i e n t s e r v i c i n g s p a c e and mechanics t o perform
p r e d e l i v e r y and w a r r a n t y s e r v i c e , i n a d d i t i o n t o r e g u l a r maintenance s e r v i c e .
Both American Motors and C h r y s l e r p r o v i d e
s p e c i f i c s t a n d a r d s f o r p h y s i c a l f a c i l i t i e s used f o r s e r v i c i n g ,
r e l a t i n g s p a c e r e q u i r e d f o r s e r v i c e and p a r t s t o new c a r s a l e s . 1 3
N e i t h e r Ford n o r General Motors h a s e s t a b l i s h e d s p e c i f i c s t a n d a r d s
f o r s e r v i c e a r e a , p a r t s , inventory, o r personnel f o r t h e i r d e a l e r s ,
b u t d e a l e r s a r e a s s i s t e d i n d e t e r m i n i n g t h e f a c i l i t i e s , manpower,
and o t h e r n e c e s s i t i e s needed f o r a s e r v i c e o p e r a t i o n . 1 4
When t h e F e d e r a l Trade Commission asked d o m e s t i c m a n u f a c t u r e r s
how many o f t h e i r d e a l e r s d i d n o t meet t h e m a n u f a c t u r e r ' s s t a n d a r d s
c o n c e r n i n g s p a c e and equipment i n t h e i r s e r v i c e a r e a s , American
Mctors and C h r y s l e r answered t h a t most o f t h e i r d e a l e r s met t h e
requirements.
Ford d i s c l o s e d it knew o f no d e a l e r which d i d n o t have
t h e s t a l l s and mechanics needed t o h a n d l e w a r r a n t y work, w h i l e
General Motors s t a t e d t h a t i t d i d n o t m a i n t a i c r e c o r d s o f d e a l e r s
who d o n o t meet t h e c o r p o r a t i o n ' s s t a n d a r d s . None o f t h e m a n u f a c t u r e r s
indicated t h a t they s t r i c t l y enforced s e r v i c i n g standards.15
Manufacturer ' s Aid t o D e a l e r s
I n r e t u r n f o r meeting t h e demands of t h e m a n u f a c t u r e r s ,
d e a l e r s a r e p r o v i d e d w i t h c o n s i d e r a b l e a s s i s t a n c e by t h e manuA l l m a n u f a c t u r e r s m a i n t a i n an e l a b o r a t e n a t i o n w i d e
f-zturers.
o r g a n i z a t i o n t o a s s i s t d e a l e r s i n p r o c e s s i n g w a r r a n t y c l a i m and i n
making d e t e r m i n a t i o n s on whether a p a r t i c u l a r c l a i m i s a w a r r a n t y c l a i m .
!4anufacturers review r e c u r r i n g maintenance problems i n p a r t i c u l a r
c a r models and t h e s e problems a r e e x p l a i n e d t o a l l d e a l e r s . Nonr e c u r r i n g maintenance problems which a d e a l e r i s u n a b l e t o d i a g n o s e
may be s o l v e d by c a l l i n g on h i s m a n u f a c t u r e r f o r h e l p . A l l b u t two
o f t h e t h i r t y - f o u r new c a r d e a l e r s i n t e r v i e w e d t h r o u g h o u t t h e S t a t e
o f Hawaii i n d i c a t e d t h a t t h e y c o u l d c o u n t on t h e i r m a n u f a c t u r e r
f o r d i a g n o s t ~ ca s s i s t a n c e . 1 6
I n a d d i t i o n t o h e l p i n maintenance, d i a g n o s i s , and c l e r i c a l
work, m a n u f a c t a r e r s .cake e x t e n s i v e e f f c r t s t o a s s i s t t h e dealers
THE WARRANTY
i n m e e t i n g t h e i r n e e d s f o r t r a i n e d mechanics and s p e c i a l i z e d e q u i p m e n t . American Motors h a s a t r a v e l i n g t r a i n i n g program t o t r a i n
m e c h a n i c s and o t h e r s e r v i c e p e r s o n n e l t h r o u g h o u t the c o u n t r y .
C h r y s l e r h a s many programs and f i l m s it d i s t r i b u t e s t o i t s d e a l e r s .
I n a d d i t i o n , C h r y s l e r m a i n t a i n s twenty-two p a r t s d e p o t s and p l a n t s
i n k e y l o c a t i o n s t o s u p p l y d e a l e r s . Ford a l s o h a s many s p e c i a l
programs f o r i t s d e a l e r s . G e n e r a l Motors m a i n t a i n s a network o f
t h i r t y t r a i n i n g c e n t e r s around the n a t i o n and i n 1967 t h e s e
c e n t e r s t r a i n e d 514,000 p e r s o n s . Of this amount, 120,000 t o o k
c o u r s e s d e s i g n e d t o improve mechanical s k i l l s . 1 7
CHAPTER I11
WARRANTY EXPERIEKCE-XATIOS'11'11)E
Part.1. Consumer Experience
The consumer who makes e x t e n s i v e o u t l a y s t o p u r c h a s e a new
c a r s h o u l d be a b l e t o e x p e c t a v e h i c l e s u b s t a n t i a l l y f r e e from
d e f e c t s . U n t i l 1969, domestic m a n u f a c t u r e r s promised t h e consumer
a v e h i c l e f r e e from d e f e c t s i n m a t e r i a l and workmanship. Now
d o m e s t i c m a n u f a c t u r e r s no l o n g e r promise a d e f e c t - f r e e v e h i c l e ,
a l t h o u g h a d e f e c t - f r e e v e h i c l e i s s t i l l b e i n g o f f e r e d by f o r e i g n
m a n u f a c t u r e r s i n t h e i r w a r r a n t i e s . The domestic m a n u f a c t u r e r s '
w a r r a n t i e s p r e s e n t l y promise t o r e p a i r o r r e p l a c e any p a r t t h a t
i s d e f e c t i v e i n m a t e r i a l o r workmanship.
Many consumers have become d i s e n c h a n t e d w i t h m a n u f a c t u r e r s '
w a r r a n t y promises.
The r e a s o n f o r t h i s d i s s a t i s f a c t i o n becomes
a p p a r e n t when t h e r e s u l t s o f n a t i o n w i d e consumer s u r v e y s and o t h e r
indices are studied. 1
A summary r e p o r t o f t h e s u r v e y s conducted y e a r l y by Consumers
Union i s p r e s e n t e d below.
These a n n u a l s u r v e y s a r e o f major
magnitude s i n c e t h e y c o v e r between 40,000 and 50,000 c a r owners.
The c a r owners r e s p o n d i n g t o t h e s u r v e y were s u b s c r i b e r s t o t h e
Consumers Union p u b l i c a t i o n , Consumer R e p o r t s .
Consumers Union
asked t h r e e questions i n order t o determine t h e e x t e n t of warranty
and w a r r a n t y r e l a t e d problems.
The f i r s t q u e s t i o n asked whether
t h e new c a r t h e consumer r e c e i v e d was i n a s a t i s f a c t o r y c o n d i t i o n
when d e l i v e r e d .
T h i s q u e s t i o n was used t o d e t e r m i n e t h e l a c k of
q u a l i t y c o n t r o l by m a n u f a c t u r e r s and i f poor d e a l e r p r e d e l i v e r y
servicing existed.
Consumers Union found t h a t d u r i n g t h e p e r i o d 1963 through 1970
an a v e r a g e o f 34.3 p e r c e n t of t h e new c a r p u r c h a s e r s were
d i s s a t i s f i e d w i t h t h e c o n d i t i o n o f t h e i r new c a r upon d e l i v e r y . 2
I f t h e a v e r a g e i s a p p l i e d t o 8,223,392,3 t h e t o t a l number of new
c a r s produced by d o m e s t i c m a n u f a c t u r e r s i n 1 9 6 9 , a t o t a l o f
2.8 m i l l i o n c a r owners r e c e i v e d t h e i r c a r s i n what t h e owner f e l t
t o b e an u n s a t i s f a c t o r y c o n d i t i o n .
Consumers Union f i r s t r e p o r t e d on f o r e i g n m a n u f a c t u r e r s i n
1 9 6 9 . F o u r t e e n p e r c e n t of t h o s e p e r s o n s r e p l y i n g t o t h e 1 9 6 9 s u r v e y
on Volkswagen f e l t t h e i r Volkswagen was d e l i v e r e d i n an u n s a t i s f a c t o r y
condition.4
I n 1970 Consumers Union d i d n o t have a breaksown of
f o r e i g n m a n u f a c t u r e r s , b u t s t a t e d t h a t 20 p e r c e n t o f t h e b u y e r s of
imported c a r s were d i s s a t i s f i e d w i t h t h e c o n d i t i o n o f the c a r when
received.5
WARRANTY EXPERIENCE
- NATIONWIDE
The second q u e s t i o n asked by t h e Consumers Union s u r v e y was
d i r e c t e d a t t h o s e p e r s o n s h a v i n g had w a r r a n t y work done on t h e i r
car,
The q u e s t i o n a s k e d i f t h e w a r r a n t y work performed was
s a t i s f a c t o r y . Twenty-five p e r c e n t o f t h e p e r s o n s having w a r r a n t y
w o r k performed on their c a r s were d i s s a t i s f i e d w i t h t h e work when
c o m p l e t e d . 6 Those p e r s o n s d i s s a t i s f i e d w i t h the work were f u r t h e r
asked:
" I f t h e w a r r a n t y work was n o t performed s a t i s f a c t o r i l y , what
was t h e t r o u b l e ? "
S e v e n t y p e r c e n t o f t h e owners o f 1966 c a r s r e p o r t e d t h a t t h e
d e a l e r c o u l d n o t f i x t h e c a r ; 11 p e r c e n t s a i d t h e d e a l e r d i d n o t
c o o p e r a t e ; 7 p e r c e n t s t a t e d t h a t the i t e m t o b e r e p a i r e d was n o t '
c o v e r e d by t h e w a r r a n t y ; and 10 p e r c e n t of t h e owners gave o t h e r
r e a s o n s f o r t h e i r d i s s a t i s f a ~ t i o n . ~The problem of w a r r a n t y work
t h e n , from t h e consumer's p o i n t of view a p p e a r s t o c e n t e r i n c r e a s i n g l y
on t h e i n a b i l i t y
and p e r h a p s u n w i l l i n g n e s s - o f t h e d e a l e r t o
p e r f o r m r e p a i r s r e q u e s t e d on t h e c a r .
-
A Newsweek magazine s t u d y o f 1967 c a r owners, based on a
s c i e n t i f i c s a m p l i n g o f 371,014 r e g i s t r a t i o n s , i n d i c a t e d t h a t w h i l e
more than h a l f o f t h o s e r e s p o n d i n g found t h e i r c a r s e x t r e m e l y
r e l i a b l e , more t h a n 9 p e r c e n t found them t o b e m e c h a n i c a l l y
u n r e l i a b l e . When q u e s t i o n e d on t h e s e r v i c e s o f f e r e d by t h e d e a l e r s ,
86 per c e n t responded t h a t t h e d e a l e r s e r v i c e s were s a t i s f a c t o r y ,
w h i l e 1 4 p e r c e n t responded t h a t t h e s e r v i c e s r e c e i v e d were
unsatisfactory. 8
A t h i r d s t u d y on w a r r a n t i e s was conducted between J u n e ,
1968, and
S e p t e m b e r , 1969, by O p e r a t i o n s Research, I n c o r p o r a t e d , f o r t h e
N a t i o n a l Highways S a f e t y Bureau. O p e r a t i o n s Research found t h a t
i n w a r r a n t y r e p a i r s i n v o l v i n g s a f e t y - c r i t i c a l subsystems, more t h a n
2 2 per c e n t o f t h e v e h i c l e s were r e t u r n e d by t h e consumer t o t h e
d e a l e r because of inadequate r e p a i r . 9
A s a f u r t h e r i n d i c a t i o n o f a consumer w a r r a n t y problem on a
n a t i o n w i d e s c a l e , t h e F e d e r a l Trade Commission h a s r e c e i v e d more t h a n
3 , 0 0 0 c o m p l a i n t s on w a r r a n t i e s .
T h i s number i s t h e l a r g e s t volume
of c o m p l a i n t l e t t e r s r e c e i v e d r e g a r d i n g a s i n g l e t o p i c s i n c e the
Commission was e s t a b l i s h e d i n 1914.10
A f i n a l i n d i c a t i o n of t h e q u a l i t y of c a r s b e i n g r e l e a s e d from
b o t h d o m e s t i c and f o r e i g n m a n u f a c t u r e r s i s t h e number of c a r s
i n v o l v e d i n s a f e t y r e c a l l s under t h e N a t i o n a l T r a f f i c and Motor
V e h i c l e S a f e t y A c t o f 1 9 6 6 . 1 1 Between t h e t i m e t h e Act t o o k e f f e c t
i n 1966 t h r o u g h 1969, 14,124,108 v e h i c l e s ( c a r s and t r u c k s ) have been
recalled.
During t h e y e a r 1969 a l o n e , 7.9 m i l l i o n v e h i c l e s ,
7,502,440 d o m e s t i c v e h i c l e s , and 405,744 f o r e i g n v e h i c l e s , were
recalled.
S i n c e t h e t o t a l r e g i s t r a t i o n o f p a s s e n g e r c a r s i n 1969 i n
t h e U n i t e d S t a t e s was 87,153,381,12 a s i g n i f i c a n t p e r c e n t a g e o f
p a s s e n g e r c a r s were r e c a l l e d .
NEW CAR WARRANTIES
While many o f t h e d e f e c t s i n v o l v e d i n t h e r e c a l l s w e r e caused
by m i s t a k e s made on t h e assembly l i n e , o r by u s e o f d e f e c t i v e
m a t e r i a l s , a s i g n f i c a n t p o r t i o n were caused by f a u l t y d e s i g n o r
e n g i n e e r i n g . 1 3 i t s h o u l d b e k e p t i n mind t h a t t h e g r e a t number
of r e c a l l s do not: n e c e s s a r i l y mean t h a t a l l c a r s r e c a l l e d had
s a f e t y d e f e c t s , s i n c e more c a r s t h a n n e c e s s a r y a r e u s u a l l y r e c a l l e d
i n o r d e r t o d i s c o v e r a l l p o s s i b l e d e f e c t i v e c a r s . Moreover, many
of t h e c a r s s u b j e c t t o r e c a l l were s t i l l i n t h e d e a l e r ' s i n v e n t o r y
and n o t y e t i n t h e hands o f t h e consumer.14 Even w i t h t h e above
c a v e a t s t a k e n i n t o c o n s i d e r a t i o n , t h e number of v e h i c l e s r e c a l l e d
i n d i c a t e t h a t c a r s a r e n o t l e a v i n g t h e f a c t o r i e s f r e e from d e f e c t s .
These d e f e c t s may l a t e r t u r n i n t o w a r r a n t y problems.
Thus, t h e r e s u l t s o f major consumer s u r v e y s and o t h e r i n d i c i e s
p o i n t toward a d e f i n i t e c a r q u a l i t y and w a r r a n t y problem f o r t h e
new car owner t h r o u g h o u t t h e n a t i o n .
Part 11. Dealer Experience
Although m a n u f a c t u r e r s appear t o make e x t e n s i v e e f f o r t s t o
h e l p t h e d e a l e r i n t h e a r e a s o f maintenance, d i a g n o s i s o f r e p a i r
problems, c l e r i c a l work, and q u a l i t y c o n t r o l , l 5 w a r r a n t y performance
i n t h e f i n a l a n a l y s i s i s up t o t h e d e a l e r . The d e a l e r ' s r e s p o n s i b i l i t y commences upon r e c e i p t of t h e c a r from t h e m a n u f a c t u r e r and
continues u n t i l t h e warranty expires.
Predelivery Servicing
The f i r s t s t e p i n t h e w a r r a n t y p r o c e s s , once t h e c a r i s r e c e i v e d
by t h e d e a l e r , i s p r e d e l i v e r y s e r v i c i n g . I n p r i n c i p l e , a thorough
p r e d e l i v e r y s e r v i c i n g and i n s p e c t i o n could r e d u c e t h e number o f
w a r r a n t y c l a i m s , s i n c e many w a r r a n t y r e l a t e d d e f e c t s c o u l d b e
c o r r e c t e d d u r i n g s u c h p r e s e r v i c i n g . I n p r a c t i c e , however, t h i s i s
n o t always t h e c a s e . Some o f t h e r e a s o n s why w a r r a n t y c l a i m s a r e
n o t s u b s t a n t i a l l y reduced by p r e d e l i v e r y s e r v i c i n g w i l l be
e x p l o r e d below.
P r e d e l i v e r y s e r v i c i n g and i n s p e c t i o n p l a c e s a burden on t h e
d e a l e r i f t h e c a r s he receives a r e not i n excellent condition.
According t o t h e t h i r t y - f o u r l o c a l d e a l e r s i n t e r v i e w e d , o n l y
n i n e r a t e d t h e c o n d i t i o n o f c a r s r e c e i v e d from t h e i r m a n u f a c t u r e r
a s e x c e l l e n t . Many o f t h e d e a l e r s s t a t e d t h a t t h e c a r s t h e y
r e c e i v e d were i n good, f a i r , o r poor c o n d i t i o n . The poor c o n d i t i o n
o f t h e s e c a r s i s i n some i n s t a n c e s due t o s h i p p i n g , such a s n i c k s
i n p a i n t and d e n t s , b u t t h e m a j o r i t y o f tine t r o u b l e i s due t o
poor f a c t o r y q u a l i t y c o n t r o l , such a s door a l i g n m e n t . 1 6 I f t h e
WARRANTY EXPERIENCE
- NATIONWIDE
c a r s a r e r e c e i v e d by t h e d e a l e r s i n less t h a n an e x c e l l e n t c o n d i t i o n ,
c o u p l e d w i t h t h e l a r g e amount o f new car sales made i n Hawaii ( t h e
a v e r a g e d e a l e r i n Hawaii sells a p p r o x i m a t e l y 385 c a r s a y e a r l 7 ) , -&e
w o r k l o a d and t i m e burden on mechanics d o i n g p r e d e l i v e r y s e r v i c e i s
g r e a t l y increased. A s a r e s u l t , t h e q u a l i t y of predelivery
s e r v i c e i s a f f e c t e d and t h e t i m e s p e n t on such s e r v i c e is r e d u c e d .
The second problem c o n c e r n i n g p r e d e l i v e r y s e r v i c e i s t h e
d e a l e r ' s compensation f o r s u c h s e r v i c i n g . The s u g g e s t e d r e t a i l
p r i c e of a new c a r may i n c l u d e s e r v i c i n g c o s t s which v a r i e s from
$50 t o $150 p e r c a r , depending on t h e make and model.
This
s u g g e s t e d r e t a i l p r i c e i s e s t a b l i s h e d by t h e m a n u f a c t u r e r , b u t
d e a l e r s c l a i m t h a t t h e s e r v i c i n g c o s t which i s p a s s e d on i n t h e
s u g g e s t e d r e t a i l p r i c e , i s i n a d e q u a t e f o r compensation p u r p o s e s .
Compensation i s i n a d e q u a t e b e c a u s e it i s i n c l u d e d i n t h e r e t a i l
Instead,
p r i c e , and t h e r e t a i l p r i c e i s seldom t h e s e l l i n g p r i c e . 1 8
t h e r e t a i l p r i c e i s t h e s t a r t i n g p o i n t f o r dealer-consumer
b a r g a i n i n g . The b e t t e r t h e b a r g a i n i n g o f t h e consumer, t h e less
t h e d e a l e r w i l l r e c e i v e on t h e s a l e o f t h e c a r . S i n c e t h e r e d u c e d
s a l e s p r i c e h a s t o c o v e r the c o s t o f p r e d e l i v e r y s e r v i c e , which
c o s t i s a l r e a d y i n a d e q u a t e , p r e d e l i v e r y s e r v i c i n g i t s e l f may n o t
be performed a d e q u a t e l y due t o t h e d e a l e r ' s need f o r p r o f i t . 1 9
Thus, i n t h e f i r s t s t a g e o f t h e w a r r a n t y p r o c e s s , t h e c a r
r e c e i v e d by t h e customer may have d e f e c t s t h a t s h o u l d have been
c o r r e c t e d d u r i n g t h e p r e d e l i v e r y s e r v i c i n g b u t were n o t c o r r e c t e d
f o r t h e reasons s t a t e d .
Warranty Reimbursement
Although d e a l e r s a r e reimbursed f o r w a r r a n t y l a b o r and p a r t s
r e p l a c e m e n t , a s p r e v i o u s l y s t a t e d , d e a l e r s f e e l t h a t such
reimbursement i s v e r y i n a d e q u a t e and does n o t c o v e r t h e a c t u a l
c o s t s involved.
Warranty reimbursement i s based upon t h r e e s e p a r a t e
(1) payment f o r p a r t s used i n w a r r a n t y r e p a i r : ( 2 ) t h e
elements:
f l a t r a t e s c h e d u l e s o f t i m e allowed f o r r e p a i r o p e r a t i o n s ; and
( 3 ) t h e h o u r l y r a t e p a i d f o r w a r r a n t y work.
