Time to Build Unreliable Cars?

By Chris Haak

06.15.2007

Logic tells you that owning a reliable vehicle that requires nothing more than routine maintenance such as tire rotations, oil changes, and filter replacements should be the equivalent of automotive utopia. Everyone wants a “bulletproof” car, right?

Well, almost everyone. Automotive News reported this week that improved vehicle quality over the past several years has significantly reduced the volume of warranty repairs performed by dealerships. According to GM, their volume of warranty repairs is down 40% since 1998. Ford has seen similar drops. Part of this reduction is from improved quality, but part is from reduced sales (if you sell 40% fewer cars, you’ll likely see 40% fewer warranty claims even if the quality remained constant). The oldest data I could find on sales was 1999 – for example, GM sold 2,591,420 vehicles that year, but sold 1,722,871 vehicles in 2006, which is a 33.5% reduction in new vehicle sales over the past seven years.

This reduction in warranty volume has started squeezing some domestic dealers, because fewer repairs per car is not being offset by increased sales per dealership as many import brands have seen. None of the dealers in the article have complained about the fact that cars are better than they were 10 years ago, but that’s probably because they didn’t want to sound bad in an interview. So I’ll say it for them…”please start building crappy cars that fall apart again so that we can make money from the manufacturer for warranty repairs.” To help out the GM dealers, I recommend an immediate resumption of Quad 4 production. Note to the dealers: keep plenty of head gaskets in stock.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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