Monday, September 25, 2006

Ford and G.M. Talk of Quality as They Try to Court Buyers

September 7, 2006
Ford and G.M. Talk of Quality as They Try to Court Buyers

DETROIT, Sept. 6 — After years of trying to court customers with ever-larger discounts, General Motors and the Ford Motor Company are now vying to prove that each is more willing to stand behind the vehicles it builds.

They also hope to persuade consumers who started buying Toyotas and Hondas out of frustration that the quality problems that have plagued American vehicles have been fixed.

G.M. said on Wednesday that it would extend warranty coverage of the engine and transmission on all 2007 vehicles to five years or 100,000 miles, whichever occurs first. Most vehicles previously came with a powertrain warranty of three years or 36,000 miles, which is the industry standard.

The move allows G.M. to boast that it offers “the best coverage of any full-line automaker,” two months after Ford extended warranties on its vehicles and claimed that distinction. Both automakers took a cue from Hyundai, the South Korean automaker whose reputation for poor quality nearly drove it out of the American market before it introduced a 10-year, 100,000-mile warranty in 1998. Hyundai’s annual sales have more than quadrupled since.

“Some people don’t put us on their consideration list because of their perception of some historical problems,” G.M.’s chief executive, Rick Wagoner, said on Wednesday outside the company’s headquarters.

Mr. Wagoner said G.M. had significantly reduced the amount it spent repairing vehicles and decided to lengthen warranties as part of a strategy to enhance the value of its vehicles.

Although Ford and the Chrysler division of DaimlerChrysler indicated that they had no plans to match G.M.’s offering, analysts said that warranties had emerged as the latest way for Detroit’s automakers to try to set themselves apart.

“This is a method of providing an additional benefit to the consumer without using incentives,” said Tom Libby, senior director of industry analysis at J. D. Power and Associates, which surveys consumers on vehicle quality.

But whether car shoppers will respond to longer warranties is unclear. Warranties usually appear low on the list of reasons consumers buy a vehicle, according to J. D. Power data.

At the same, Wall Street often dislikes longer warranties because they expose automakers to more risk.

“It’s a dangerous game to play” unless repair costs are truly under control, said David E. Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. “This is an area that you can get into a lot of trouble.”

Ford, which covers powertrain repairs for up to five years or 60,000 miles on most vehicles and six years or 70,000 miles on Lincoln models, said dealers liked the change. The protection, like G.M.’s, can be transferred if the vehicle is sold.

“It’s been a very good closing tool on the showroom floor,” said a Ford spokesman, Jim Cain. “Over time, we expect that it’s going to have a very significant impact on purchase consideration.”

But it could also have the opposite effect on some potential customers.

Some automakers, particularly those who have honed reputations for building high-quality vehicles, view longer warranties as “a sign of weakness,” Mr. Libby said. “The consumer starts to wonder, ‘Is there a reason I need this?’ ”

Copyright 2006 The New York Times Company

© Copyright 2006 The Detroit News. All rights reserved.


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