A s d i s c u s s e d i n Chapter 11, d e a l e r reimbursement f o r p a r t s
r e p l a c e d under t h e w a r r a n t y i s n e t c o s t of t h e p a r t p l u s 25 p e r c e n t .
The F e d e r a l T r a d e Commission found t h a t d e a l e r s f e e l such reirnbursement t o be t o t a l l y i n a d e q u a t e s i n c e t h e c o s t t o Ws d e a l e r f o r a
p a r t i n c l u d e s f a c t o r s o t h e r t h a n t h e i n i t i a l c o s t o f t h e p a r t , and
t h e 25 p e r c e n t i n c r e a s e i n reimbursement by t h e m a n u f a c t u r e r d o e s
I n some i n s t a n c e s t h e c o s t o f s h i p p i n g p a r t s
n o t meet t h i s c o s t .
t o t h e d e a l e r i s p a i d by t h e d e a l e r , which is an a d d i t i o n a l c o s t
a t t r i b u t a b l e t o t h e p a r t . Moreover, once r e c e i v e d , t h e p a r t must
NEW CAR WARRANTIES
b e h a n d l e d and s t o r e d . The N a t i o n a l Automobile D e a l e r s A s s o c i a t i o n
(NADA) e s t i m a t e s t h a t h a n d l i n g and s t o r a g e o f p a r t s i s 23 t o
25 p e r c e n t o f t h e t r u e c o s t o f t h e p a r t . Thus, t h e m a n u f a c t u r e r ' s
compensation a l l o w s t h e d e a l e r l i t t l e i f any p r o f i t on p a r t s used
i n warranty repair.20
Of c o u r s e , d e a l e r s s h o u l d n o t make a p r o f i t
under t h e m a n u f a c t u r e r ' s w a r r a n t y reimbursement program, b u t o n l y
o b t a i n f u l l c o s t r e c o v e r y . N e v e r t h e l e s s , f u l l c o s t r e c o v e r y does
n o t seem t o b e o c c u r r i n g i n p r a c t i c e . 2 1
A m a n u f a c t u r e r ' s " f l a t rate t i m e " e s t a b l i s h e s t h e t i m e allowance
f o r t h e performance o f w a r r a n t y r e p a i r s and i s based on a c t u a l
time s t u d i e s .
( F l a t r a t e t i m e i s t h e time it t a k e s an a v e r a g e
mechanic working a t a normal r a t e o f s p e e d t o complete a r e p a i r . )
I n addition, manufacturers maintain t h a t t h e f l a t r a t e t i m e includes
r e a s o n a b l e t i m e a l l o w a n c e s f o r d i a g n o s i s and job p r e p a r a t i o n .
Dealers c l a i m t h a t t h e f l a t rate t i m e i s much t o o s h o r t , p r i m a r i l y ,
due t o i n a d e q u a t e t i m e allowed f o r d i a g n o s i s . D e a l e r s a l s o s t a t e
"hat t h e s y s t e m d o e s n o t p r o v i d e f o r l e a r n i n g time allowances when
new c a r s a r e i n t r o d u c e d . M a n u f a c t u r e r s , on t h e o t h e r hand, i n d i c a t e
t h a t p r o c e d u r e s f o r t h e a d j u s t m e n t o f t h e f l a t r a t e t i m e have been
e s t a b l i s h e d and a r e o f t e n used.22 A NADA s u r v e y r e v e a l e d t h a t i n
o n e - t h i r d o f t h e r e p a i r s r e q u i r i n g one hour o r l e s s o f l a b o r t i m e ,
the mechanic c o u l d n o t complete t h e job i n t h e f l a t r a t e t i m e .
The r e a s o n s g i v e n were t h e t i m e i n v o l v e d i n moving t h e c a r t o and
from t h e vork s p a c e and p r e p a r i n g t h e job r e p o r t . T h i s same s t u d y
t i l s o showed t h a t t h e a v e r a g e mechanic does 9 . 4 hours of work based
on t h e f l a t r a t e t i m e f o r each 8.0 h o u r s he works.
The s t u d y
f u r t h e r i n d i c a t e d t h a t i n e l e c t r i c a l and a c c e s s o r y r e p a i r j o b s t h e
~ . e c h a n i c sc o u l d do 7 . 4 and 6 . 6 h o u r s o f work, r e s p e c t i v e l y , based on
f l a t r a t e t i m e i n an 8 .O-hour day . 2 3 The e x c e s s o f 1 . 4 h o u r s f o r
n o n e l e c t r i c a l and nonaccessory r e p a i r j o b s would appear t o o f f s e t
t h e s l o w e r r a t e o f work on e l e c t r i c a l and a c c e s s o r y r e p a i r s . We
d o n o t have, h ~ w e v e r , any p e r c e n t a g e s o f work performed between
-at? two c a t e g o r i e s o f r e p a i r work n o r how many j o b s t a k e less t h a n
or.<: h o u r t o c o n c l u s i v e l y s a y t h a t d e a l e r s a r e a s bad o f f c o n c e r n i n g
i l a t r a t e tics a s t h e y c l a i m .
The t h i r d element i n w a r r a n t y reimbursement is t h e h o u r l y
r a t e p a i d f o r w a r r a n t y work. T h i s r a t e i s based upon what t h e
d e a l e r pays h i s mechanics by t h e hour p l u s f r i n g e b e n e f i t s
m u l t i p l i e d by a f a c t o r e s t a b l i s h e d by t h e m a n u f a c t u r e r t o o b t a i n
t h e d e a l e r ' s hourly r a t e .
The d e a l e r ' s h o u r l y r a t e i s t h e n
m u l t i p l i e d by t h e f l a t r a t e t i m e f o r t h e p a r t i c u l a r r e p a i r work
b e i n g claimed a s a w a r r a n t y r e p a i r .
For example, u s i n g t h e
C h r y s l e r reimbursement formula s e t f o r t h i n Chapter 11, i f t h e
d e a l e r pays h i s mechanics an a v e r a g e o f $3.65 p e r hour and h a s
an a d d i t i o n a l 50 c e n t s p e r hour i n f r i n g e b e n e f i t s c o s t , t h e
d e a l e r ' s w a r r a n t y r a t e would b e $9.13 p e r hour ($4.15 x 2 2 0 % ) .
T h i s $9.13 r a t e i s t h e n a p p l i e d t o t h e r e p a i r work done by t h e
mechanic by m u l t i p l y i n g i t w i t h t h e f l a t t i m e f o r t h e r e p a i r
claimed.
WARRANTY EXPERIENCE
-
NATIONWIDE
The w a r r a n t y r a t e i s t h u s b a s e d upon t h e a v e r a g e h o u r l y wage
r a t e o f t h e d e a l e r ' s mechanics. The d e a l e r ' s mechanic f o r c e ,
however, i s n o t made up o f mechanics who r e c e i v e t h e a v e r a g e
h o u r l y wage rate. F o r example, a d e a l e r may have journeyman,
i n t e r m e d i a t e , and a p r e n t i c e mechanics a l l o f whom r e c e i v e a
d i f f e r e n t wage r a t e . 34 I f a journeyman mechanic's h o u r l y wage
r a t e i s above t h e a v e r a g e o f $3.65 an hour t h e d e a l e r may b e
d i s i n c l i n e d t o u s e h i s journeyman mechanics on w a r r a n t y work.
The
n e t r e s u l t may b e i n a d e q u t e w a r r a n t y r e p a i r , t h e r e b y l e a d i n g t o
c u s t o m e r d i s s a t i s f a c t i o n . 45
I n a d d i t i o n t o t h e u s e o f a n a v e r a g e h o u r l y wage r a t e f o r
r e p a i r s , t h e r e i s a time l a g between a p p r o v a l by t h e d e a l e r o f
a new l a b o r c o n t r a c t p r o v i d i n g f o r i n c r e a s e d wages o r f r i n g e
b e n e f i t s and t h e t i m e i n which t h e m a n u f a c t u r e r makes a r e e v a l u a t i o n o f t h e d e a l e r ' s a v e r a g e h o u r l y wage r a t e . 26 U n t i l an upward
a d j u s t m e n t i s made, t h e d e a l e r would b e r e c e i v i n g e v e n l e s s
reimbursement and i s t h u s more u n l i k e l y t o view w a r r a n t y work a s
something on which h i s b e s t e f f o r t s s h o u l d b e made.
Labor performed on m e c h a n i c a l , e l e c t r i c a l , and a c c e s s o r y
r e p a i r i s n o t t h e o n l y c o s t t o t h e d e a l e r of d o i n g w a r r a n t y work.
Warranty r e p a i r s r e q u i r e e x t e n s i v e paperwork and r e c o r d k e e p i n g
f o r which t h e r e i s no reimbursement.
Records must b e p r e s e r v e d
by t h e d e a l e r and p a r t s r e p l a c e d under t h e w a r r a n t y must b e
t a g g e d and s t o r e d s o t h a t t h e m a n u f a c t u r e r ' s r e p r e s e n t a t i v e may
examine t h e p a r t s .
A s t u d y by t h e NADA i n 1967 r e p o r t e d 1 8 c l e r i c a l
s t e p s i n p r e p a r i n g w a r r a n t y claim forms a s compared t o 9 s t e p s i n
r e g u l a r s e r v i c e p r o c e d u r e s a d d i n g $3.45 i n e x t r a cost f o r which
t h e r e i s no reimbursement. 27 S i m i l a r d e a l e r s t u d i e s have produced
t h e s a m e r e s u l t s . 28
F i n a l l y , t h e d e a l e r s i n many i n s t a n c e s must w a i t 30 t o 120
days f o r w a r r a n t y reimbursement f o r l a b o r , w h i l e t h e m a n u f a c t u r e r
e x p e c t s t o b e p a i d by t h e d e a l e r w i t h i n 30 days a f t e r t h e c a r s are
delivered.
S e v e r a l m a n u f a c t u r e r s , p a r t i c u l a r l y Ford, now r e i m b u r s e
t h e i r d e a l e r s w i t h a monthly c r e d i t advance based on a one month
a v e r a g e c l a i m e x p e r i e n c e . 29 Those d e a l e r s n o t b e i n g r e i m b u r s e d
i n advance have t h e i r money t i e d up u n t i l t h e y a r e reimbursed.
From t h e f o r e g o i n g d i s c u s s i o n , it a p p e a r s t h a t t h e d e a l e r s
a r e n o t b e i n g a d e q u a t e l y reimbursed f o r consumer s e r v i c e s p l a c e d
upon them by t h e m a n u f a c t u r e r s .
Without a n a d e q u a t e reimbursement,
t h e r e is l i t t l e incentive for t h e dealer t o give t h e best service
where p r e d e l i v e r y and w a r r a n t y s e r v i c i n g i s i n v o l v e d .
CHAPTER IV
\$
ARRASTY EXPERIENCE-STATE
Part I. Consumer Experience
I n o r d e r t o d e t e r m i n e consumer e x p e r i e n c e w i t h w a r r a n t i e s on
new c a r s , l o c a l consumer p r o t e c t i o n a g e n c i e s were c o n t a c t e d .
The
S t a t e Consumer P r o t e o t o r , d u r i n g t h e p e r i o d from J u l y , 1 9 6 9 , t o
J u l y , 1971, r e c e i v e d t h i r t y - f i v e c o m p l a i n t s on motor v e h i c l e w a r r a n t i e s .
The Hawaii Motor V e h i c l e I n d u s t r y L i c e n s i n g Board, from t h e d a t e
of i t s i n c e p t i o n a s a s t a t e b o a r d i n iqovember, 1 9 6 9 , t o J u l y , 1971,
received t h i r t y oomplaints.
Some o f t h e oomplaints r e c e i v e d by t h e
Consumer P r o t e o t o r were forwarded t o t h e Xotor V e h i c l e I n d u s t r y
L i c e n s i n g Board a s b e i n g more a p p r o p r i a t e l y t h e b u s i n e s s of t h e
Board.
T h e r e f o r e , t h e r e i s some d u p l i c a t i o n i n t h e number o f
c o m p l a i n t s r e c e i v e d by t h e Board and t h e Consumer P r o t e c t o r .
The B e t t e r B u s i n e s s Bureau of Hawaii r e c e i v e d no w a r r a n t y
o o m p l a i n t s i n 1970 and f i v e o o m p l a i n t s through September, 1 9 7 1 .
S i n c e t h e number of w a r r a n t y o o m p l a i n t s f i l e d w i t h consumer p r o t e c t i o n
a g e n c i e s i n t h e S t a t e was low i n comparison w i t h t h e n a t i o n w i d e
e x p e r i e n c e , t h e L e g i s l a t i v e Reference Bureau conducted. a s t u d y among
1 9 6 9 c a r owners r e g i s t e r e d i n t h e s t a t e .
The y e a r 1 9 6 9 was chosen
a s t h e model y e a r i n o r d e r t o o b t a i n d a t a which was r e l a t i v e l y
r e c e n t y e t would b e based on a p e r i o d s u f f i c i e n t t o a f f o r d c a r
owners an o p p o r t u n i t y t o a s c e r t a i n d e f e c t s , i f any, m a n i f e s t e d i n
t h e i r automobile.
A q u e s t i o n n a i r e c o n s i s t i n g o f f i v e pages and c o n t a i n i n g f o u r
major p a r t s was used i n t h e s t u d y ( s e e Appendix C). P a r t one of
t h e q u e s t i o n n a i r e d e a l t w i t h g e n e r a l background i n f o r m a t i o n c o n c e r n i n g
t h e owner. P a r t two of t h e q u e s t i o n n a i r e q u e r i e d t h e owner on t h e
c o n d i t i o n of t h e c a r when it was d e l i v e r e d t o him i n o r d e r t o
d e t e r m i n e f a c t o r y q u a l i t y problems and t h e adequacy of p r e d e l i v e r y
s e r v i c i n g by t h e d e a l e r . P a r t t h r e e measured t h e w a r r a n t y s e r v i c i n g
e x p e r i e n c e of t h e oonsumer. Both ? a r t s two and t h r e e asked q u e s t i o n s
t o d e t e r m i n e consumer s a t i s f a c t i o n witin t h e q u a l i t y of t h e s e r v i c i n g
i n a manner s i m i l a r t o t h e Consumers Union s u r v e y s e t f o r t h i n
Chapter 111. P a r t f o u r o f t h e q u e s t i o n n a i r e a t t e m p t e d t o d e t e c t
consumer knowledge and u n d e r s t a n d i n g o f t h e w a r r a n t y .
The q u e s t i o n n a i r e was sent t o a random sampling of 1969
r e g i s t e r e d p r i v a t e c a r owners. F o u r t e e n hundred q u e s t i o n n a i r e s
were s e n t o u t w i t h two hundred g o i n g t o owners of each m a n u f a c t u r e r American Motors, C h r y s l e r , F o r d , G e n e r a l Motors, Datsun, Toyota, and
Volkswagen. T a b l e I g i v e s t h e number of p r i v a t e c a r owners who
WARRANTY EXPERIENCE
-
STATE
w e r e i n c l u d e d i n t h e random s a m p l e a n d t h e number o f business-owned
1969 cars which w e r e n o t i n c l u d e d i n t h e random sample:
Table 1
Number o f 1969 C a r s
A m e r i c a n Motors
Chrysler
Ford
G e n e r a l Motors
Datsun
Toyota
Volkswagen
Total
Private
Business
Total
1,244
8,409
5,502
9,875
3,626
4,107
4,508
320
1,082
1,401
1,741
86 3
54 7
351
1,564
9,491
6,903
11,616
4,489
4,654
4,859
37,271
6,305
43,576
The t o t a l number of 1969 cars o f a l l m a n u f a c t u r e r s r e g i s t e r e d i n t h e
T h u s , 94.7 p e r c e n t o f t h e 1969 cars
S t a t e o f H a w a i i i s 46,023.
i n t h e S t a t e w e r e r e p r e s e n t e d by t h e s e v e n m a n u f a c t u r e r s i n c l u d e d
i n t h i s study.
T a b l e 2 i n d i c a t e s t h e number a n d p e r c e n t a g e o f r e t u r n s f o r e a c h
manufacturer.
Table 2
Number o f R e t u r n s
Sent
American Motors
Chrysler
Ford
G e n e r a l Motors
Datsun
Toyota
Volkswagen
Total
Total Questionnaires
Returned
P e r Cent
NEW CAR WARRANTIES
The answers t o t h e q u e s t i o n n a i r e have been weighed s o t h a t a
p e r c e n t a g e o f t h e t o t a l number of c a r s f o r each m a n u f a c t u r e r i n
T a b l e 1 can b e s e t f o r t h i n t h e t a b l e s o f t h i s r e p o r t .
For r e f e r e n c e
t o complete r e s u l t s , w e i g h t s a s s i g n e d , and s t a t i s t i c a l e r r o r due
t o such weighing, s e e Appendix D.
Predelivery Servicing
Q u e s t i o n s e v e n o f t h e q u e s t i o n n a i r e was used t o d e t e r m i n e t h e
p o s s i b l e l a c k of q u a l i t y c o n t r o l by m a n u f a c t u r e r s and poor d e a l e r
predelivery servicing.
Table 3 p r e s e n t s t h e answers t o t h i s q u e s t i o n .
The numbers i n p a r e n t h e s i s r e p r e s e n t t h e a c t u a l number of r e s p o n s e s .
Table 3
Q u e s t i o n : "When t h e c a r was d e l i v e r e d t o you,
was it i n s a t i s f a c t o r y c o n d i t i o n ? "
T o t a l Responses
American Motors
Yes
NO
Chrysler
Yes
NO
Ford
Yes
No
G e n e r a l 24otors
Yes
NO
Datsun
Yes
NO
Toyota
Yes
No
Volkswagen
Yes
No
Responses by O r i g i n a l Owners
P u r c h a s i n g Car from:
D e a l e r on
Mainland o r
Local D e a l e r
Nanuf a c t u r e r
WARRANTY EXPERIENCE
-
STATE
T a b l e 3 r e v e a l s t h a t , on t h e a v e r a g e , p u r c h a s e r s o f 1969
d o m e s t i c c a r s from l o c a l d e a l e r s a r e d i s s a t i s f i e d w i t h t h e c a r upon
d e l i v e r y 4 5 . 4 p e r c e n t o f t h e t i m e w i t h a wide v a r i a t i o n between
Ford and C h r y s l e r . P u r c h a s e r s of f o r e i g n c a r s f a r e b e t t e r , b e i n g
d i s s a t i s f i e d w i t h t h e c a r upon d e l i v e r y a b o u t 2 3 . 3 p e r c e n t of t h e
time.
This is a higher percentage than t h e 3 4 . 3 per c e n t d i s s a t i s f a c t i o n w i t h d o m e s t i c c a r s and t h e 20 p e r c e n t d i s s a t i s f a c t i o n w i t h
f o r e i g n c a r s found by Consumers Union.
Those p e r s o n s s t a t i n g t h a t t h e y were d i s s a t i s f i e d w i t h t h e c a r
upon d e l i v e r y were f u r t h e r asked why t h e y were d i s s a t i s f i e d w i t h
t h e c o n d i t i o n o f t h e c a r . The answers were d i v i d e d i n t o t h r e e
major c a t e g o r i e s :
( I ) mechanical which i n c l u d e s b r a k e s , s t e e r i n g ,
e n g i n e , c l u t c h , t r a n s m i s s i o n , wheel a l i g n m e n t , c a r b u r e t o r , s t a r t e r ,
e t c . ; ( 2 ) body e x t e r i o r which i n c l u d e d p a i n t s c r a p e s , s c r a t c h e s ,
c h i p s , . d e n t s i n t h e body o r e x t e r i o r chrome, r u s t , e t c . ; and
( 3 ) body i n t e r i o r which i n c l u d e d s e a t c o v e r s , o t h e r u p h o l s t e r y , d i r t ,
i n t e r i o r t r i m , window s e a l s and o p e r a t i o n , e t c . A l l m a n u f a c t u r e r s
r e c e i v e d c o m p l a i n t s a b o u t t h e mechanical c o n d i t i o n of t h e c a r when
it w a s d e l i v e r e d . Also, d o m e s t i c m a n u f a c t u r e r s r e c e i v e d more
c o m p l a i n t s c o n c e r n i n g t h e e x t e r i o r and i n t e r i o r o f t h e c a r t h a n
f o r e i g n m a n u f a c t u r e r s , p a r t i c u l a r i l y c o n c e r n i n g p a i n t , r u s t , and
window s e a l s .
O f t e n , d e a l e r s e r v i c e s a t i s f a c t i o n by a consumer i s measured by
whether o r n o t t h e d e a l e r has c o r r e c t e d an u n s a t i s f a c t o r y condition
a f t e r it w a s b r o u g h t t o h i s a t t e n t i o n . T a b l e 4 s e t s f o r t h t h e
number o f p e r s o n s who asked t o h a v e a n u n s a t i s f a c t o r y c o n d i t i o n
c o r r e c t e d which was d i s c o v e r e d p r i o r t o a c c e p t i n g t h e c a r and whether
the condition w a s corrected to t h e i r satisfaction.
T a b l e 4 d i s c l o s e s t h a t a b o u t 50 p e r c e n t of t h o s e p e r s o n s who
p u r c h a s e d from l o c a l d e a l e r s o b t a i n e d c o r r e c t i o n t o t h e i r s a t i s f a c t i o n .
I n t h i s a r e a , t h e r e does n o t a p p e a r t o b e much d i f f e r e n c e between
d o m e s t i c d e a l e r s and f o r e i g n d e a l e r s . A n a v e r a g e of 2 4 . 9 p e r c e n t
o f t h o s e p e r s o n s p u r c h a s i n g a d o m e s t i c c a r from l o c a l d e a l e r s were
s t i l l not s a t i s f i e d with t h e c a r they f i n a l l y received. Purchasers
from f o r e i g n d e a l e r s f a r e somewhat b e t t e r w i t h o n l y 10 p e r c e n t
being d i s s a t i s f i e d .
Table 4
Question:
Did you have t h e c o n d i t i o n c o r r e c t e d
p r i o r t o acceptance of t h e c a r ?
T o t a l Responses
American Motors
Asked t o c o r r e c t
Corrected t o s a t i s f a c t i o n
Yes
No
Chrysler
Asked t o c o r r e c t
Corrected t o s a t i s f a c t i o n
Yes
No
Ford
Asked t o c o r r e c t
Corrected t o s a t i s f a c t i o n
Yes
No
General Motors
Asked t o c o r r e c t
Corrected t o s a t i s f a c t i o n
Yes
No
Datsun
Asked t o c o r r e c t
Corrected t o s a t i s f a c t i o n
Yes
No
Toyota
Asked t o c o r r e c t
Corrected t o s a t i s f a c t i o n
Yes
No
Volkswagen
Asked t o c o r r e c t
Corrected t o s a t i s f a c t i o n
Yes
No
Responses by O r i g i n a l Owners
P u r c h a s i n ~Car from:
Dealer on
Mainland o r
Local Dealer
Manufacturer
WARRANTY EXPERIENCE
-
STATE
Those p e r s o n s n o t s a t i s f i e d w i t h t h e c o r r e c t i o n r e c e i v e d on
t h e i r c a r s were asked t o g i v e a r e a s o n f o r t h e i r d i s s a t i s f a c t i o n .
of those p e r s o n s answering, a much l a r g e r number of p e r s o n s f e l t
t h a t t h e d e a l e r d i d n o t c o o p e r a t e w i t h them when d e a l i n g w i t h
domestic dealers than foreign dealers.
Usual e x p l a n a t i o n s g i v e n
f o r l a c k o f c o o p e r a t i o n by d i s g r u n t l e d owners were t h a t t h e d e a l e r
was u n a b l e t o f i x t h e problem, t h e problem k e p t r e c u r r i n g , t h e
d e a l e r took t o o l o n g t o c o r r e c t t h e problem, p o o r s e r v i c e due t o
s t a l l i n g o r runarounds, o r a poor j o b was done when t h e c a r was
finished.
Like t h e Consumers U n i o n ' s f i n d i n g s f o r w a r r a n t y s e r v i c e ,
i n t h e a r e a o f p r e d e l i v e r y s e r v i c i n g , Hawaii's consumers a r e
f i n d i n g t h a t t h e d e a l e r s a r e e i t h e r unable o r unwilling t o c o r r e c t
f a u l t y cars.
Those p e r s o n s p u r c h a s i n g t h e i r c a r s from a mainland
d e a l e x o r d i r e c t from t h e f a c t o r y d o n o t appear t o have r e c e i v e d
t r e a t m e n t d i f f e r e n t from t h a t o f p e r s o n s p u r c h a s i n g t h e i r c a r from
a local dealer.
I t must b e k e p t i n mind, however, t h a t t h e number
o f p e r s o n s f a l l i n g w i t h i n t h i s c a t e g o r y is s m a l l , making an a c c u r a t e
determination d i f f i c u l t .
Warranty S e r v i c i n g
I n o r d e r t o d e t e r m i n e t h e number of p e r s o n s h a v i n g w a r r a n t y
work done, t h e f o l l o w i n g q u e s t i o n was asked:
" A f t e r d e l i v e r y and
u s e of t h e a u t o m o b i l e by y o u , d i d you have any work o r r e p a i r done
under your new c a r w a r r a n t y o r g u a r a n t e e ? " T a b l e 5 g i v e s t h e
results.
T a b l e 5 r e v e a l s t h a t , on t h e a v e r a g e , more t h a n 5 6 . 9 p e r c e n t
of t h e new c a r owners who p u r c h a s e d from a l o c a l d e a l e r had t o
o b t a i n w a r r a n t y work on t h e i r c a r a f t e r h a v i n g d r i v e n it f o r some
time.
Toyota and Datsun owners had t h e l o w e s t p e r c e n t a g e o f
less t h a n 50 p e r c e n t of t h e t i m e .
Those
w a r r a n t y work performed
p e r s o n s h a v i n g w a r r a n t y work done were asked whether t h e work
i n v o l v e d a m e c h a n i c a l , body e x t e r i o r , o r body i n t e r i o r problem.
In
g e n e r a l , t h e answers i n d i c a t e t h a t t h e r e a r e more mechanical
problems a f t e r d e l i v e r y t h a n problems w i t h t h e e x t e r i o r o r i n t e r i o r
o f t h e body.
The e x t e r i o r and i n t e r i o r problems such a s p a i n t ,
t r i m , and f i t t i n g s may have been c o r r e c t e d a t t h e t i m e o f d e l i v e r y .
Thus, t h e y appear t o b e l e s s of a problem i n t h e w a r r a n t y s e r v i c e
area.
-
NEW CAR WARRANTIES
Table 5
Question:
Did you have w a r r a n t y work done on your c a r ?
T o t a l Responses
Responses by O r i g i n a l Owners
P u r c h a s i n g C a r from:
D e a l e r on
Mainland o r
Local Dealer
Manufacturer
American Motors
Yes
NO
Chrysler
Yes
NO
Ford
Yes
NO
G e n e r a l Motors
Yes
NO
Datsun
Yes
NO
Toyota
Yes
NO
Volkswagen
Yes
No
When t h e consumer h a s t o r e t u r n a c a r f o r w a r r a n t y work, one
o f h i s b i g g e s t c o n c e r n s i s t h e amount of t i m e i t w i l l t a k e and
how many t i m e s t h e consumer w i l l have t o r e t u r n t h e c a r i n o r d e r
t o have t h e problem c o r r e c t e d . With t h e e x c e p t i o n of Volkswagen
owners, more t h a n h a l f o f a l l p e r s o n s p u r c h a s i n g from l o c a l d e a l e r s
and h a v i n g w a r r a n t y work done on t h e i r c a r had t o t a k e t h e i r c a r back
t o t h e d e a l e r f o r r e p a i r s two t o t h r e e times i n o r d e r t o complete
the repair.
G e n e r a l l y , t h e t i m e r e q u i r e d t o r e p a i r a c a r is from
one t o t h r e e d a y s .
T a b l e 6 i n d i c a t e s t h e number of p e r s o n s who were s a t i s f i e d
o r d i s s a t i s f i e d w i t h t h e r e p a i r o f t h e c a r under t h e w a r r a n t y a s
performed by t h e d e a l e r .
WARRANTY EXPERIENCE
-
STATE
Table 6
Question:
Was w a r r a n t y r e p a i r work done t o your s a t i s f a c t i o n ?
T o t a l Responses
American Motors
S a ti s f i e d
Dissatisfied
Chrysler
Satisfied
Dissatisfied
Ford
Satisfied
Dissatisfied
G e n e r a l Motors
Satisfied
Dissatisfied
Datsun
Satisfied
Dissatisfied
Toyota
Satisfied
Dissatisfied
Volkswagen
Satisfied
Dissatisfied
R e s ~ o n s e sbv O r i a i n a l Owners
* ~ u r c h a s i nC&
~ from:
P e a l e r on
Mainland o r
Local D e a l e r
Manufacturer
22.4% (15)
14.9% ( L O )
0 % (0)
0% ( 0 )
T a b l e 6 d i s c l o s e s t h a t a b o u t o n e - f o u r t h o f t h e p u r c h a s e r s from
l o c a l d e a l e r s were d i s s a t i s f i e d w i t h t h e r e p a i r of t h e c a r t h e y
o r d e r e d , a f i n d i n g s i m i l a r t o t h a t of Consumers Union i n C h a p t e r 111.
Those p e r s o n s n o t s a t i s f i e d w i t h t h e r e p a i r r e c e i v e d were a s k e d
t o g i v e a r e a s o n f o r t h e i r d i s s a t i s f a c t i o n . Over 40 p e r c e n t of
r e s p o n s e s were t h a t t h e d e a l e r w a s u n a b l e t o r e p a i r t h e car. These
f i n d i n g s a l s o a g r e e w i t h t h o s e o f Consumers Union.
The d a t a p r e s e n t e d above i n d i c a t e s t h a t an a v e r a g e of 23.8 p e r
c e n t o f t h e p u r c h a s e r s of d o m e s t i c c a r s from l o c a l d e a l e r s and
17.5 p e r c e n t o f t h e p u r c h a s e r s o f f o r e i g n cars from l o c a l d e a l e r s
who had t o o b t a i n w a r r a n t y work were d i s s a t i s f i e d w i t h t h e w a r r a n t y
work t h e y r e c e i v e d .
While t h i s d o e s n o t seem t o b e a l a r g e
p e r c e n t a g e , when a p p l i e d t o t h e t o t a l number o f 1969 c a r s i n Hawaii,
t h i s means 5,957 owners of p r i v a t e d o m e s t i c c a r s and 2,142 owners
o f f o r e i g n c a r s were d i s s a t i s f i e d w i t h t h e w a r r a n t y work done, i f
t h e s e f i n d i n g s a r e a p p l i e d t o a l l model y e a r s , t h e n a s i g n i f i c a n t
nuwber o f p e r s o n s i n Hawaii may be unhappy w i t h t h e w a r r a n t y s e r v i c e
they a r e receiving.
Warranty u n d e r s t a n d i n g
The Bureau a l s o wished t o d e t e r m i n e consumer u n d e r s t a n d i n g of
t h e warranty.
I n o r d e r t o d e t e r n i n e consumer nnt5erstandingr seven
q u e s t i o n s were i n c l u d e d i n t h e q u e s t i o n n a i r e d e a l i n p w i t h t h e l e n g t h
and c o v e r a g e o f fhe w a r r a n t y and r e q u i r e m e n t s f o r keeping t h e
w a r r a n t y i n f o r c e . Two o f t h e s e v e n q u e s t i o n s d e a l t i n p a r t i c u l a r
w i t h e x c e p t i o n s c o n t a i n e d i n t h e w a r r a n t i e s , The q u e s t i o n n a i r e
p e r m i t t e d t h e p e r s o n answering t h e q u e s t i o n s t o look a t t h e w a r r a n t y
i n answering t h e q u e s t i o n s , i f t h e y s o d e s i r e d .
When asked t h e l e n g t h o f t h e i r w a r r a n t y , d o m e s t i c c a r owners
d i d v e r y p o o r l y , p o s s i b l y because t h e y had t o check two answers
f o r t h e b a s i c and power t r a i n w a r r a n t y , The f o r e i g n c a r owners,
however, d i d q u i t e w e l l i n t h e i r knowledge o f t h e l e n g t h o f t h e
warranty.
Q u e s t i o n s c o n c e r n i n g t h e c o n s u m e r ' s knowledge on t h e
v a r i o u s a r e a s o f t h e c a r t h a t were covered by t h e w a r r a n t y were
asked.
The r e s p o n s e s t o t h e s e q u e s t i o n s were poor f o r boLt domestic
and f o r e i g n c a r owners, w i t h l e s s t h a n 5 0 p e r c e n t knowing t h e
c o r r e c t answers.
Poor r e s p o n s e s were a l s o r e c e i v e d when t h e consumers
were asked t o c o r r e c t l y check t h e v a r i o u s a r e a s o f t h e c a r t h a t
i s c o v e r e d by t h e d i f f e r e n t w a r r a n t i e s .
When q u e s t i o n e d a b o u t r e q u i r e d maintenance, o v e r 7 5 p e r c e n t
of t h e consumers knew t h a t **e,ey had t o f o l l o w a maintenance schediule
t o keep t h e i r w a r r a n t i e s i n f o r c e , The m a j o r i t y of t h e new c a r
owners f e l t t h a t t h e y had t o t a k e t h e i r c a r t o a new c a r d e a l e r f o r
s e r v i c i n g i n o r d e r t o keep t h e i r w a r r a n t y .
Except f o r Volkswagen i n
1 9 6 9 , h w ~ e v e r , owners c o u l d t a k e t h e i r c a r anywhere f o r s e r v i c i n g .
Thus, it a p p e a r s t h a t consumers have o n l y a f a i r knowledqe o f t h e
terms c E t h e w a r r a n t y .
The Bureau n e x t asked q u e s t i o n s c o n c e r n i n g t h e u n d e r s t a n d i n g of
t i e warranty.
F i r s t , t h e consumer was asked i f b r a k e l i n i n g s on
;he c a r wonid be r e p l a c e d a t no c o s t under t h e w a r r a n t y when tile
l i n i n g s wore o u t a t 17,0 0 m i l e s ,
Only a l i e t i e o v e r 50 p e r c e n t
knew t h e c o r r e c t answer t o t h i s q u e s t i o n , Brake l i n i n g s a r e
s p e c i f i c a l l y exempted from t h e w a r r a n t y c o v e r a g e .
A
An a d d i t i o n a l question was asked:
" I f t h e p a i n t on your
automobile had d e t e r i o r a t e d and you had t h e a u t o m o b i l e for e l e v e n
months, c o u l d you have t h e a u t o m o b i l e r e p a i n t e d a t no c o s t t o you
under t h e w a r r a n t y o r g u a r a n t e e ? " Even l e s s p e r s o n s knew t h e
c o r r e c t answer t o t h i s q u e s t i o n .
P a i n t i s n o t speoificaLly
WARRANTY EXPERIENCE
-
STATE
e x c e p t e d from t h e w a r r a n t y , b u t f a l l s w i t h i n t h e w a r r a n t y e x c l u s i o n
c o n c e r n i n g normal d e t e r i o r a t i o n o f e x t e r n a l a p p e a r a n c e due t o
wear and e x p o s u r e .
The answers t o t h e s e q u e s t i o n s r e v e a l t h a t t h e a v e r a g e consumer
h a s v e r y l i t t l e u n d e r s t a n d i n g o f t h e terms and c o n d i t i o n s o f t h e
w a r r a n t y he i s r e c e i v i n g .
D e a l e r s were i n t e r v i e w e d and asked
i f t h e i r salesmen were r e q u i r e d t o inform t h e customer o f t h e
t e r m s o f t h e w a r r a n t y . A l l d e a l e r s s t a t e d t h e s a l e s m e n w e r e so
r e q u i r e d and most d i d s o a t t h e time o f d e l i v e r y o f t h e c a r t o t h e
customer. The q u e s t i o n n a i r e o f t h e Bureau a s k e d consumers i f the
t e r m s of t h e w a r r a n t y had been e x p l a i n e d t o t h e m by t h e s e l l i n g
d e a l e r . There was a wide v a r i a n c e o f answers, b u t an a v e r a g e o f
34 p e r c e n t s a i d t h e d e a l e r d i d n o t e x p l a i n t h e w a r r a n t y .
The h i g h
r a t e o f consumers answering t h a t t h e y d i d n o t h a v e t h e terms o f t h e
w a r r a n t y e x p l a i n e d t o them may b e due t o t h e f a c t t h a t , s i n c e t h e
t e r m s a r e e x p l a i n e d upon d e l i v e r y o f t h e c a r , t h e consumer i s more
i n t e r e s t e d i n t h e c a r t h a n t h e e x p l a n a t i o n o f t h e terms o f t h e
warranty.
Whatever t h e r e a s o n f o r t h e poor consumer u n d e r s t a n d i n g o f t h e
w a r r a n t y , such f e e l i n g w i l l , t o a c e r t a i n d e g r e e , be r e f l e c t e d i n
consumer d i s s a t i s f a c t i o n w i t h d e a l e r s e r v i c i n g under t h e w a r r a n t y .
I n summary, t h e B u r e a u ' s s u r v e y o f consumers, i n a d d i t i o n t o
r e v e a l i n g a poor consumer u n d e r s t a n d i n g o f t h e w a r r a n t y , found t h a t
the consumer e x p e r i e n c e i n Hawaii i s s i m i l a r t o t h a t found n a t i o n a l l y .
About o n e - t h i r d o f t h e p u r c h a s e r s o f d o m e s t i c cars are d i s s a t i s f i e d
w i t h t h e i r c a r s upon d e l i v e r y and a p p r o x i m a t e l y o n e - f o u r t h o f s u c h
p u r c h a s e r s a r e d i s s a t i s f i e d w i t h t h e w a r r a n t y work performed on
t h e i r c a r s . A smaller percentage of foreign c a r buyers a r e
d i s s a t i s f i e d w i t h their c a r s on a n a t i o n a l and l o c a l b a s i s . About
one-fourth of the foreign c a r purchasers a r e d i s s a t i s f i e d with
t h e i r c a r s upon d e l i v e r y and a b o u t o n e - f i f t h a r e d i s s a t i s f i e d w i t h
w a r r a n t y work completed on t h e i r c a r s .
Part 11. Dealer Experience
There a r e f i f t y - s i x new c a r d e a l e r s r e g i s t e r e d w i t h t h e Motor
V e h i c l e I n d u s t r y L i c e n s i n g Board and o f t h e s e , twenty-two d o n o t
h a n d l e American Motors, C h r y s l e r , Ford, General Motors, Datsun,
Toyota, o r Voikswagen c a r s , t h e s u b j e c t s o f t h i s s t u d y . T h i r t y - f o u r
i n t e r v i e w s w i t h new c a r d e a l e r s were conducted t h r o u g h o u t t h e
S t a t e - twelve w i t h f o r e i g n c a r d e a l e r s and twenty-two w i t h
d o m e s t i c c a r d e a l e r s . Seven o f t h e d e a l e r s i n t e r v i e w e d h a n d l e d
b o t h f o r e i g n and d o m e s t i c c a r s and w i l l b e t r e a t e d a s s e p a r a t e
d e a l e r s i n this r e p o r t . Many o f t h e d e a l e r s who w e r e n o t i n t e r v i e w e d
NEW CAR WARRANTIES
are part of the same corporation as those interviewed, such as
Datsun dealerships which are part of the Hawaii Corporation and
Toyota dealerships which are part of Servco.
Predelivery Servicing
Reimbursement for predelivery servicing in Hawaii is the same
as on the mainland, being part of the list price of the car
established by the manufacturer and paid for by the consumer. The
newly adopted General Motors' policy of manufacturer reimbursement
for predelivery servicing discussed in Chapter 11, has not been
initiated for all General Motors dealers in the state; only two
of the six interviewed stated that they were being reimbursed under
this policy.
One of the reasons for poor predelivery servicing reimbursement
is poor factory quality control. When predelivery service is
extensive and more time and work would be required to properly
service the vehicle, the dealer will be inadequately reimbursed for
his efforts because reimbursement by the manufacturer is based on
a formula of normal servicing. When asked about the quality of
cars being received, eight of the foreign car dealers stated that
the cars received were in excellent condition and four felt that
the cars were in good or very good condition. On the other hand,
only one of the domestic car dealers felt that the cars received
were in excellent condition while nine rated the cars from fair
to bad.
The dealers were primarily concerned with poorly fitted trim
and other fittings, wheel balancing and alignment, paint chips,
rust, and dents. Some dealers mentioned that the paint chips and
dents were due to shipping damage, which is particularily a problem
for Hawaii because of the distance and nwiber of changes in modes
of transportation involved. Transportation damage is covered by
the insurance of the shipper. Some dealers expressed dissatisfaction
with this type of remedy because of the time involved in obtaining
recovery. Additionally, the amount of the claim is generally
small thus making the cost for filing a claim more expensive
than the amount of the claim itself. Many of the local dealers
are making a practice of absorbing this cost, and further lowering
predelivery reimbursement.
It would appear, then, Lbat Hawaii's new car 2ealers suffer
the same problem of poor reimbursement as their mainland counterparts
with the addition of a possible higher cost for shipping damaqes.
Warranty Reimbursement, P o l i c i e s , and P r o c e d u r e s
a.
Labor
The formula f o r w a r r a n t y l a b o r reimbursement i s d i f f e r e n t
f o r a l l m a n u f a c t u r e r s . 1 The l a b o r reimbursement r a t e s f o r
f o r e i g n d e a l e r s v a r i e d from a l o w o f $7.00 t o a h i g h o f $10.00,
w h i l e t h e d o m e s t i c d e a l e r s ' r a t e s v a r i e d from a low o f $7.50
t o a h i g h o f $11.25.
The v a r i a n c e i s a p p a r e n t l y due i n p a r t
t o l a b o r c o n t r a c t s w i t h d i f f e r e n t l a b o r r a t e s and f r i n g e b e n e f i t s .
On the o t h e r hand, t h e r e t a i l l a b o r r a t e , i . e . , t h e r a t e charged
customers who a r e n o t e l i g i b l e f o r f r e e w a r r a n t y work, averaged
$11.82 a n hour t h r o u g h o u t the s t a t e and v a r i e d between $9.50
and $12.00 f o r f o r e i g n d e a l e r s and between $11.00 and $14.00
f o r domestic d e a l e r s .
The w a r r a n t y l a b o r r a t e i s lower f o r a l l d e a l e r s on t h e
outer islands.
However, t h e r e t a i l l a b o r r a t e f o r t h e o u t e r
i s l a n d d e a l e r s i s a p p r o x i m a t e l y t h e same a s t h a t f o r Oahu
d e a l e r s . D e a l e r s w e r e a s k e d whether t h e y were l o s i n g money
on their reimbursement r a t e . N i n e t e e n s t a t e d t h a t t h e y were
l o s i n g money, w h i l e t e n s a i d t h e y were b r e a k i n g even and t h r e e
i n d i c a t e d t h a t t h e y were making a p r o f i t . The answers were
s p r e a d among a l l t y p e s o f d e a l e r s , w i t h no one m a n u f a c t u r e r ' s
d e a l e r s s t a t i n g t h a t t h e y were a l l l o s i n g money on t h e
reimbursement r a t e . The o u t e r i s l a n d d e a l e r s w e r e g e n e r a l l y
l o s i n g money e x c e p t f o r Volkswagen d e a l e r s whose reimbursement
r a t e i s the same f o r a l l d e a l e r s . L i k e t h e i r mainland c o u n t e r p a r t s l o c a l d e a l e r s complained o f t h e f l a t r a t e t i m e ,
p a r t i c u l a r l y t h e allowance f o r d i a g n o s t i c t i m e .
b.
Parts
The d e a l e r s i n t h e s t a t e o b s e r v e t h e same m a n u f a c t u r e r
p a r t s reimbursement p o l i c y a s p r a c t i c e d on t h e mainland.
Both
f o r e i g n and d o m e s t i c d e a l e r s , e x c e p t Datsun and Toyota, a r e
reimbursed f o r p a r t s used i n w a r r a n t y work a t t h e r a t e o f t h e
c o s t o f t h e p a r t p l u s 25 p e r c e n t . Some Datsun and Toyota
d e a l e r s received c o s t p l u s shipping c o s t s o r c o s t p l u s 10 p e r c e n t ,
w h i l e o t h e r s r e c e i v e d c o s t p l u s 25 p e r c e n t .
D e a l e r s were a s k e d a b o u t t h e t i m e i t took t o r e c e i v e p a r t s
t h a t were o r d e r e d from t h e mainland. Many o f t h e d e a l e r s
r e c e i v e d a 1 1 shipments by a i r , and p a r t s n o t m a i l e d by a i r t o o k
between one and t h r e e months t o a r r i v e . About one-half o f t h e
d e a l e r s s t a t e d t h a t p a r t s r e q u i r e d i n w a r r a n t y s e r v i c i n g were
a u t o m a t i c a l l y s h i p p e d by a i r , a l t h o u g h i n some i n s t a n c e s t h e r e
was a s h i p p i n g c h a r g e t o t h e c u s t o m e r . The o u t e r i s l a n d
d e a l e r s g e n e r a l l y a t t e m p t t o o b t a i n p a r t s from Oahu p r i o r t o
c o n t a c t i n g t h e mainland.
YEFT CAR WARRANTIES
O b t a i n i n g p a r t s has been a problem on t h e mainland due t o
poor d i s t r i b u t i o n systems and a n i n s u f f i c i e n t q u a n t i t y o f p a r t s .
T h i s problem h a s been remedied somewhat by t h e m a n u f a c t u r e r s
t h r o u g h t h e e s t a b l i s h m e n t of p a r t s d e p o t s i n v a r i o u s a r e a s of
t h e c o u n t r y and m a n u f a c t u r e r s now f e e l t h a t t h e o a r t s s u p p l y
system w i l l be more r e s p o n s i v e t o consumer demands.2 F o r e i g n
dealers indicated t h a t p a r t s a r e stockpiled i n various areas
on t h e mainland and t h e y seldom have t o go t o t h e c o u n t r y o f
origin for parts.
c.
Reimbursement P r o c e s s T i m e
Although t h e r e have been s c a t t e r e d i n s t a n c e s o f r e i ~ b u r s e r r i e n t
by t h e m a n u f a c t u r e r t o i t s d e a l e r w i t h i n 30 d a y s , g e n e r a l l y ,
t h e p r o c e s s time r e q u i r e d between 4 5 and 1 2 0 d a y s , o r an a v e r a g e
o f 7 2 d a y s , a f t e r t h e c l a i m was p r e s e n t e d .
The one e x c e ~ t i o n
was Ford which a l l o w s a c r e d i t advance t o t h e d e a l e r based on
t h e d e a l e r ' s p a s t w a r r a n t y c o s t e x p e r i e n c e . The c r e d i t advance
was a l s o used by C h r y s l e r and G e n e r a l Motors f o r one d e a l e r e a c h .
The s l o w n e s s of m a n u f a c t u r e r s t o p r o c e s s reimbursement c l a i m s
h a s been a s o u r c e o f i r r i t a t i o n t o t h e d e a l e r s s i n c e such
t a r d i n e s s d e p r i v e s t h e d e a l e r s o f e s s e n t i a l working c a p i t a l
which c o u l d b e used t o p r o v i d e b e t t e r w a r r a n t y r e p a i r e f f o r t s .
d.
Replacement o f Car
D e a l e r s were q u a e r e d on t h e p o l i c y t h e y had f o r r e p l a c i n g
a c u s t o m e r ' s c a r t h a t was i n t h e shop f o r w a r r a n t y work. Both
f o r e i g n and d o m e s t i c d e a l e r s were s p l i t i n t h e i r p r a c t i c e s ,
s i x t e e n d e a l e r s p r o v i d e d f r e e l o a n e r c a r s and f i f t e e n d e a l e r s
p r o v i d e d a r e n t a l c a r . Only t h r e e d e a l e r s had no t y p e o f
replacement c a r a v a i l a b l e .
G e n e r a l l y , t h e l o a n e r s and r e n t a l s
were g i v e n o u t on a f i r s t - c o m e , f i r s t - s e r v e d b a s i s , a l t h o u g h
arrangements c o u l d be made i n advance.
The customer whose
c a r would be i n o p e r a b l e f o r more t h a n one day was u s u a l l y
given preference i n obtaining a c a r .
The r e n t a l c h a r g e d f o r
c a r s ranged from a low o f $2.00 a day t o $8.00 a day p l u s
10 c e n t s a m i l e .
e.
Warranty a s a S a l e s Item
D e a l e r s were a l s o asked i f t h e y used t h e w a r r a n t y a s a
s a l e s i t e n . D e a l e r s i n d i c a t e d tkhat i n 1969 t h e p r a c t i c e was
t o u s e the w a r r a n t y a s 2 s a l e s i t e m s i n c e , a t t h a t t h e , t h e
5 y e a r s o r 50,000 m i l e s extended w a r r a n t y was s t i l l b e i n g
offered.
I n 1971, however, none o f t h e d o m e s t i c d e a l e r s were
using t h e warranty a s a s e l l i n q p o i n t , while t h e f o r e i g n
d e a l e r s were s p l i t i n t h e i r p r a c t i c e s .
Both Datsun o f Hawaii
and Volkswaqen a r e emphasizing t h e i r w a r r a n t i e s s i n c e t h e y
a r e o f f e r i n g a 2 y e a r s o r 24,000 m i i e s w a r r a n t y a s compared t o
t h e I :Jear o r 1 2 , 0 0 0 miles warrar,ty h e i n i ; ~ivc:: by d ~ m s t i i .
dealers a n d Toyota d e a l e r s .
I,EC;ISI,ATIVF, ATTEMPTS TO SOLVE WARRANTY PROBLEMS
Part I. State Attempts
S i n c e 1 9 6 7 numerous s t a t e s have t r i e d t o d e a l w i t h t h e
w a r r a n t y problem i n o r d e r t o p r o t e c t b o t h t h e d e a l e r s and t h e
consumers. The s u b j e c t m a t t e r o f t h e b i l l s and s t a t u t e s examined,
f o r t h e p u r p o s e s o f t h i s r e p o r t , w i l l be broken down i n t o t h r e e
b a s i c c a t e g o r i e s - p r e d e l i v e r y s e r v i c i n g , w a r r a n t y reimbursement,
and w a r r a n t y r e q u i r e m e n t s . A f o u r t h c a t e g o r y , l a b e l e d m i s c e l l a n e o u s , is composed o f a t t e m p t s which a p p e a r t o d e a l w i t h t h e r e s u l t s
of t h e w a r r a n t y problem r a t h e r t h a n t h e problem i t s e l f .
Predelivery Servicing
M a s s a c h u s e t t s , M i s s i s s i p p i , Tennessee, and Wisconsin have
passed s t a t u t e s r e q u i r i n g manufacturers t o s p e c i f y t h e d e a l e r ' s
p r e d e l i v e r y and p r e p a r a t i o n o b l i g a t i o n s .
Such s p e c i f i c a t i o n s ,
t o g e t h e r w i t h a s c h e d u l e o f compensation f o r performance o f t h e
o b l i g a t i o n s , must be f i l e d w i t h t h e a t t o r n e y g e n e r a l o f t h e
s t a t e o r t h e e q u i v a l e n t of t h e H a w a i i Motor V e h i c l e I n d u s t r y
L i c e n s i n g Board.
The compensation i n t h e s c h e d u l e s must be
r e a s ~ n a b l e ,and
~ M i s s i s s i p p i r e q u i r e s t h e reasonableness of
t h e compensation t o b e approved by i t s motor v e h i c l e commission.2
A l l s t a t e attempts t o control predelivery s e r v i c e provide
t h a t f i l e d statement of predelivery d u t i e s s h a l l c o n s t i t u t e the d e a l e r ' s
o n l y r e s p o n s i b i l i t y f o r p r o d u c t l i a b i l i t y between t h e d e a l e r and
h i s manufacturer.
T h i s p r o v i s o i s made s o t h a t t h e d e a l e r w i l l
n o t be r e s p o n s i b l e f o r performing any p r e d e l i v e r y and p r e p a r a t i o n
work n o t s t a t e d i n t h e s c h e d u l e , and presumably t h e d e a l e r c o u l d
r e f u s e t o a c c e p t a v e h i c l e n e e d i n g such work.3 T h i s would t e n d
t o a l l e v i a t e t i e d e a l e r ' s problems i n t h e c a s e o f p o o r l y p r o d u c e d v e h i c l e s a s d i s c u s s e d i n C h a p t e r s I11 and I V .
The e x p e r i e n c e s o f t h e f o u r s t a t e s w i t h t h i s t y p e o f
l e g i s l a t i o n have been v e r y poor u n t i l r e c e n t l y . X a n u f a c t u r e r s
would e s t i m a t e t h e c o s t o f t h e p r e d e l i v e r y s e r v i c i n g p e r v e h i c l e
and t h a t amount would be added t o t h e d e a l e r ' s i n v o i c e w i t h a n
a d d i t i o n a l charge of 7 per c e n t of t h e increase t o cover the
f e d e r a l e x c i s e t a x . To i l l u s t r a t e , i f t h e normal c a r i n v o i c e was
$4,000 and t h e p r e d e l i v e r y c o s t s were $50, t h e new i n v o i c e p a i d
by t h e d e a l e r b e a r s t h e i n c r e a s e o f $50 p l u s $3.50 t a x .
The d e a l e r s
i n n e i g h b o r i n g s t a t e s w i t h a n i n v o i c e o f $4,000 t h u s g a i n e d a
competitive advantage over t h e d e a l e r s w i t h t h e higher invoice p r i c e
When f a c e d w i t h t h i s t y p e o f m a n u f a c t u r e r ' s p r a c t i c e , t h e
d e a l e r s i n Massachusetts vigorously p r o t e s t e d a g a i n s t t h e p r a c t i c e
a s b e i n g i n v i o l a t i o n o f t h e p o l i c y and v e r y terms o f t h e adopted
s t a t u t e . A p p a r e n t l y , t h e p r e s s u r e o f t h e d e a l e r s f o r c e d General
Motors t o announce a new p r a c t i c e which p r o v i d e d t h a t new c a r
i n v o i c e c h a r g e s would be i n c r e a s e d e v e n l y on a n a t i o n a l b a s i s ,
and d e a l e r s would b e reimbursed f o r t h e c o s t of t h e w a r r a n t y work
on e a c h c a r , p a y a b l e a s t h e work i s performed.4
I f t h e General Motors' p o l i c y i s f o l l o w e d by a l l m a n u f a c t u r e r s ,
t h e n t h i s t y p e o f s t a t u t e would a p p e a r t o s o l v e a t l e a s t two o f
t h e problems c a u s e d by t h e d e a l e r " p r e d e l i v e r y o b l i g a t i o n s t h a t o f poor f a c t o r y q u a l i t y c o n t r o l c a u s i n g e x t r a work and t h a t
o f u n f a i r reimbursement t o t h e d e a l e r . A t h i r d problem - t h e
number o f c a r s a d e a l e r s e l l s e a c h y e a r p e r a v a i l a b l e manpower f o r
p r e s e r v i c i n g c o u l d p e r h a p s b e s o l v e d by r e q u i r i n g t h e d e a l e r s t o
have a c e r t a i n r a t i o o f mechanics p e r n u d e r o f new c a r s s o l d ,
b a s e d on t h e p r e v i o u s y e a r ' s e x p e r i e n c e o r p r o j e c t e d s a l e s o r a
combination t h e r e o f .
Warranty Reimbursement
F l o r i d a , M i s s i s s i p p i , M a s s a c h u s e t t s , Tennessee, and Wisconsin
h a v e adopted s t a t u t e s r e q u i r i n g t h a t m a n u f a c t u r e r s r e a s o n a b l y
compensate d e a l e r s f o r w a r r a n t y work.5 Both M a s s a c h u s e t t s
and M i s s i s s i p p i a l s o r e q u i r e d e a l e r ' s c l a i m s t o be approved o r
d i s a p p r o v e d w i t h i n 30 d a y s f o l l o w i n g r e c e i p t and t o be p a i d
w i t h i n 30 d a y s f o l l o w i n g a p p r o v a l . 6
Tennessee and M i s s i s s i p p i
r e q u i r e t h e w a r r a n t y reimbursement r a t e t o be n o t l e s s t h a n t h e
r e t a i l l a b o r r a t e t h e d e a l e r c h a r g e s customers who a r e n o t e n t i t l e d
t o f r e e w a r r a n t y work,7 The Arizona and C a l i f o r n i a l e g i s l a t u r e s
have c o n s i d e r e d s i m i l a r l e g i s l a t i o n b u t f a i l e d t o p a s s such l e g i s l a t i o n . $
The Tennessee s t a t u t e i s now i n l i t i g a t i o n i n t h e f e d e r a l c o u r t
a s a r e s u l t o f s u i t s b r o u g h t immediately a f t e r i t s p a s s a g e by Ford,
General Motors, C h r y s i e r , and I n t e r n a t i o n a l R a r v e s t e r . 9
Since
t h e Tennessee s t a t u t e e n a c t e d i n 1968 was t h e f i r s t o f i t s k i n d ,
o t h e r s t a t e s w i t h s i m i l a r s t a t u t e s a r e h o l d i n g t h e enforcement of t h e
s t a t u t e s i n abeyance u n t i l a d e c i s i o n i s r e a c h e d .
The m a n u f a c t u r e r s wish t o have t h e Tennessee s t a t u t e d e c l a r e d
u n c o n s t i t u t i o n a l a s an unreasonable i n t e r f e r e n c e with i n t e r s t a t e
commerce and a v i o l a t i o n o f t h e f o u r t e e n t h amendment's due p r o c e s s
clause.
The l a t t e r argument i s based, i n g a r t , on t h e ground t h a t
t h e Tennessee Motor V e h i c l e Commission, which i s c h a r g e d w i t h e n f o r c e ment o f t h e new law, i s composed a l m o s t e n t i r e l y o f a u t o m o b i l e
d e a l e r s . l O The due p r o c e s s argument a s used i n t h e Tennessee c a s e
would n o t a p p e a r t o be a p p l i c a b l e i n Hawaii, s i n c e t h e Hawaii Notor
V e h i c l e I n d u s t r y L i c e n s i n g Board h a s more p u b l i c members t h a n
LEGISLATIVE ATTEWTS TO SOLVE WARRANTY PROBLEMS
d e a l e r members.
Concerning t h e i s s u e of i n t e r f e r e n c e w i t h i n t e r s t a t e commerce, t h e t r e n d of l e g a l a u t h o r i t y i s t o d e c l a r e s t a t e laws
r e g u l a t i n g manufacturer-dealer r e l a t i o n s h i p s t o be c o n s t i t u t i o n a l
on t h e b a s i s t h a t t h e y d o n o t impose an undue burden on i n t e r s t a t e
commerce. l1 One commentator b e l i e v e s t h a t t h e s t a t u t e i s c o n s t i tutional :
I n view of such f e d e r a l p r e c e d e n t s a s t h e DavisBacon Act, 4 0 U.S.C. Sec. 2 7 6 a ( a ) ( 1 9 6 4 ) ( p r e s c r i b i n g
" p r e v a i l i n g wages" f o r l a b o r on government c o n s t r u c t i o n
c o n t r a c t s ) , t h e Walsh-Healey Act, 4 1 U . S . C . Sec. 3 5 ( b )
( 1 9 6 4 ) ( r e q u i r i n g t h a t s p e c i f i e d l o c a l l a b o r r a t e s be
i n c o r p o r a t e d i n t o government procurement c o n t r a c t s ) ,
and t h e F a i r Labor S t a n d a r d s A c t , 29 U . S . C . Sec. 206
( 1 9 6 4 ) ( p r e s c r i b i n g minimum l a b o r r a t e s ) , it i s d i f f i c u l t
t o comprehend t h e b a s i s f o r a c o n s t i t u t i o n a l a t t a c k on
s t a t e legislation prescribing " r e t a i l " labor r a t e s
f o r w a r r a n t y work, p a r t i c u l a r l y s i n c e s t a t e s a r e n o t conf r o n t e d w i t h t h e j u r i s r c t i o n a l problems i n h e r e n t i n
the federal statutes.
19'
I f c o n s t i t u t i o n a l , t h i s t y p e o f s t a t u t e would s o l v e t h e
d e a l e r ' s problem of i n a d e q u a t e reimbursement.
Warranty Requirements
C a l i f o r n i a a p p e a r s t o be t h e o n l y s t a t e which h a s p a s s e d
a s t a t u t e e s t a b l i s h i n g warranty requirements. l3 T h i s s t a t u t e ,
p a s s e d i n l a t e 1970, a p p l i e s t o a l l consumer goods bought p r i m a r i l y f o r p e r s o n a l , f a m i l y , o r household p u r p o s e s .
The s t a t u t e r e q u i r e s e x p r e s s w a r r a n t i e s t o b e s e t f o r t h
i n r e a d i l y understood language and t o c l e a r l y i d e n t i f y t h e p a r t i e s
I f a m a n u f a c t u r e r makes an e x p r e s s w a r r a n t y
making t h e w a r r a n t y .
on consumer goods s o l d w i t h i n t h e S t a t e of C a l i f o r n i a , he i s
r e q u i r e d t o m a i n t a i n s u f f i c i e n t s e r v i c e and r e p a i r f a c i l i t i e s t o
c a r r y o u t t h e terms of t h e w a r r a n t y o r be l i a b l e t o
e retail seller
f o r t h e o b l i g a t i o n s imposed by t h e e x p r e s s w a r r a n t y .
The s t a t u t e
a l s o imposes r e q u i r e m e n t s on t h o s e m a n u f a c t u r e r s who d o n o t maint a i n s e r v i c e f a c i l i t i e s w i t h i n t h e s t a t e , b u t who s e l l i n t h e s t a t e . 1 5
The main i n t e r e s t s i n t h e C a l i f o r n i a s t a t u t e a r e t h e r e q u i r e m e n t s
s e t t i n g f o r t h t h e w a r r a n t y i n r e a d i l y u n d e r s t o o d language and maint a i n i n g s e r v i c e f a c i l i t i e s w i t h i n t h e s t a t e . While t h e r e q u i r e m e n t
t o m a i n t a i n s e r v i c e f a c i l i t i e s may i n d i r e c t l y h e l p t h e p l i g h t o f
t h e new c a r d e a l e r , i t i s n o t a d i r e c t s o l u t i o n t o t h e problem a s
a r e t h e s t a t u t e s c o n c e r n i n g p r e d e l i v e r y s e r v i c i n g and w a r r a n t y
reimbursement.
Miscellanous
I l l i n o i s h a s a s t a t u t e which a p p l i e s t o any motor v e h i c l e s o l d
a f t e r J a n u a r y l , 1968, making t h e d e a l e r l i a b l e t o t h e p u r c h a s e r
f o r a l i s t e d p e r c e n t a g e o f t h e c o s t of r e p a i r o f t h e power t r a i n a s
d e f i n e d , s i m i l a r t o t h e m a n u f a c t u r e r ' s d e f i n i t i o n i n a power t r a i n
warranty,
The s t a t u t e f u r t h e r 2 r o v i d e s t h a t t h e d e a l e r and t h e
customer may n e g o t i a t e a s a l e n o t s u b j e c t t o t h e s t a t u t e s o l o n g
a s t h e r e i s a d i s c l a i m e r p r i n t e d above t h e s i g n a t u r e o f t h e c u s tomer.l6
There i s no i n f o r m a t i o n on how e f f e c t i v e t h i s s t a t u t e i s ,
n o r a r e t h e r e any c o u r t c a s e s i n t e r p r e t i n g t h e p r o v i s i o n s o f t h e
statute.
Two o t h e r s t a t e s have i n t r o d u c e d b i l l s i n t h e w a r r a n t y
a r e a , a l t h o u g h t h e y do n o t a p p e a r t o go t o t h e h e a r t o f t h e problem.
F l o r i d a i n t r o d u c e d a b i l l t o r e q u i r e t h e m a n u f a c t u r e r t o reinhurse
a c a r owner f o r any t i m e l o s t from X i s o c c u p a t i o n due t o a d e f e c t
d i s c o v e r e d w i t h i n s i x non-kks a f t e r d e l i v e r y of t h e e a r . 1 7 A s i m i l a r
b i l l was s u b m i t t e d i n Minnesota r e q u i r i n q reirchursement f o r any
l o s s o f u s e o f t h e c a r i n e x c e s s o f a reasonable t i m e which must
n o t exceed s e v e n c a l e n d a r d a y s . The m a n u f a c t u r e r " w a r r a n t y p e r i o d i s
extended f o r t h e p e r i o d i n e x c e s s o f a r e a s o n a b l e p e r i o d b u t t h e
d e a l e r i s a l l o w e d t o f u r n i s h a r e p l a c e m e n t v e h i c l e which would suspend
t h e o p e r a t i o n o f t h e proposed b i l l . 1 8
Both b i l l s a r e a i n e d a t consumer
p r o t e c t i o n b u t n e i t h e r o f t h e s e t i l l s would h e l p t h e predicament o f
the dealer.
On "&e f e d e r a l l e v e l Congress h a s i n t r o d u c e d b i l l s on w a r r a n t i e s
b u t , t o d a t e , nothing has passed.
T h e f i r s t b i l l s were i n t r o d u c e d
i n 1 9 6 7 , i n 'be 9 0 t h Congress, w i t h b i o d i f f e r e n t a p p r o a c h e s
b e i n g used.
The f i r s t approach was t o p r o t e c t the consumer by
r e q u i r i n g f u l l d i s c l o s u r e o f t h e terms an2 c o n d i t i o n s of t h e w a r r a n t i e s
and by c r e a t i n g a n Advisory C o u n c i l on G u a r a n t e e s , W a r r a n t i e s , and
S e r v i c i n g t o c o n d u c t a s t u d y o f t h e problems a r i s i n g i n s e c u r i n g
a d e q u a t e performance under w a r r a n t i e s - 1 9 T h i s b i l l would have a p p l i e d
The main concern
t o motor v e h i c l e s a s well a s o t h e r merchandise.
o f t h e b i i i w a s t o r e q u i r e a complete 2 i s c l o s u r e of 5?e t e r m of t h e
w a r r a n t y and tile o b l i g a t i o n s of a l l p a r t i e s t o t h e w a r r a n t y ,
The second approach was t o p r o v i d e h i g h e r s t a n d a r d s o f q u a l i t y
c o n t r o l i n t h e manufacture o f motor v e h i c l e s and t o provide f o r
t h e establish-meat o f s t a n 2 a r d s f o r n e w m t c r v e h i c l e w a r r a n t i e s
and f o r motor v e h i c l e d e a l e r f r a n c h i s e agreements.20
This b i l l
would have p r o v i d e d f o r a t l e a s t once a y e a r f a c t o r y i n s p e c t i o n o f
m a n u f a c t u r e r s producing new motor vehicles f c r s a l e i n i n t e r s t a t e
cenrterce.
LEGISLATIVE ATTPIPTS TO SOLVE ClAXP.A.JTY
ROBLEXS
Ic t h e 9 1 s t Congress, 1969 t o 1970, t h e r e was more a c t i v i t y
i n w a r r a n t y l e g i s l a t i o n w i t h s e v e n house b i l l s and one s e n a t e
b i l l b e i n g i n t r o d u c e d . A l l b i l l s f a i l e d t o p a s s b o t h h o u s e s of
(1) t h e
Congress. These b i l l s , g e n e r a l l y , f e l l i n two c a t e g o r i e s :
s e t t i n g o f minimum s t a n d a r d s by a f e d e r a l agency t o g u a r a n t e e
comprehensive w a r r a n t y p r o t e c t i o n t o p ~ r c h a s e r s ,and
~ ~ (2) requiring
d i s c l o s u r e s t a n d a r d s f o r w a r r a n t i e s and g u a r a n t e e s o f consumer
products. 22
S i n c e t h e s t a r t o f t h e 92nd Congress i n 1971, e i g h t house
b i l l s and t h r e e s e n a t e b i l l s on w a r r a n t i e s have been i n t r o d u c e d .
Some o f t h e s e b i l l s a r e , i n s u b s t a n c e , s i m i l a r t o t h o s e b i l l s t h a t
were c o n s i d e r e d i n t h e 9 1 s t Congress.23
Two b i l l s p r o v i d e i n c r e a s e d w a r r a n t y p r o t e c t i o n f o r consumers.24
These b i l l s a p p l y t o a l l consumer p r o d u c t s o v e r $ 1 0 and a l l o w t h e
F e d e r a l Trade Commission t o p a s s r u l e s and r e g u l a t i o n s r e q u i r i n g
The
f u l l and conspicuous d i s c l o s u r e o f t h e t e r m s o f t h e w a r r a n t y .
commission is n o t allowed t o p r e s c r i b e t h e d u r a t i o n o f t h e w a r r a n t y
n o r t o r e q u i r e t h a t w a r r a n t i e s be g i v e n .
I f a warranty is given,
t h e n the p r o v i s i o n o f t h e b i l l s would a p p l y and t h e w a r r a n t y would h a v e
t o meet t h e s p e c i f i c a t i o n s i n t h e b i l l s . House b i l l H . R. 6314 h a s had
a h e a r i n g b e f o r e t h e House I n t e r s t a t e and F o r e i g n Commerce Committee,
b u t t h e r e s u l t s o f the h e a r i n g a r e as y e t unknown.
One b i l l p r o v i d e s f o r t h e e s t a b l i s h m e n t o f n a t i o n a l s t a n d a r d s
f o r w a r r a n t i e s made w i t h r e s p e c t t o consumer goods d i s t r i b u t e d i n
o r a f f e c t i n g i n t e r s t a t e commerce.25 The b i l l p r o v i d e s t h a t w a r r a n t i e s
b e i n g o f f e r e d must be found by t h e F e d e r a l Trade Commission t o
conform t o s t a n d a r d s e s t a b l i s h e d f o r w a r r a n t i e s under the b i l l .
F u r t h e r , such w a r r a n t y must be r e g i s t e r e d w i t h t h e Commission a f t e r
d e t e r m i n a t i o n o f c o n f o r m i t y . The F e d e r a l Trade Commission i s g i v e n
e x t e n s i v e r u l e and r e g u l a t i o n - m a k i n g power c o n c e r n i n g w a r r a n t i e s
under t h e b i l l .
The major concern o f t h e s e c o n g r e s s i o n a l b i l l s i s t o i n s u r e
t h a t i f a n e x p r e s s w a r r a n t y i s b e i n g o f f e r e d , c e r t a i n minimum
t e r m s must be d i s c l o s e d and c o n d i t i o n s i n t h e w a r r a n t y met. F o r
example, s e n a t e b i l l S . 986 ( 1 9 7 1 ) which h a s passed t h e s e n a t e
and is now i n t h e House I n t e r s t a t e and F o r e i g n Commerce Committee
would r e q u i r e t h e d i s c l o s u r e of t h e p r o v i s i o n s o f t h e w a r r a n t y
i n s i m p l e and r e a d i l y u n d e r s t o o d l a n g u a g e . The F e d e r a l Trade
Commission i s n o t a l l o w e d t o p r e s c r i b e t h e d u r a t i o n o f t h e w a r r a n t y ,
n o r r e q u i r e &?at a w a r r a n t y be q i v e n . I f a w a r r a n t y i s g i v e n ,
i t s p r o v i s i o n s must be d i s c l o s e d p u r s u a n t t o r e g u l a t i o n s o f t h e
F e d e r a l Trade Commission which r e g u l a t i o n s may r e q u i r e i n c l u s i o n
o f any o f t h e f o l l o w i n g p r o v i s i o n s i n t h e w a r r a n t y :
(1) The c l e a r i d e n t i f i c a t i o n o f t h e name and a d d r e s s o f
t h e warrantor.
NEW CAR PIARRANTIES
I d e n t i t y of t h e c l a s s o r c l a s s e s o f p e r s o n s t o
whom t h e w a r r a n t y i s e x t e n d e d .
The p r o d u c t s o r p a r t s c o v e r e d .
A s t a t e m e n t o f what t h e w a r r a n t o r w i l l d o i n t h e
e v e n t of a d e f e c t o r m a i f u n c t i o n
and f o r what p e r i o d o f t i m e ,
-
a t whose expense -
A s t a t e m e n t o f what t h e p u r c h a s e r must do and expenses
he must b e a r .
E x c e p t i o n s and e x c l u s i o n s from t h e terms o f t h e w a r r a n t y .
The s t e p - b y - s t e p p r o c e d u r e which t h e p u r c h a s e r s h o u l d
t a k e i n o r d e r t o o b t a i n performance o f any o b l i g a t i o n
under t h e w a r r a n t y , i n c l u d i n g t h e i d e n t i f i c a t i o n o f any
c l a s s o f p e r s o n s a u t h o r i z e d t o perform t h e o b l i g a t i o n s
s e t f o r t h i n t h e warranty.
On what d a y s and d u r i n g what h o u r s t h e w a r r a n t o r w i l l
perform h i s o b l i g a t i o n s .
The p e r i o d o f time w i t h i n which, a f t e r n o t i c e o f malf u n c t i o n o r d e f e c t , t h e w a r r a n t o r w i l l under normal
c i r c u m s t a n c e s r e p a i r , r e p l a c e , o r o t h e r w i s e perform
any o b l i g a t i o n s under t h e w a r r a n t y .
The a v a i l a b i l i t y o f any i n f o r m a l d i s p u t e s e t t l e m e n t
p r o c e d u r e o f f e r e d by t f e w a r r a n t o r and a r e c i t a l t h a t t h e
p u r c h a s e r must r e s o r t t o such p r o c e d u r e b e f o r e purs u i n g any l e g a l remedies i n t h e c o u r t s .
A r e c i t a l t h a t any p u r c h a s e r who s u c c e s s f u l l y p u r s u e s
h i s l e g a l remedies i n c o u r t may r e c o v e r t h e r e a s o n a b l e
costs incurred, including reasonable a t t o r n e y s Y e e s . 2 6
Under S . 356, t h e m a n u f a c t u r e r nay o f f e r e i t h e r a l i n i t e d o r
f u l i w a r r a n t y b u t it must be c o n s p i c u o u s l y s t a t e d whether a l i m i t e d o r
f u l l warranty i s being o f f e r e d .
I f a f u l l w a r r a n t y i s o f f e r e d i t must
i n c o r p o r a t e f e d e r a l s t a n d a r d s which r e q u i r e t h e m a n u f a c t u r e r t o :
( I ) r e p a i r o r r e p l a c e any m a l f u n c t i o n i n g o r d e f e c t i v e w a r r a n t e d
consumer 2 r o d u c t ; (2) w i t h i n a r e a s o n a b l e t i n e ; ant? ( 3 ) w i t h o u t c h a r g e .
A l i m i t e d w a r r a n t y i s a w a r r a n t y u h i c h does n o t i n c o r p o r a t e any o f
Lhe t h r e e f e d e r a l s t a n d a r d s . 2 7
S e n a t e b i l l S . 9 8 6 f u r t h e r p r o v i d e s t h a t s a p p l i e r s engaged i n
t h e b u s i n e s s o f making a consuner p r o d u c t o r o f f e r i n g s e r v i c e cont r a c t s t o consumers e i t h e r d i r e c t l y o r i n d i r e c t l y a r e encouraged t o
e s t a b l i s h i n f o r m a l d i s p ~ t es e t t l e m e n t p r o c e d u r e s f o r s e t t i i n g consumer
c o r p l a i n t s . T h e i n f o r x a i settle~cntp r o c e d u r e s a r e t r i h e c r e a t e 6 by
LZGISLATIVE ATTEMPTS TO SOLVE W.?PJLyTY
PROBLEMS
t h e s u p p l i e r s i n c o o p e r a t i o n w i t h i n d e p e n d e n t and governmental e n t i t i e s
p u r s u a n t to g u i d e l i n e s e s t a b l i s h e d by t h e F e d e r a l T r a d e Commission.
I f t h e informal s e t t l e m e n t procedures a r e incorporated i n a w r i t t e n
w a r r a n t y , t h e n t h e i n f o r m a l p r o c e d u r e s must be used by the consumer
p r i o r t o b r i n g i n g a c o u r t s u i t . A f t e r p u r s u i n g t h e i n f o r m a l proced u r e s and p r o v i d i n g a s u p p l i e r w i t h r e a s o n a b l e t i m e t o m e e t t h e
consumer's demands, t h e consumer may go t o c o u r t . I f t h e consumer
wins i n c o u r t , t h e n t h e consumer may r e c o v e r a sum e q u a l t o
t h e a g g r e g a t e amount o f c o s t s and e x p e n s e s , i n c l u d i n g a t t o r n e y f e e s . 2 8
ciasiThe b i l l s i n t h e 92nd Congress would h e l p t h e consumer by:
f y i n g what t h e consumer i s r e c e i v i n g from a w a r r a n t y ; i n s u r i n g
t h a t t h e consumer w i l l r e c e i v e c e r t a i n minimum p r o t e c t i o n s ; and by
e s t a b l i s h i n g i n f o r m a l c o m p l a i n t p r o c e d u r e s t h a t t h e consumer may
u s e . 29 V i o l a t i o n s o f t h e s e b i l l s , g e n e r a l l y , a r e made v i o l a t i o n s
o f t h e F e d e r a l Trade Commission A c t and c o u r t a c t i o n s by t h e Commission
o r by t h e United S t a t e s A t t o r n e y General may be used t o e n f o r c e the
provisions of t h e b i l l s . 3 0
The b i l l s p r e s e n t l y b e i n g c o n s i d e r e d by Congress a r e p r i m a r i l y
consumer o r i e n t e d . None o f t h e b i l l s a d d r e s s themselves t o t h e
major problems o f d e a l e r s c o n s i d e r e d by t h i s r e p o r t . Any a t t e m p t
t o f u l l y s o l v e t h e problems c r e a t e d by a u t o m o b i l e w a r r a n t i e s must
a l s o c o n s i d e r t h e p l i g h t o f t h e new c a r d e a l e r s .
Part I. Conclusions
The f o r e g o i n g c h a p t e r s have p o i n t e d o u t t h a t when c a r s i e a v e
t h e f a c t o r y , t h e q u a l i t y of such c a r s i s n o t a s good a s i t should
be.
T h i s i n t u r n p l a c e s a burden on ?he d e a l e r s which i s r e f l e c t e d
i n i n a d e q u a t e p r e d e l i : ~ e r y and w a r r a n t y s e r v i c e , and i n consumer
d i s s a t i s f a c t i o n w i t h such s e r v i c e s .
On t h e a v e r a g e t h r o u g h o u t the n a t i o n , o v e r a s e v e n y e a r
p e r i o d , 3 4 . 4 p e r c e n t of domestic c a r b u y e r s were 6 i s s a t i s f i e d
w i t h t h e i r c a r s upon d e l i v e r y .
For 1969 c a r s i n Hawaii, t h a t
f i g u r e was h i g h e r a t 4 5 . 5 p e r c e n t . A s m a l l e r p e r c e n t a g e o f f o r e i g n
c a r buyers a r e d i s s a t i s f i e d with t h e i r c a r s with t h e n a t i o n a l
f i g u r e f o r 1 9 7 0 b e i n g 20 p e r c e n t (no comparable f i g u r e s a r e
a v a i l a b l e f o r 1 9 6 9 ) . The Hawaii r a t e f o r 1 9 6 9 c a r s i s 23.3 p e r c e n t .
Although t h e r e a r e no n a t i o n a l f i g u r e s f o r d i s s a t i s f a c t i o n w i t h t h e
c a r a s f i n a l l y received a f t e r t h e c o r r e c t i o n of predelivery d e f e c t s ,
i n Hawaii such d i s s a t i s f a c t i o n averaged 24.9 p e r c e n t f o r t h e donest i c c a r b u y e r s and 1 0 p e r c e n t f o r t h e f o r e i g n c a r b n y e r s .
I n t h e a r e a of w a r r a n t y s e r v i c e , t h r o u g h o u t t h e n a t i o n d u r i n g
t h e p e r i o d 1963 t o 1370, 2 5 p e r c e n t o f t h o s e p e r s o n s a s k i n g f o r
w a r r a n t y r e p a i r s were d i s s a t i s f i e ? . w i t h such r e p a i r s , N a t i o n a l l y ,
t h e r e a r e no s e p a r a t e f i g u r e s f o r domestic and! f o r e i g n c a r s .
In
Hawaii, 2 3 . 8 p e r c e n t o f domestic c a r owners and 17.5 p e r c e n t o f
f o r e i g n c a r owners, o r an a v e r a u e o f 2 0 . 7 p e r c e n t , were d i s s a t i s f i e d w i t h t h e w a r r a n t y r e p a i r s made on t h e i r 1969 c a r s .
.
-
F u r t h e r , in Hawaii, t h e B u r e a u ' s s u r v e y i n d i c a t e d . t h a t t h e r e
i s a poor u n d e r s t a n d i n g o f t h e w a r r a n t y document by t h e consumer.
The w a r r a n t y q i v e n t h e consumer i s u s u a l l y a one page document.
The
d e a l e r , however, i n s e r v i c i - g a -warranty c l a i m i s guided by t h e
p o l i c i e s and p r o c e d u r e s e s t s b l i s h e d by t k rzarmfacturer, wiich p r o c e d u r e s and! ~ o l i c i e st3e cons>xrer i s unaware cf. This sometimes
l e a d s t o a n i s u n d e r s t a n d i ~ q r~e s u b t i n ? in consurter d i s s a t i s f a c t i o n *
D e a l e r s themselves have c r a b l e n s i n t n e i r d e a l i n g s w i t h t i e
m a n u f a c t u r e r s , which i n t u r n may a f f e c t t h e r e l a t i o n s h i p between
t h e d e a l e r and t h e c o n s u e e r , D e a i e r s t h r o u g h o u t t h e n a t i o n and i n
Hawaii a r e n o t reimbursed f o r t h e i r f a l l c o s t of p r e d e l i v e r y s e r v i c i n c j
and, i n some c a s e s , must a b s o r b c o s t s due t o poor f a c t o r y q u a l i t y
c o n t r o l . Also, d e a l e r s a r e underpaid f o r t h e i r l a b o r c o s t s because
o f t h e i n a d e q u a t e " f i a t r a t e t i n e " and low h o u r l y r c h b u r s e n e n t r a t e
s e t by t h e m a n u f a c t u r e r . These underpaynents c a y c a u s e some d e a l e r s
t o p e r f o r 2 helm par i n p r e d c l i v e m- and w a r r a n t y s e r v l. c l. n c .
CONCLUSIONS L I D RE;COMHENDATIONS
To a l l e v i a t e some o f the w a r r a n t y problems p o i n t e d o u t i n t h i s
r e p o r t , s e v e r a l a l t e r n a t i v e recommendations a r e d i s c u s s e d i n the
following section.
Pan 11. Recommendations
Consumer d i s s a t i s f a c t i o n w i t h t h e d e a l e r , and d e a l e r d i s s a t i s f a c t i o n
w i t h t h e m a n u f a c t u r e r ' s reimbursement p o l i c i e s r e p r e s e n t two a r e a s
i n which problems may be c o r r e c t e d through l e g i s l a t i o n .
Dealer D i s s a t i s f a c t i o n
i
Those s t a t e s which have adopted s t a t u t e s r e q u i r i n g m a n u f a c t u r e r s
t o s p e c i f y t h e d e a l e r ' s p r e d e l i v e r y and p r e p a r a t i o n o b l i g a t i o n s and
t o e s t a b l i s h a s c h e d u l e o f compensation f o r t h e performance o f
o b l i g a t i o n s a p p e a r t o have had good r e s u l t s .
I n Hawaii o n l y G e n e r a l
Motors h a s adopted a method o f payment a c c e p t a b l e under this t y p e
o f s t a t u t e . T h i s form o f reimbursement r e q u i r e s d i r e c t reimbursement
t o t h e d e a l e r from t h e m a n u f a c t u r e r f o r p r e d e l i v e r y s e r v i c i n g
i n s t e a d o f reimbursement from t h e consumer t o t h e d e a l e r based on
the list price.
For example, t h e M i s s i s s i p p i s t a t u t e p r o v i d e s :
The [ N i s s i s s i p p i motor v e h i c l e ] c o m i s s i o n may deny
an a p p l i c a t i o n f o r a l i c e n s e , o r revoke o r suspend a
l i c e n s e a f t e r i t has been g r a n t e d , f o r any o f t h e followi n g reasons:
Being a m a n u f a c t u r e r who f o r t h e p r o t e c t i o n
of t h e buying p u b l i c f a i l s t o s p e c i f y t h e d e l i v e r y
and p r e p a r a t i o n o b l i g a t i o n s o f i t s motor v e h i c l e
d e a l e r s p r i o r t o d e l i v e r y of new motor v e h i c l e s t o
r e t a i l b u y e r s . A copy o f t h e d e l i v e r y and p r e p a r a t i o n o b l i g a t i o n s o f i t s motor v e h i c l e d e a l e r s and a
s c h e d u l e of t h e compensation t o b e p a i d t o i t s motor
v e h i c l e d e a l e r s f o r t h e work and s e r v i c e s t h e y s h a l l
b e r e q u i r e d t o perform i n c o n n e c t i o n w i t h such d e l i v e r y
and p r e p a r a t i o n o b l i g a t i o n s s h a l l b e f i l e d w i t h t h e
commission by e v e r y l i c e n s e d motor v e h i c l e m a n u f a c t u r e r
and s h a l l c o n s t i t u t e any such d e a l e r ' s o n l y r e s p o n s i b i l i t y f o r p r o d u c t l i a b i l i t y as between s u c h d e a l e r
and such m a n u f a c t u r e r .
The compensation a s s e t f o r t h
on s a i d s c h e d u l e s h a l l be r e a s o n a b l e and t h e r e a s o n a b l e n e s s t h e r e o f s h a l l be s u b j e c t t o t h e a p p r o v a l of t h e
c o m i s s i o n . Any mechanical, body o r p a r t s d e f e c t s
a r i s i n g from any e x p r e s s o r i m p l i e d w a r r a n t i e s o f any
such m a n u f a c t u r e r s h a l l c o n s t i t u t e such m a n u f a c t u r e r s '
product o r warranty l i a b i l i t y . 1
(9)
NEW CAR WARRAKTIES
Hawaii may a l s o want t o c o n s i d e r a s t a t u t e s i m i l a r t o t h a t
o f M a s s a c h u s e t t s which r e q u i r e s a d e q u a t e and f a i r compensation
f o r l a b o r and p a r t s b u t s e t s no l e v e l o f compensation.
Every m a n u f a c t u r e r , d i s t r i b u t o r , w h o l e s a l e r ,
d i s t r i b u t o r branch o r d i v i s i o n , f a c t o r y branch o r
d i v i s i o n , o r wholesale branch o r d i v i s i o n s h a l l properly
f u l f i l l any w a r r a n t y agreement and a d e q u a t e l y and f a i r l y
compensate e a c h o f i t s motor v e h i c l e d e a l e r s f o r l a b o r
A l l c l a i m s made by motor v e h i c l e d e a l e r s h e r e and p a r t s .
under and under s e c t i o n 5 f o r such l a b o r an2 p a r t s s h a l l
be p a i d w i t h i n 30 days f o l l o w i n g t h e i r a p p r o v a l . A l l such
c l a i m s s h a l l be e i t h e r approved o r d i s a p p r o v e d w i t h i n
30 d a y s a f t e r t h e i r r e c e i p t , and when any such c l a i m
i s d i s a p p r o v e d t h e motor v e h i c l e d e a l e r who s u b m i t s it
s h a l l b e n o t i f i e d i n w r i t i n g of i t s d i s a p p r o v a l w i t h i n
s a i d p e r i o d , and each such n o t i c e s h a l l s t a t e t h e s p e c i f i c
grounds upon which t h e d i s a p p r o v a l i s based.2
There i s no i n f o r m a t i o n c o n c e r n i n g t h e e x p e r i e n c e o f d e a l e r s
i n Massachusetts with t h i s s t a t u t e .
The a p p a r e n t drawback o f s u c h
a s t a t u t e seems t o be t h a t t h e r e i s no d e f i n i t i o n of what a d e q u a t e
and f a i r compensation means o r who i s t o d e t e r m i n e when t h e compens a t i o n i s f a i r and a d e q u a t e . The M a s s a c h u s e t t s s t a t u t e d o e s p r o v i d e
t h a t t h e a t t o r n e y g e n e r a l i s t o e n f o r c e t h e s t a t u t e , b u t such e n f o r c e ment would a p e a r t o b e a f t e r t h e d e a l e r h a s complained o f i n a d e q u a t e
compensation.3 A p o s s i b l e a l t e r n a t i v e t o t h i s method o f enforcement
i s t o a l l o w t h e Hawaii Motor V e h i c l e I n d u s t r y L i c e n s i n g Board t o make
a d e t e r m i n a t i o n a s t o t h e adequacy o f t h e compensation when r e q u e s t e d
by t h e d e a l e r and t h e n r e q u i r e enforcement by t h e a t t o r n e y g e n e r a l
i f t h e m a n u f a c t u r e r s f a i l t o comply w i t h t h e b o a r d ' s d e c i s i o n .
The M a s s a c h u s e t t s s t a t u t e f u r t h e r r e q u i r e s a p p r o v a l o f c l a i m s
f o r reimbursement w i t h i n 30 d a y s a f t e r r e c e i p t by t h e m a n u f a c t u r e r
and payment w i t h i n 30 d a y s a f t e r a p p r o v a l .
T h i s r e q u i r e m e n t does
n o t seem t o speed payment s i n c e 6 0 d a y s c o u l d e l a p s e between r e c e i p t
and payment.
The d e a l e r s i n Hawaii r e c e i v e reirrJ3ursexent a s e a r l y
a s 4 5 days, with t h e average being 72 days, A b e t t e r a l t e r n a t i v e
may be t o r e q u i r e advance payment o r c r e d i t a l l o w a n c e s , such a s
t h a t used by Ford which i s based on a mont"ily a v e r a g e o f t h e d e a l e r ' s
warranvy c o s t s computed by d i v i d i n g t h e p r e v i o u s y e a r ' s w a r r a n t y
c o s t s by t w e l v e , T h i s t y p e o f r e i r b u r s e m e n t would n o t add a g r e a t
burden on t h e m a n u f a c t u r e r s and i s a p p a r e n t l y s n c c e s s f u l i n F o r d ' s
operation.
Consumer D i s s a t i s f a c t i o n
Once t h e d e a l e r i s ai3equatel.y reimbursed f o r h i s work, he w i l l
more l i k e l y improve h i s w a r r a n t y work,
Since b u s i n e s s e s a r e p r o f i t
motivated however, i t would s t i l l be t o a d e a l e r " advantage i n
CONCLUSIONS AND RECOMMENDATIONS
some i n s t a n c e s t o c l a i m t h a t t h e w a r r a n t y d i d n o t a l l o w s u c h work
o r t o c h a r g e f o r w a r r a n t y work when the work s h o u l d b e done f o r
f r e e . A d d i t i o n a l l y , p r e s s u r e i s o c c a s i o n a l l y e x e r t e d by t h e manuf a c t u r e r s upon t h e d e a l e r s n o t t o b e t o o l e n i e n t w i t h w a r r a n t y
complaints.4
Thus, t h e consumer s h o u l d a l s o b e c o n s i d e r e d i n
enacting warranty l e g i s l a t i o n .
A s t a t u t e s i m i l a r t o the C a l i f o r n i a s t a t u t e o r the C o n g r e s s i o n a l
b i l l s e s t a b l i s h i n g c e r t a i n minimum r e q u i r e m e n t s t h a t a w a r r a n t y
must c o n t a i n may be c o n s i d e r e d t o p r o t e c t t h e i n t e r e s t s o f t h e
consumer. The l e g i s l a t i o n s h o u l d r e q u i r e t h e m a n u f a c t u r e r t o pay
f o r t h e r e p a i r o r r e p l a c e m e n t o f any p a r t it s u p p l i e s t h a t i s d e f e c t i v e
i n m a t e r i a l o r workmanship w i t h i n t h e w a r r a n t y p e r i o d , w i t h no except i o n s p e r m i t t e d f o r s u c h items a s b r a k e s o r wheel a l i g n m e n t i f
T h i s would
t h e v e h i c l e i s used f o r o t h e r t h a n b u s i n e s s p u r p o s e s .
a l l o w t h e m a n u f a c t u r e r t o d e t e r m i n e whether o r n o t t o o f f e r a
w a r r a n t y and the l e n g t h o f the w a r r a n t y , w h i l e t h e s t a t e would
d e t e r m i n e t h e minimum coverage.
Enforcement o f w a r r a n t y r e q u i r e m e n t s s h o u l d be s o l e l y the respons i b i l i t y o f t h e Consumer P r o t e c t o r .
Placement o f t h e b u r d e n o f
e n f o r c e m e n t on t h e Consumer P r o t e c t o r i n s t e a d o f t h e Motor V e h i c l e
I n d u s t r y L i c e n s i n g Board w i l l p r e v e n t a c o n f l i c t o f i n t e r e s t f o r
t h e board, s i n c e t h e b o a r d would b e c h a r g e d w i t h p r o t e c t i n g t h e d e a l e r s ,
i n t h e i r warranty r e l a t i o n s with t h e manufacturer.
FOOTNOTES
Chapter I
Xodel car year is c5e period from the introduction of a new car in September to August
of the following year.
S. Federal Trade Commission, Staff Report
on Autorr.obi:e tiarranties (Kashingiun: C. 5 .
Govermenr Printing Office, 1568). p. 24.
(Hereinafter cited as FTC Report, 1468.)
U.
FTC Report, 1968, p. 2;.
The exclusions specifically include engine
tune-up, adjustments of wheels, brakes, or
clutch, lubrication and oil change, and
replacement of items such as brake and ciutch
~ .m i n g s ,spark plugs, ignition points, filters,
clutch plates, and light bulbs. Also excluded
is deterioration l i i e to normal wear or exposure
of soft trim, decorative bright metal trim,
pointed parts, rubber parts and the like.
.
?TC Report, 1968, pp. 27-28.
M.,Appendix
of Liability: i970 A s s m g e r Cars (Except
ifaverifks and Cortinasj and Light T r u c k s " ;
General :%tors Corporacion, "19iC Xaiei Ger.rral
Motors Passeager Car Xev Vehicle !iarracty".
Ford Motor Co-npaay, "l97l Xodel Passenger Car
(Except Capri, C m e t , Xaverick and Sinto: and
Light Truck-Warranty and Limitation of Liability"; General %tors Corporation, "1971 M O D C
Passenger Car Kew Vehicie 'Sarranty - Zxcept
Kova and IJega 23OC".
Free adjustment i r e m
include - cheel balancing, alig~.nmt,engine
atjust-nents, addition of fluids, except
gasoline, and tightening of ncts, bolts and
iiitings.
See advertisement in Business Week,
September 25, 1971, ? p . i i - 4 6 .
PTC Report, 1968, p. 29.
American ?lotors Corporation, "1966 New Car
~ e v
Car 'h'arranty"; Ford X t t r Company, "1966
S e w Car Warranty"; General ?lotors Corporation,
"1566 New Car Warranty".
.,
warranty"; Chrysler Corporation, "1966
B.
Ford Motor Compny, "1969 Model Car and T~do
.idneel
Drive Light Truck Warranty" and "Ford
Ibid.
U. S. Federal Trade Coamission, Report on
Automobile Uarranties Washington: 1970j,
p. 16. (Hereinafter cited as FTC Report,
1970.j
Ibid.
Ibid., p?.
-
11-18; FTC Report, 1968, p. 25;
See generally, A*erican Motors Corporation,
Warrznty Administration; Warranty and Policy
Procedures (Detroit: 1970); Chrysler Corporation, Warrant? Policy and "rocedure ?fanual
Passenger Cars and Trucks (Detrcic: 1570);
Ford Xotor Company, Warranty and Policy Manual
: General Xotors Cwerseas
(Dearborn: 1970)
, .
Disrributors Corporation, GMODC Service Policies
and Procedures Manual *ll70H (New York: 1970).
Components deleted were suspension, steering
g e a r , steering pump, steering linkage, wheels,
and wheel bearings.
.
FTC Report, 7
.
and Dealer Basic Warranty and Limitation o f
Liability: 1970 Passenger Cars (Except
?lavericks and Cortinasj and Light Trucks".
American Motors Corporarion, "American Xators
1970 S e w Ambassador, Rebel, Javelin, A l l
Warranty"; Ghrysler Corporation, "Chrysler
Corporation's Warranty and Limitation of
Liability for 1970 Mode1 Passenger Cars";
Genera: Motors Corporation, "1970 Model General
Motors Passenger Car Sew Vehicle :iarrantyW.
F o r d Xotor Company, "Ford and Dealer Basic
Xarranty and Limitation of Liability: i570
Passenger Cars (Except Mavericks and Cortinasj
and Light Trucks".
\.
.*lssan:+ator Company, "Nissan New Vehicle
Warranty"; l c y o t a Xotcr Sales Colipany,
"Warranty"; Valkswagenwerk Aktiengesellschait,
I,.,
%arrant? for New Voikswagen Vehicles".
19; See generally, k e r i c i n
M a r c r z Corporatian; Chrysler Corparatia;; Ford
:%tar Company; Cener~l\ l o t o r s O ~ e r a e a sDistii-
FTC R e p o r t , i ? M , p p . 30-31
butcrs Corporation.
FTC Report, 1970, 2. 20; herican Xotors
Corporation, "American Motors 19783 Krw
Ambassador, Rebel, .;a~ieliz,iL% Warranty";
Chryslrr Corporation, "Chrysler Corporarion's
nn,rraaty
~ and Linitaiion c: Liability for 1970
"odei Ztsstlger Cars"; Ford ?!otor Cocpar.;,,
..
"Fcrd and Dca;cr &sic '#larran:i am5 LimiLnricn
See ad-~ertisrmestin
pp. 152-153,
-,
PIC Y e p o r r , 1568, pp. 3C-33.
Ibid., p.
-
35
J a z u a r y , !465,
28. Business Week, September 25, 1971, p. 46
29.
FTC Report, 1970, pp. 23-25.
Chapter 11
1.
The GCC Warranties disclaimed are found in
Hawaii Revised Statutes, s e e s . 490: 2-313
to 490: 2-315.
2.
Ford Motor Company, "1971 Mode: Passenger Car
(Except Capri, Comet, Maverick and Pinto) and
Light Truck-Warranty and Limitation of
Liability".
3.
General Motors Overseas Distributors
Corporation, GMODC Service Policies and
Procedures Manual #1170H (Cew Y o r b : 1970),
part 2, section 2, part 4, pp. 7-8.
5.
E . ,part 2s. section
6.
U.,
part 2, section 2, part 4, p. 8
7.
See for example, American Motors Corporation,
Warranty Administration; Warranty and Policx
Procedures (Detroit: 1970); Chrysler Corporation, Warranty Policy and Procedure Manual
Passenger Cars and Trucks (Detroit: 1970);
Ford Motor Company, Warranty and Policy Manual
(Dearborn: 1970):
. . General Motors Overseas
Distributors Corporation, GMODC Service
Policies and Procedures Manual #1170H (New York:
1970).
These manuals contain information and
instructions with regard to such matters as:
(1) the terms of warranties for the current as
well as previous model years, (2) a list af
items or repairs not covered by warranties,
(3) procedures relating to receipt, inspection,
and delivery of new cars fo buyers, ( 4 ) discussion of rates at which the dealer will be
reimbursed for work performed and hou; he will
be credited or paid, (5) discussion and
explanation of the forms to be used by dealers
in claiming reimbursement, ( 6 j instructions
concerning disposition, storage, or return
of parts replaced by dealers in performing
work, and (7) maintenance of records of warranty
work the dealer has performed and a reference
to periodic examination of the records by the
manufacturer's representative.
2, part 5, p. 4.
8. C . S. Federal Trade Cmission, Staff Report
on Automobile Warranties (Washington: U. S.
Government Printinn Office. 19681.. .o . 91.
(Hereinafter cited as FTC Report, 1968.) See
also chapter I\, pert 11.
-
9.
10.
Interview with General Motors Dealer,
August, 1970.
FTC
Report, 1968, p. 94
I:.
Chrysler further states the dealer's cost of
fringe benefits other than those listed
(including those required by law snch as
social security and worlcmea's cmpensationj
are not included in the warrancy labor rate
unless such costs are part of a union negotiated contract. U. S. federal Trade
Commission, Report an Autmobiie Warranties
(Washineton: 1970).
. . o. 109. (Hereinafter
cited as FTC Report, 1970.); Chrysler
Corporation, Warranty Policy and Procedure
Manual Passenger Cars and Trucks (3etroit:
19701, section 11, subject 11-5, p. 1.
General Motors has a similar formcia
to Chrysler, General Motors Overseas
Distributors Corporation, W O D C Service
Policies and Procedures Manual 11170H (Sew
York: 1970), part 2, secrion 2, part 5,
p. 1.
American Motors does not adopt a
formula approach, but instead studies the
wage rate in the dealer's market area and
then sets his warranty reimbursement rate
at a level that will allow him t o compete.
FTC Report, 1970, p. 109.
Ford Motor Company computes its warranty
labor rate at the average wage rate for
similar mechanics skills as computed by the
Department of Labor's Bureau of Labor Standards for each labor a r e a . Ford then rnultiplies that wage by 200 fo 215 per cent
depending on the particular dealer's
performance in certain prescribed areas.
FTC Report, 1970, pp. 108-109.
Nissan Motor Company (Datsun) bases its
labor rate on net labor cost which includes
base pay and fringe benefits. This is
compared with an 80 per cent valuation
of retail labor rate and a comparison with
other manufacturer reimbursement rates in
the area. Interview with Datsun Dealer,
November, 1970.
Toyote Motor Company uses the General
Motors formula which the dealers compute
and then send to Japan for approval. Interview with Toyota Dealer, October, 1970.
Volkswagen of America takes an average
of the retail labor rate in all fifty states
and pays all Volkswagen dealers that average.
Inferview with Volkswagen Dealer,
October, 1970.
-
.
12. FTC Report, 1968, p. 98
13. Chrysler's standards also include the value
of parts inventory and number of personnel
to be provided by the dealer. Chrysler
requires its dealers selling 1,000 cars a
year to have 18,050 square feet devoted to
servicing. American Motors dealers who sell
fifty cars or less per year must have 3,800
square feet of building space of which
66 per cent is devoted to service, while a
dealer selling 1,000 c a r s annually is urged
to provile 28,600 square feet of space with
;he service lepartmmt occupying73
per c e n t of the area. &.
, pp. ill-114.
16.
E.,
pp. l i b - 1 1 7 .
16.
s.,
pp. 117-119
s.,
p. 1 2 5 ; I n t e r v i e x s
17.
FTC R e p o r t , 1 9 6 8 , pp. :27-128.
IS.
1 9 7 1 (Xew
-
'iork: The N e w iori Times Book a n d
E d u c a t i o n a l D i v i s i o n , 19703, p. 660.
w i t h new car
d e a l e r s , J u i y t o September 1971.
rer c i t e d as FTC Re
Ibid.,
-
Chapter 111
p. 45, f o o t n o t e I
FTC R e p o r t , 1 9 6 8 , 9 . 9 0 ; I n t e r v i e w s w i t h new
e a r d e a l e r s , .July t o September, 1971.
1.
T h e s e s u r v e y s are used p r i m a r i l y t o i n d i c a t e
a n e x i s t i n g problem a n d t h e r e f o r e , do n o t
r e p r e s e n t r h e e x p e r i e n c e of t h e e n t i r e
buying pubiic.
2.
Sea Appendix B , T a b l e 1 .
3.
A u t o m o b i l e X a n u f a c t u r e r s A s s o c i a t i o n , 1970
Automobile F a c t s a n d Z i g u r e s ( D e t r o i t :
l970),
p. 9 .
4.
5.
I n d e t e r m i n i n g how many c a r s a n a v e r a g e d e a l e r
s e l l s , a few of t h e l a r g e r d e a l e r s have n o t
been included w i t h i n t h e average as they s e l l
between 1 , 0 0 0 a n d 3 , 0 0 0 c a r s a y e a r .
"rlC
R e p o r i , 1970, pp. 73-15
Ibid.
I b i d . , pp. 102-103.
...
'Warranties
a n d w h a t s h o u l d be done a b o u t
them,'' Consumer R e p o r t s , A p r i l , 1 9 6 9 , pp. 177181.
I b i d . , pp. 1 0 3 - 1 0 4 .
Ibid.,
Ibid.,
-
"Some v a r i a b i e c o s t s of o w n e r s h i p ; r e p a i r s ,
i n s u r a n c e , w a r r a n t i e s , " Consumer R e p o r t s ,
A p r i l , 1 9 i 0 , pp. 201-20L.
p. 105.
p . 119-120.
6.
S e e Appendix B , T a b l e 2 .
I n t e r v i e w s w i t h new c a r d e a l e r s , J c l y t o
S e p t e z b e r , 1971.
7.
See A p p e n d i x 8 , T a b l e 3 .
FTC R e p o r t , 1968, pp. 95-96,
8.
U. S . F e d e r a l T r a d e Commission, S t a f f R e p o r t
o n Automobile W a r r a n t i e s (Washington: U. S.
Government P r i n t i n e O f f i c e , 1 9 6 8 ) .. ..
UP. 63-66.
( H e r e i n a f t e r c i t e d as FTC R e p o r t , 1 9 6 8 . )
Ibid.,
-
-
9.
B. H. Lovejoy and u t l k r s , A Stud? of Garage
Repair and Dealer Warranty !Vactices (Springi l r l d : Clearinghouse f o r F e d e r a l S c i e n t i f i c
and Y e c h n i c a l I n i o n n a t i o n , 1 9 6 9 ) , p. 8 8 . Of
i n t e r e s t i n t h i s study is t h a t the q u a l i t y
o f r e p a i r was found i n a d e q t a t s . I n a 1 1 of
t h e jobs which involved a s a f e t y - c r i t i c a i
s u b s y s t e m o f t h e v e h i c l e , more t h a n 11 p e r
c e n t o f a i l n o n - w a r r a n t y a n d more t h a n 22
p e r c e n t o f a 1 1 w a r r a n t y j c b s were r e t u r n e d
b e c a u s e o f i n a d e q u a t e r e p a i r . Moreover,
more t h a n 6 p e r c e n t o f t h e c u s t o m e r s i r v o l v e d
c i t e d a s a f e t y hazard p r e s e n t i n n o n - w a r r a n t y
r e p a i r j a b s , a n d more t h a n 11 p e r c e n t
r e p o r t e d such h a z a r d is r e p a i r s u n d e r w a r r a n t y
(p. 88).
102
p . 96.
FTC R e p o r t , 1970, p . 110-111.
:bid.,
-
pp. 110-114. M a n u f a c t u r e r ' s s t u d i e s ,
however, g i v e d i f f e r e n t r e s u l t s .
" 2 . 112-113.
29.
x.,
FTC R e p o r t , 1 9 6 6 , p . 1 0 1 . I n t e r v i e w s w i t h
new car d e a l e r s , J u l y t o September 1971.
Chapter IV
i.
See c h a p t e r 11.
2.
U. S . F e d e r a l Trade C o m . i s s i o n , R e p o r t on
A u t m o b i i e ! < a r r a n t i r s <dashington:
19i0),
u . 9:.
i0. STC R e p o r t , 1 9 5 8 , pp. 6 6 - 6 7 ,
3 c r i c g the
f o u r t e e n - m o n t h p e r i o d between J a n u a r y 1, 1967
a n d F e b r u a r y 2 9 , 1968 t i e Commission r e c e i v e d
380 l e t t e r s of c o m p i a i n t c o n c e r n i n g w a r r a n t y
problems o r 1 3 per c e c t of t h e t o t a l c m p l a l n t
file.
u.
:I.
i5 U. S . C . A. s e c . 3 3 : e t . s r q . (19633.
iZ. The
:<ew S o r k T i m e s Z n c y c l c r c d i c A l m a n a c
Chapter V
1.
Sen. Laws Ann., ch. 93B, s e c . I;\Iis..
Code Ann., s e c . 5 0 1 7 . 7 - 0 6 ( 9 ) ; Tenc. Code Ann.,
s e c . 5 9 - 1 7 1 4 ( h ) ( 7 ) : W i s . S r e c . Ann., s e c .
Z 1 8 , O l ( I ) ( t j (22).
Kass.
2. Kiss. Code Ann., sec. 8017.7-06(9)
H. R. 5519, 92nd Cong., 1st Sess. (1971);
I?. R. 5942, 92nd Cong., 1st Sess. (1971);
H. R . 10673, 92nd Cong., 1st S e s r . (1411)
3. Brown, "A Bill of Rights for Auto Dealers,"
12 B . C. Ind. & Cm.. L. Rev. 757, 807 (1971).
4.
fbid., p.
2G.
S. 1221, 92nd Cong., 1st Sess. (1971);
H. R. 6314, 92nd Cong., 1st Sess. (1971)
25.
S. 425, 92nd Cong., 1st Sess. (1971).
809.
5. Fla. Scat. Ann., sec. 320.696; Mass. Gen. Laws
Ann., c h . 33B, s e c . 6; Miss. Code Ann., s e c .
8017.7-06(10j; Tenn. Code Ann., s e c . 59-1714
(h)(ij; Wis. Stat. A n n . , $ 3 ~ .2i8.0ii3i(a)
(22j.
6. Nass. Gen. Laws Ann., c'n. 43B, s e c . 6 ; -Y
Code Ann., s e c . 8017.7-06(10).
26. U. S., Congress, Senate, C m i t t e e on
Comerce, Hearings on S. 986. Consumer
Product Warranties and Federal Trade
Commission Improvement Act of 1971, 92nd
Cong., 1st S e s s . , 1571, PP. 3 0 - 3 : .
7. Miss. Code Ann., s e c . 8017.7-06(10j; Term.
Code Ann., sec. 59-1714( h j (7).
28.
8.
29.
s.,
p p . 29-32.
m.,pp. 33-34.
m.
30.
E.,
pp.
27.
S. B. 277, Arizona, 1970 Legislative Session.
9. Brown, p . 807.
10. Whitford, "Law and the Consmer Transaction:
A Case Study of the Automobile Warranty,"
1968 W i s . L. Rev. 1006, 1015, note 175
(1968).
11.
Brown, p. 807, note 256.
12.
7 A. L. R. 3d Validicy and ConstructiStatutes Regulating Dealinas between Autwobile Manufacturers, Distributors and Dealers,
1173, L192.
Calif. Civil Code, s e c . 1793.2 (a).
Calif. Civil Code, secs. lj93.3, 1793.5
sec.
262L.
H. B. 3458, Florida, 1970 Legislative Session.
H. F. 1628, Xinnesota, 1969 Legislative
Session.
S. 2726, 90th Cong., 1st Sess. (1967);
H. R. 16109, 90th Cong., 1st Sess. (1967).
S. 2721, 90th Cong., 1st Sess. (1967);
W. a. 14746, 90th Cong., lsr Sess. (1967)
21. 8 . R. 10690, 91st
W. 8. 12656, 51st
. n . 15782, 9lst
H. R. 18056, gist
Cong., 1st
1st
Cong., 2nd
Cong., 2nd
Cong.,
Chapter VI
1. Miss. Code A m . ,
Calif. Civil Code, s e c s . 1190 to 1795.
L11. Ann. Stat., ch. 121k,
35-36.
Sess.
Sess.
Sess.
Sess.
(1969);
(1955);
(1570);
(1970).
22. I?. a. 13395, 9Lst Cong., 1st Sess. (1569);
S. 30iL, 51sr Ccng., 2nd Sess. (1970);
Y. R . 18758, 9:sL Cang., 2nd Sess. (1570);
H, R. 19293, 91st Cung., 2nd S e s s . (1570).
23. s. 986, 92nd Cong., 1st Sess. (1971);
R . R. 261, 92nd Cong., 1st Sess. (1971);
F. R. 985, 92nd Cong., 1st Sess. (1971);
H. R . 4809, 92nd Cong., 1st S e s s . (1971);
P. R . 5027, 92nd Cong., 1st Sess. (1971;;
2. Mass. Gen.
Laws
sec.
8071.7-06(Yj.
Ann., ch. 038,
sec.
7
3. Mass. Gen. Laws Ann., ch. 93B, s e c . 12.
4. U. S. Federal Trade Cmiasion, Staff Report
on Automobile Warranties (Washington: U. S.
Government Printing Office, 1968), p. 145;
U. S., Congress, Senate, Consumer Subcoonnittee
of the ComiStee on Commerce, Hearings on
S. 3074. Consumer Products Guaranty Act, 91st
Cong., 2nd Sess., 1970, pp. 26-33.
APPENDIX A
V
PONTIAC MOTOR OiVlSlON
~
~
* corporataor
~
~
~
r
Hu~aomw
~ A W T E N ~ N C C
1971 PONTIAC
PRE-DELIVERY SERVICE
VEHICLE lDENTlFICATlON N O .
AND ADJUSTMENT
CHECK SHEET
2.
BOCbY.CHASS6 INSPECTION A N D ADJUSTMENTS
WNCTIGNAILY CHECK AND COlllECl AS N K E S S A R I :
..
CHECX AND CORRECT A5 NECESSARY:
%rering d u r n " ,gniliOn lack
Neutral %wit',,
. .
rianrrn,rrion pe:io,manc+
,inri"d;"g down ,hiit
.*itch:
C d i s i a n t i a l , if 10 equippad
Steeiing. r l e l i i n g wheel c e n t t i poa+ien ond
5.
.
iandling
.
H ~ a l r "nd/oi
i
a;, iardeio*ri
"omi
Squeak% aod iolllpi
(71 APPEARANCE
..
INSPECT CONDiiiON AND CGRIECI AS NECESSARY:
Wosb car
E l t r r i a r ,rim
and m.:ding.
Erieiioi i,":sh~brrri. ~e"ih."@.%pa: pa,".
rrpatr.
6
OWNER
C
-
-
Review Owner', Manual with owner.
...: neiraos,;o,e
~
~~
-
DEALER
VEHICLE DATA
Fi:I in owner and vehicle datn an foce of "Owner Identification
end New vehiicie Worianty" folder provided wi!h vehicle.
ExnInin v4o,.rn,v Prarisian.:
rper0,:an of oil ocieisories.
i
d
cub
""3,
and d d 0 , l &m."p
iaq"i,~d
REMOVE KEY NUMBER SLUGS FROM DOOR A N D TRUNK
KEYS A N D P U C E SPARE KEYS A N D SLUGS I N ENVELOPE
PROVIDED
NOTE. Xefsi :o Ssrriie Monvci !ai Correct ipeciiicafioor
APPENDIX B
Table 1
Question:
General
Motors
1970 C a r s
"Was t h e new c a r i n s a t i s f a c t o r y
c o n d i t i o n when d e l i v e r e d ? "
Chrysler
-
Ford
American Motors
Average
Approximately 36% o f t h e c a r s were i n an u n s a t i s f a c t o r y
c o n d i t i o n when d e l i v e r e d .
1969 .Cars
% Yes
% NO
1968 C a r s
Approximately 33% o f t h e c a r s w e r e i n a n u n s a t i s f a c t o r y
c o n d i t i o n when d e l i v e r e d .
1967 C a r s
Approximately 35% o f the c a r s w e r e i n a n u n s a t i s f a c t o r y
c o n d i t i o n when d e l i v e r e d .
1966 C a r s
% Yes
% NO
1965 C a r s
% Yes
% NO
1964 Cars
% Yes
s, No
1963 C a r s
% Yes
% NO
Source: U. S . F e d e r a l Trade Commission, S t a f f R e p o r t on Automobile
W a r r a n t i e s (Washington: U. S. Government P r i n t i n g O f f i c e , 19681, p . 58;
" W a r r a n t i e s : T h i s y e a r ' s r e t r e a t , " Consumer R e p o r t s , A p r i l , 1 9 6 8 ,
pp. 176-179; " W a r r a n t i e s . . . a n d what s h o u l d b e done a b o u t them,"
Consumer R e p o r t s , A p r i l , 1969, pp. 177-181; "Some v a r i a b l e c o s t s o f
ownership: R e p a i r s , i n s u r a n c e , w a r r a n t i e s , " Consumer R e p o r t s , A p r i l ,
1970, pp. 201-204; "From showroom t o s e r v i c e shop," Consumer R e p o r t s ,
A p r i l , 1971, pp. 203-206.
Table 2
Question:
General
Motors
"Was w a r r a n t y work
performed s a t i s f a c t o r i l y ? "
Chrysler
Ford
American Motors
Total
1970 Cars
Approximately 26% s t a t e d t h e y were u n a b l e t o g e t t h e i r
c a r s s a t i s f a c t o r i l y r e p a i r e d under t h e w a r r a n t y .
1969 Cars
Approximately 25% s t a t e d t h e y were u n a b l e t o g e t t h e i r
c a r s s a t i s f a c t o r i l y r e p a i r e d under t h e w a r r a n t y .
1968 Cars
Approximately 25% s t a t e d t h e y were u n a b l e t o g e t t h e i r
c a r s s a t i s f a c t o r i l y r e p a i r e d under t h e w a r r a n t y .
1967 Cars
Approximately 25% s t a t e d t h e y were u n a b l e t o g e t t h e i r
c a r s s a t i s f a c t o r i l y r e p a i r e d under t h e w a r r a n t y .
1966 Cars
% Yes
% NO
Total
1965 Cars
% Yes
% NO
Total
1964 Cars
% Yes
% NO
Total
1963 Cars
% Yes
% NO
Total
U . S. F e d e r a l Trade Commission, S t a f f Report on Automobile
Source:
W a r r a n t i e s (Washinqton: U . S. Government P r i n t i n q O f f i c e , 1 9 6 8 ) ,
p . 60; " w a r r a n t i e s ;
T h i s y e a r ' s r e t r e a t , " consumer R e p o r t s , A p r i l ,
ut
1968.. w w . 176-179: " W a r r a n t i e s . . . a n d what s
them," Consumer R e p o r t s , A p r i l , 1969, pp. 177-181; "Some v a r i a b l e
c o s t s of ownership:
R e p a i r s , i n s u r a n c e , w a r r a n t i e s , " Consumer
R e p o r t s , A p r i l , 1970, pp. 201-204; "From showroom t o s e r v i c e s h o p , "
Consumer R e p o r t s , A p r i l , 1971, pp. 203-206.
.-
Table 3
Question:
" I f w a r r a n t y work was n o t performed s a t i s f a c t o r i l y ,
w h a t was t h e t r o u b l e ? "
General
Motors
1966 Cars
Dealer d i d n o t cooperate
Not c o v e r e d
Dealer could n o t f i x
Other
Total
11.1
9.3
71.6
8.0
795
Chrysler
Ford
-
11.7
5.8
69.2
13.3
377
12.1
6.7
70.0
11.1
404
11.5
7.9
70.6
10.0
1,616
American Motors
Total
1965 C a r s
Dealer did n o t cooperare
Not c o v e r e d
Dealer could n o t f i x
Other
Total
14.9
12.6
66.3
6.2
1,597
18.0
11.7
61.2
9.1
649
14.2
8.2
67.3
10.3
681
15.2
11.2
65.6
8.0
3,092
1964 C a r s
Dealer d i d n o t cooperate
Not c o v e r e d
Dealer could not f i x
Other
Total
15.8
11.4
64.8
8.0
1,293
18.1
18.4
54.8
343
15.2
11.2
66.4
7.2
429
16.0
12.2
63.8
8.0
2,232
1963 C a r s
Dealer d i d not cooperate
Not c o v e r e d
Dealer could n o t f i x
Other
Total
19.0
14.7
59.0
7.3
1,029
18.6
18.6
52.5
10.3
280
12.8
11.4
67.6
8.2
376
17.1
13.7
61.5
7.7
1.878
8.7
S o u r c e : C. S. F e d e r a l T r a d e Commission, S t a f f Report o n Automobile W a r r a n t i e s
(Washington: L'. S . Government P r i n t i n g O r r i c e , 1 9 6 8 ) , p . 6 1 . The r e s p o n s e s f o r
y e a r s f o l l o w i n g 1966 a r e u n a v a i l a b l e , a l t h o u g h r e p e a t e d i n q u i r i e s w e r e made t o
Consumers Cnion.
APPENDIX C
Questionnaire
I n answering t h e following q a e s t i o n s , i f t h e spaces provided a r e n o t
s u f f i c i e n t , p l e a s e u s e t h e back of t h e page. Xost o f t h e q u e s t i o n s may be
answered by s i m p l y p l a c i n g a n X i n t h e a p p r o p r i a t e box; a few q u e s t i o n s a s k
f o r w r i t t e n - i n a n s w e r s . You may w r i t e a d d i t i o n a l comments whenever you
w i s h t o do s o . P l e a s e i g n o r e t h e numbers b e s i d e s t h e q u e s t i o n s and a n s w e r s ;
t h e y a r e f o r machine t a b u l a t i o n o n l y .
The L e g i s l a t i v e R e f e r e n c e Bureau would l i k e t o t h a n k you i n advance f o r
your cooperation i n completing t h i s q u e s t i o n n a i r e .
1.
Do you p r e s e n t l y own a 1969 a u t o m o b i l e ?
1 [
1
2 [ ]No
Yes
i f y o u r answer i s yes, p l e a s e
complete t h e rest of t h e
questions.
I f you own more t h a n one 1969
a u t o m o b i l e , p l e a s e answer che
q u e s t i o n s f o r t h e c a r you f i r s t
bought i n 1969.
2.
i f y o u r answer i s no, d i s r e g a r d
t h e rest o f t h e q u e s t i o n s and
return the questionnaire t o the
L e g i s l a t i v e R e f e r e n c e Bureau.
Did you p u r c h a s e your a u t o m o b i l e from:
1 [ j A local dealer
2 [ j A d e a l e r on t h e mainland
3 [ ] D i r e c t from t h e m a n u f a c t u r e r
4
] Csed c a r agency
5 [ 1 O r i g i n a l owner
6 [ ] Other
3.
Did t h e p a r t y from whom you purchased your a u t o m o b i l e e x p l a i n t h e terms
of t h e new c a r w a r r a n t y o r g u a r a ~ n t e et o you'!
1 [ 1 Yes
2 [ j?Jo
4.
P l e a s e i n d i c a t e t h e m a n u f a c t u r e r , model, and t h e month t h a t y o u r 1969
a u t o m o b i l e was p u r c h a s e d .
Manufacturer:
L [
2 [
3 1
i[
Nodel
Month s o i d t o you
] General Notors
] Chrysler
] America2 %tor.:
j Ford
5 [ j Datsun
6 I I Toyota
-,
c
, ! Volkswagen
5. Are you the original owner of the automobile?
1 [ 1 Yes
2 1 ]NO
If your answer is n o , please indicate the year and month in which you
acquired the automobile.
1 [ 1 1969
2 [ 1 1970
3 1 1 1971
[
[
[
[
05 [
06 [
01
02
03
04
1
January
07
08
09
10
11
12
1 February
1
1
riarch
April
I May
I June
[ I July
[ 1 August
[ 1 September
[ 1 October
[ ] November
[ I December
6. How many miles has the automobile traveled?
1
2
3
4
5
6
7
8
[ 1 Less than 12,000
[ J 12,000
[ ] 18,000
[ ] 24,000
[ 1 30,000
i 1 36,000
[ 142,000
[ 1 More than 42,000
7. When the automobile was delivered to you, was it in satisfactory condition?
1 [ ] Yes
2[1NO
If your answer is
a.
no,
please answer the following:
Was the unsatisfactory condition of your automobile:
[ ] Mechanical problem
[ I Body exterior problem
[ ] Body interior problem
(1) If your answer is body exterior or body interior, please explain:
b.
Did you have the condition corrected?
I Yes
1
2ilN0
If your answer is E:
(lj Was the condition corrected by:
1 [ I Dealer
2 [ I Used car agency
3 1
4 /:
1
1
Original owner
Other
(2) Was the condition corrected to your satisfaction?
1 [ I Yes
2 ; j ? k
I f your answer i s
no,
c h e c k one o r more and p l e a s e e x p l a i n :
[ ] Dealer d i d not cooperate
[ j Not c o v e r e d by t h e w a r r a n t y o r p r e d e l i v e r y s e r v i c e
[ j Dealer could not f i x
[ I Other
Explanation:
8.
A f t e r d e l i v e r y and u s e of t h e a u t o m o b i l e by you, d i d you have any work o r
r e p a i r done under y o u r new c a r w a r r a n t y o r g u a r a n t e e ?
1 [ I Yes
2 / I N O
I f y o u r answer i s yes, p l e a s e i n d i c a t e :
a.
The a p p r o x i m a t e d a t e s on which t h e work was done
b.
The n a t u r e o f t h e r e p a i r work
t h a t was done:
[ ] Mechanical
[ 1 Body e x t e r i o r
[ 1 Body i n t e r i o r
Explanation:
c.
Did you have t o r e t u r n t h e c a r more t h a n once f o r t h e same w a r r a n t y o r
g u a r a n t y problem?
I f y o u r answer i s yes, how many t i m e s ?
How l o n g d i d t h e r e p a i r t a k e ?
What was t h e problem?
1
2
3
L
5
6
[ j
1 1
1 1 2
[
1 day
! I 2 t o 3 days
[ ] 4 t o 5 days
[ j 1 t o 2 weeks
i ; 1 month
[ 1 More t h a n 1 month
d.
Was t h e r e p a i r work done i n a s a t i s f a c t o r y manner?
1 [
1 Yes
2 [ I N 0
I f y o u r answer i s
no,
checii one o r more and p l e a s e e x p l a i n :
] Dealer d i d not cooperate
1 Not c o v e r e d by t h e w a r r a n t y
] D e a l e r could n o t f i x
j Other
Explanation:
Many p e o p l e f i n d new a u t o m o b i l e w a r r a n t i e s c o n f u s i n g . The L e g i s l a t i v e R e f e r e n c e
Bureau would l i k e t o d e t e r m i n e how much c o n f u s i o n e x i s t s . The f o l l o w i n g q u e s t i o n s
w i l l b e used t o d e t e r m i n e how w e l ? you a n d e r s t a n d your w a r r a n t y . You may, i f you
w i s h , l o o k a t your w a r r a n t y t o answer t h e s e q u e s t i o n s .
9.
How l o n g i s t h e l e n g t h of t h e w a r r a n t y o n your a u t o m o b i l e ?
more.
1
2
3
4
5
6
10.
Check one o r
[ I 12,000 miles112 nonths
[ 1 24,000 m i l e s / 2 4 months
[ 1 36,000 m i l e s / 3 6 months
[ 1 50,000 m i l e s / 5 y e a r s
[ j 60,000 m i l e s 1 6 y e a r s
[ ] D o n ' t know
O t h e r t h a n t i r e s and b a t t e r y , i s t h e l e n g t h o f t h e w a r r a n t y on y o u r a u t o m o b i l e t h e same f o r a l l p a r t s ?
1 [ I Yes
2 [ I N 0
3 [ ] Don't k n o ~
11.
I f t h e l e n g t h o f t h e w a r r a n t y i s n o t t h e same f o r a l l p a r t s o f t h e a u t o m o b i l e , o t h e r t h a n t i r e s and b a t t e r y , what p a r t s a r e c o v e r e d by d i f f e r e n t
warranty periods?
Body
D r i v e t r a i n and r e l a t e d p a r t s
Paint
Interior
Don ' t know
None
12.
Are you r e q u i r e d t o f o l l o w m a i n t e n a n c e s e r v i c e s and s c h e d u l e s t o keep
the warranty o r guarantee?
1 [ I Yes
2 1 I N 0
3 [ 1 D o n ' t know
13.
Where a r e t h e s e m a i n t e n a n c e s e r v i c e s t o be performed?
1
2
3
4
14.
[
[
[
[
1
1
1
1
New c a r d e a l e r
Service s t a t i o n
Other
D o n ' t know
I f t h e b r a k e l i n i n g s o f y o u r a u t o m o b i l e were worn o u t a t 17,000 m i l e s ,
would you b e a b l e t o have them r e p a i r e d a t no c o s t t o you under t h e
warranty o r guarantee?
1 [ I Yes
2 [ 1 N O
3 [ 1 D o n ' t know
15.
I f t h e p a i n t on y o u r a u t o m o b i l e had d e t e r i o r a t e d and you had t h e a u t o m o b i l e
f o r e l e v e n months, c o u l d you have t h e a u t o m o b i l e r e p a i n t e d a t no c o s t t o
you under t h e w a r r a n t y o r g u a r a n t e e ?
1 i 1 Yes
2
i
j
~
~
3 [ ] D o n ' t know
APPENDIX D
The t a b l e s i n t h i s r e p o r t were o b t a i n e d from a c o m p i l a t i o n
o f t h e answers t o a q u e s t i o n n a i r e s e n t t o r e g i s t e r e d owners of
1969 c a r s o b t a i n e d through a s i m p l e random sample. The s i m p l e
random sampling t e c h n i q u e i s a s t a t i s t i c a l method i n s u r i n g each
i n d i v i d u a l car owner an e q u a l chance t o b e s e l e c t e d i n a sample.
The t a b l e s i n this r e p o r t r e p r e s e n t a n e x p a n s i o n o f the a c t u a l
responses f o r each question.
The e x p a n s i o n o f t h e r e s p o n s e s was
made by a t t a c h i n g w e i g h t s t o e a c h m a n u f a c t u r e r .
A weight is the
m u l t i p l i c a t i o n o f subgroup d a t a ( r e s p o n s e s ) by a f a c t o r or f a c t o r s
so a s t o b r i n g t h e i r v a l u e s i n t o p r o p e r p r o p o r t i o n s r e l a t i v e t o
t h e p o p u l a t i o n ( t o t a l m a n u f a c t u r e r ' s c a r s ) o r t o o t h e r subgroups
s u r v e y e d . The e x p a n s i o n was c a l c u l a t e d by d i v i d i n g t h e t o t a l
number o f cars f o r a p a r t i c u l a r m a n u f a c t u r e r ( e . g . G e n e r a l Motors
9,875) by t h e t o t a l number o f r e s p o n s e s (93) t o f i n d t h e weight
f o r e a c h r e s p o n s e ( 1 0 6 ) . T h i s w e i g h t was i n t u r n used t o expand
t h e r e s p o n s e s by m u l t i p l y i n g t h e w e i g h t a s s i g n e d t o t h a t
m a n u f a c t u r e r ( e . 9 . General Motors 106) by t h e number o f r e s p o n s e s
f o r a p a r t i c u l a r q u e s t i o n ( e . g . 4 6 ) f o r a n answer ( 4 , 8 7 6 ) . T h i s
answer was i n t u r n d i v i d e d by t h e t o t a l number o f cars a s weighed
f o r e a c h m a n u f a c t u r e r (e.g. G e n e r a l Motors 9,858) t o o b t a i n an
a c t u a l p e r c e n t a g e o f t h e t o t a l number o f c a r s f o r t h a t m a n u f a c t u r e r
(49.4%)
T h a t p e r c e n t a g e i s used i n t h i s r e p o r t i n c o n j u n c t i o n
w i t h t h e a c t u a l number o f r e s p o n s e s found i n p a r e n t h e s i s i n t h e
tables.
.
T a b l e o f P o p u l a t i o n , Responses, Weights,
and S t a n d a r d Error
Manufacturer
Population
American Motors
Chrysler
Ford
General Motors
Datsun
Toyota
Volkswagen
1,244
8,409
5 , 502
9,875
3,626
4 , 107
4,508
Respondents
Weights
Standard Error
The s t a n d a r d e r r o r was d e t e r m i n e d by u s i n g t h i s f o r m u l a :
SE
Where SE s t a n d s f o r s t a n d a r d e r r o r
2 i s a c o r r e c t i o n i n t h e formula f o r a f i n i t e
population
N represents the t o t a l population
n r e p r e s e n t s t h e number o f r e s p o n d e n t s .
Although t h e r e s p o n d e n t s may appear t o b e s m a l l i n number, under
t h e s t a t i s t i c a l method u s e d , t h e p r o b a b i l i t y of e r r o r on a c c o u n t o f
t h e l a c k o f a g r e a t e r number o f r e s p o n s e s i s i n t h e magnitude of
a p p r o x i m a t e l y p l u s o r minus 1 0 p e r c e n t .
The t a b l e s i n t h i s r e p o r t c o n c e r n i n g p r e d e l i v e r y s e r v i c i n g and
w a r r a n t y s e r v i c i n g c o n t a i n t h r e e v e r t i c a l columns. Column one i s
a c o m p i l a t i o n of a l l 696 r e s p o n s e s t o t h e q u e s t i o n n a i r e which was
answered by p e r s o n s who p u r c h a s e d t h e i r c a r s from any o f t h e
following:
(1) A l o c a l d e a l e r
(489)
(2)
A d e a l e r on t h e mainland
(70)
(3)
D i r e c t from t h e m a n u f a c t u r e r
(4)
Used c a r agency
(56)
(5)
O r i g i n a l owner
(57)
(6)
Any o t h e r s e l l e r
(20)
(7)
No answer
(2)
(2)
Column two i s composed of r e s p o n s e s o n l y from t h o s e p e r s o n s who
a r e o r i g i n a l owners and who purchased t h e i r c a r s from l o c a l d e a l e r s
(489).
I n o r d e r t o a s c e r t a i n i f p e r s o n s who a r e o r i g i n a l owners b u t
who buy from a n o n - l o c a l s o u r c e a r e t r e a t e d d i f f e r e n t l y by l o c a l
d e a l e r s , a t h i r d column is e s t a b l i s h e d t o r e f l e c t t h e s e r e s p o n s e s .
I n u s i n g t h e tables it s h o u l d be k e p t i n mind t h a t some q u e s t i o n s
r e q u i r e d more t h a n one answer and i n some i n s t a n c e s p e r s o n s d i d n o t
answer a l l t h e q u e s t i o n s .
Table 1
Question:
"What w a s t h e u n s a t i s f a c t o r y c o n d i t i o n o f your automobile?"
T o t a l Responses
American Motors
Mechnical
Body e x t e r i o r
Body i n t e r i o r
Chrysler
Mechnical
Body e x t e r i o r
Body i n t e r i o r
Ford
Mechanical
Body e x t e r i o r
Body i n t e r i o r
General Motors
Mechanical
Body e x t e r i o r
Body i n t e r i o r
Datsm
Mechanical
Body e x t e r i o r
Body i n t e r i o r
Toyota
Mechanical
Body e x t e r i o r
Body i n t e r i o r
Volkswagen
Mechanical
Body e x t e r i o r
Body i n t e r i o r
Responses by O r i g i n a l Owners
p u r c h a s i n g Car from:
Dealer on
Mainland or
Local Dealer
Manufacturer
Table 2
Q u e s t i o n on reasons f o r d i s s a t i s f a c t i o n with r e p a i r .
T o t a l Responses
American Motors
Dealer d i d not cooperate
Not covered by warranty o r
predelivery service
Dealer could n o t f i x
Other
Chrysler
Dealer d i d not cooperate
Not covered by warranty o r
predelivery service
D e a l e r could not f i x
Other
Ford
Dealer d i d n o t c o o p e r a t e
Not covered by warranty o r
predelivery service
D e a l e r could not f i x
Other
General Motors
Dealer d i d n o t cooperate
Not covered by warranty o r
predelivery service
Dealer could n o t f i x
Other
Datsun
Dealer d i d not cooperate
Not covered by warranty o r
predelivery service
Dealer could n o t f i x
Other
Toyota
Dealer did n o t cooperate
Not covered by warranty o r
predelivery service
Dealer could n o t f i x
Other
Volkswagen
Dealer d i d not cooperate
Not covered by warranty o r
predelivery service
Dealer could n o t f i x
Other
Responses by O r i g i n a l Owners
Purchasing Car from:
Dealer on
Mainland o r
Local D e a l e r
Manufacturer
Table 3
Question:
"What was t h e u n s a t i s f a c t o r y c o n d i t i o n o f y o u r a u t o m o b i l e ? "
T o t a l Responses
American Motors
Mechanical
Body e x t e r i o r
Body i n t e r i o r
Chrysler
Mechanical
Body e x t e r i o r
Body i n t e r i o r
Ford
Mechanical
Body e x t e r i o r
Body i n t e r i o r
General Motors
Mechanical
Body e x t e r i o r
Body i n t e r i o r
Datsun
Mechanical
Body e x t e r i o r
Body i n t e r i o r
Toyo t a
Mechanical
Body e x t e r i o r
Body i n t e r i o r
Volkswagen
Mechanical
Body e x t e r i o r
Body i n t e r i o r
Responses by O r i g i n a l Owners
P u r c h a s i n g Car from:
D e a l e r on
Mainland o r
Local Dealer
Manufacturer
Table 4
Question:
Did you have t o r e t u r n t h e c a r more t h a n once
f o r t h e same w a r r a n t y problem?
T o t a l Responses
American Motors
Returned
Not Returned
Chrysler
Returned
Not Returned
Ford
Returned
N o t Returned
G e n e r a l Motors
Returned
Not Returned
Datsun
Returned
Not Returned
Toyota
Re t u r n e d
Not Returned
Volkswagen
Re t u r n e d
N o t Returned
Responses by O r i q i n a l Owners
- ~ u r c h a s i n gC& from:
D e a l e r on
Mainland o r
Local Dealer
Manufacturer
Table 5
Q u e s t i o n on number o f t i m e s c a r r e t u r n e d f o r same problem.
T o t a l Responses
American Motors
1
2
3
4
5 o r more
Chrysler
1
2
3
4
5 o r more
Ford
1
2
3
4
5 o r more
G e n e r a l Motors
L
3
4
5 o r more
Datsun
1
2
3
4
5 o r more
Toycta
1
2
3
4
5 o r more
L
3
4
5 o r more
Responses by O r i g i n a l Owners
P u r c h a s i n g Car from:
Dealer on
Mainland o r
Local Dealer
Manufacturer
Table 6
Question:
How l o n g d i d r e p a i r t a k e on same problem?
~es p o n s e s by o r i q i n a l Owners
T o t a l Responses
z u r c h a s i n g Car from:
b a l e r on
Mainland o r
Local Dealer
Manafacturer
A n e r i c a n Motors
1 day
2 t o 3 days
4 t o 5 days
1 t o 2 weeks
1 month
More t h a n one month
Chrysler
1 day
2 t o 3 days
4 t o 5 davs
1 t o 2 weeks
1 month
More t h a n one month
Ford
1 day
2 t o 3 days
4 t o 5 days
1 t o 2 weeks
1 month
More t h a n one month
G e n e r a l Motors
1 day
2 t o 3 days
4 t o 5 days
1 t o 2 weeks
1 month
More t h a n one r.onth
Datsun
1 day
2 t o 3 days
4 t o 5 days
1 t o 2 weeks
1 month
More t h a n one month
'i'oyota
1 day
2 t o 3 days
4 t o 5 days
1 t o 2 weeks
1 month
More t h a n one month
'io lkswagen
1 day
2 t o 3 days
4 t o 5 6ays
it o 2 w e e k s
L Imnti;
?lore t h a n o n e m n t h
(20)
None
Table 7
Q u e s t i o n on r e a s o n s f o r d i s s a t i s f a c t i o n w i t h r e p a i r .
T o t a l Responses
American Motors
Dealer did not cooperate
Kot c o v e r e d by w a r r a n t y o r
predelivery service
Dealer could n o t f i x
Other
Chrysler
Dealer did n o t cooperate
Not c o v e r e d by w a r r a n t y o r
predelivery service
Dealer could n o t f t x
Other
Ford
Dealer did not cooperate
Kot c o v e r e d by w a r r a n t y o r
predelivery service
Dealer could not f i x
Other
General Motors
Dealer d i d not cooperate
Not c o v e r e d by w a r r a n t y o r
predelivery service
Dealer could n o t f i x
Other
Da t s u n
Dealer did not cooperate
Not covered by w a r r a n t y o r
predelivery service
Dealer could not f i x
Other
Toyo t a
Dealer d i d n o t cooperate
Not c o v e r e d by w a r r a n t y o r
predelivery service
Dealer could n o t f i x
Other
Volkswagen
Dealer d i d n o t cooperate
E o t covered by w a r r a n t y o r
predelivery service
Dealer could not f i x
Other
Responses by O r i g i n a l Owners
P u r c h a s i n g Car from:
D e a l e r on
Mainland o r
Local D e a l e r
Manufacturer
T o t a l r e s p o n s e s by a l l p e r s o n s answering t h e q u e s t i o n n a i r e a r e
n o t g i v e n i n T a b l e s 8 t o 1 4 . Only r e s p o n s e s from o r i g i n a l owners
a r e p r e s e n t e d s i n c e t h e used c a r owners e i t h e r d i d n o t r e c e i v e a
w a r r a n t y due t o e x p i r a t i o n of t h e w a r r a n t y p e r i o d p r i o r t o p u r c h a s e
o r i n d i c a t e d by t h e i r answers v e r y l i t t l e u n d e r s t a n d i n g of t h e
warranty, thus tending t o cloud t h e r e s u l t s .
Table 8
Question:
How long i s t h e l e n g t h of t h e w a r r a n t y
on your automobile?
Responses by O r i g i n a l Owners
P u r c h a s i n g Car from:
D e a l e r on
Mainland o r
Local Dealer
Manufacturer
American Motors
Correct
Partially correct
Incorrect
Don ' t know
Chrysler
Correct
Partially correct
Incorrect
Don ' t know
Ford
Correct
P a r t i a l l y Correct
Incorrect
Don ' t know
G e n e r a l Motors
Correct
Partially correct
Incorrect
Don ' t know
Datsun
Correct
Incorrect
Don ' t know
Toyota
Correct
Incorrect
Don ' t know
Volkswagen
Correct
Incorrect
D o n ' t know
Table 9
Question:
Is the l e n g t h o f t h e w a r r a n t y on y o u r a u t o m o b i l e
the same f o r a l l p a r t s ?
Responses by O r i g i n a l Owners
P u r c h a s i n g C a r from:
D e a l e r on
Mainland o r
Local D e a l e r
Manufacturer
American Motors
Correct
Incorrect
D o n ' t Know
Chrysler
Correct
Incorrect
Don ' t Know
Ford
Correct
Incorrect
Don' t Know
General Motors
Correct
Incorrect
Don' t Know
Datsun
Correct
Incorrect
Don ' t Know
Toyota
Correct
Incorrect
Don ' t Know
Volkswagen
Correct
Incorrect
Don't Know
T a b l e 10
Question:
What p a r t s a r e covered by d i f f e r e n t w a r r a n t y p e r i o d s ?
Resuonses bv O r i a i n a l Owners
- p u r c h a s i n g C a r from:
Dealer on
Mainland o r
Local Dealer
Manufacturer
American Motors
Correct
Incorrect
Don ' t know
Chrysler
Correct
Incorrect
Don ' t know
Ford
Correct
Incorrect
Don ' t know
G e n e r a l Motors
Correct
Incorrect
Don ' t know
Datsun
Correct
Incorrect
Don ' t know
Toyota
Correct
Incorrect
Don ' t know
Volkswagen
Correct
Incorrect
Don ' t know
Table 11
Question:
"Are you r e q u i r e d t o f o l l o w maintenance s e r v i c e s and
s c h e d u l e s t o keep t h e w a r r a n t y or g u a r a n t e e i n f o r c e ? "
Responses by O r i g i n a l Owners
p u r c h a s i n g car from:
Dealer on
Mainland o r
Local W a l e r
Manufacturer
American Motors
Correct
Incorrect
Don ' t know
Chrysler
Correct
Incorrect
Don ' t know
Ford
Correct
Incorrect
Don ' t know
General Motors
Correct
Incorrect
Don ' t know
Datsun
Correct
Incorrect
Don ' t know
Toyota
Correct
Incorrect
Don ' t know
Volkswagen
Correct
Incorrect
Don ' t know
T a b l e 12
Q u e s t i o n on where w a r r a n t y maintenance s e r v i c e s
a r e t o be obtained.
Responses by O r i q i n a l Owners
- p u r c h a s i n g C a r from:
D e a l e r on
Mainlana o r
Local D e a l e r
Manufacturer
American Motors
New Car D e a l e r
Service Station
Other
Don't Know
Chrysler
New Car D e a l e r
Service Station
Other
Don' t Know
Ford
N e w Car D e a l e r
Service Station
Other
Don ' t Know
G e n e r a l Motors
New Car D e a l e r
Service Station
Other
Don ' t Know
Datsun
N e w Car D e a l e r
Service Station
Other
D o n ' t Know
Toyota
X e w Car D e a l e r
Service Station
Other
Don ' t Know
Volkswagen
New Car D e a l e r
Service Station
Other
Don ' t Know
Table 1 3
Question:
I f your b r a k e l i n i n g s wear o u t a t 17,000 m i l e s ,
can f r e e w a r r a n t y r e p a i r be o b t a i n e d ?
Responses by O r i g i n a l Gwners
P u r c h a s i n g Car from:
D e a l e r on
Mainland o r
Local D e a l e r
Manufacturer
American Motors
Correct
Incorrect
D o n ' t Know
Chrysler
Correct
Incorrect
Don ' t Know
Ford
Correct
Incorrect
Don ' t Know
General Motors
Correct
Incorrect
Don ' t Know
Datsun
Correct
Incorrect
Don ' t Know
Toyota
Correct
Incorrect
Don ' t Know
Volkswagen
Correct
Incorrect
Don ' t Know
Table 1 4
Question:
I f p a i n t d e t e r i o r a t e s i n e l e v e n months,
can f r e e w a r r a n t y r e p a i r be o b t a i n e d ?
Responses bv O r i s i n a l Owners
' p u r c h a s i n g car from:
D e a l e r on
Mainland o r
Local D e a l e r
Manufacturer
American Motors
Correct
Incorrect
Don ' t Know
Chrysler
Correct
Incorrect
Don' t Know
Ford
Correct
Incorrect
Don ' t Know
G e n e r a l Motors
correct
Incorrect
Don' t Know
Datsun
Correct
Incorrect
Don't Know
Toyota
Correct
Incorrect
Don ' t Know
Volkswagen
Correct
Incorrect
Don't Know
Table 15
Question:
Did d e a l e r i n f o r m you of t h e terms
of t h e warranty?
A m e r i c a n Motors
Yes
NO
Chryslel:
Yes
NO
Ford
Yes
NO
General Motors
Yes
NO
Datsun
Yes
NO
Toyota
Y es
NO
Volkswagen
Yes
NO