Market Trends

Policy Non-Compliance Can Void OEM Warranties

October 28, 2013

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Many fleet vehicles require specialized synthetic motor oil, special coolant fluids, filters, OEM-manufactured spare parts, and strict adherence to manufacturer-recommended maintenance schedules to guarantee new-vehicle warranty coverage. The OEMs have become more stringent in requiring adherence to their maintenance service recommendations for a vehicle to remain eligible for new-vehicle warranty coverage.  

“As manufacturers continue to require these specialized services, it is very important that drivers adhere to their maintenance schedules. In some models, not using the oil specified by the manufacturer could void the warranty,” said Tom Sopel, manager, maintenance and repair management, at LeasePlan USA. “Manufacturers are looking diligently at pre- and post-warranty claims, and their willingness to return costs has decreased.”

In this environment, it is very important for drivers to strictly adhere to OEM service recommendations as specified in the fleet policy.

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“We have seen OEMs deny warranty requests based on poor driver behavior, which is being monitored and tracked through new onboard technologies,” said Tony Piscopo, director, fleet management services, for ARI.


Post-Warranty Good-Will Adjustments

This more stringent OEM warranty atmosphere is a legacy of the 2008 economic meltdown, which resulted in several OEM bankruptcies and an industry-wide belt tightening, which continues to this day. Since 2008, OEMs have become increasingly tight-fisted with warranty recovery monies offered to fleets for malfunctions occurring outside the new-vehicle warranty coverage period. Likewise, all fleet management companies similarly report that OEMs are budgeting less money for post-warranty adjustments for fleet customers, as evidenced by year-over-year declines in Automotive Fleet’s annual operating cost survey. OEMs are scrutinizing all submitted pre- and post-warranty claims.

“The OEMs continue to tightly control post-warranty recovery dollars as they are becoming increasingly aware and critical of proper PM procedures, quality oil, and fuel usage, as well as the use of OEM quality parts,” said Piscopo.

As a result, the fleet industry has witnessed a decrease in warranty recovery dollars; however, there are many other factors contributing to the decline in post-warranty recovery monies.

“As the quality of new vehicles continues to improve and the powertrain warranty periods continue to increase, manufacturers have been reducing their participation in goodwill adjustments,” said Dave Lodding, executive vice president, fleet management services, for Donlen.

The extended warranties on powertrain components have led to more warranty coverage by the manufacturers for repairs, which, in the past, may have occurred outside the new-vehicle warranty period. This has resulted in fewer post-warranty claims requiring goodwill adjustments to replace more expensive powertrain components in higher mileage, older vehicles.

As vehicles with extended powertrain warranties make up a larger percentage of the fleet, there will be fewer post-warranty goodwill repairs, and total post-warranty recoveries will decrease. In fact, most of the fleet units currently on the road today are covered by extended powertrain coverages, which are transitioning what would have been prior post-warranty recovery claims into no-charge warranty repairs.

“Due to the extended warranty parameters and shorter lifecycles for vehicles, there are fewer claims to process, bringing overall warranty recovery down,” said Mike Crumlett, manager, North American truck maintenance operations, for Emkay.


Creating a Fleet Policy Compliance Culture

Post-warranty goodwill adjustments represent a small percentage of a fleet’s overall budget; however, the loss of potentially recoverable warranty monies, which is typically caused by driver non-compliance with OEM maintenance requirements as specified in fleet policy, represents wasted dollars for a fleet.

Adherence to fleet policy is crucial and must be part of your overall business strategy. Once a policy is established, it is the fleet manager’s responsibility to communicate it to drivers. Each driver should know the rules governing the use of a company vehicle and what actions will be taken for noncompliance.

In my discussions with fleet management companies over the years, they repeatedly tell me the best-managed fleets tend to be those whose drivers adhere to a written fleet policy. The fleet manager must have the authority and backing of senior management to address a driver’s inability to operate and maintain an assigned vehicle in conformance with fleet policy. In particular, there should be no exceptions to the company’s vehicle maintenance policies. To ensure drivers observe fleet policy, it needs senior management backing and support. It is only when senior management communicates this message to the rank-and-file and begins to hold drivers accountable can you expect to see the emergence of a corporate culture conducive to policy compliance.

Ask yourself: Does your corporate culture encourage compliance with fleet policy? Answer honestly.

Let me know what you think.

mike.antich@bobit.com

Comments

  1. 1. Keith Wood [ October 29, 2013 @ 11:56AM ]

    Manufactors service policy and use of OEM parts should be required to maintain warranty coverage.

  2. 2. Steve Kibler [ October 29, 2013 @ 01:31PM ]

    Times are changing... When I was a mechanic at a Chrysler Dealership, in the 70's, they still had 100K mile drivetrain warranties. Since that dealership is long gone I can share that the service manager routinely padded his monthly work orders with false engine, transmission and rear end claims. It's no wonder OEM's quite providing "good will" warranty for failures. It’s a shame that integrity has a different interpretation today than 50 years ago. The key message in this article was the last sentence: It is only when senior management communicates this message to the rank-and-file and begins to hold drivers accountable can you expect to see the emergence of a corporate culture conducive to policy compliance. Without that, operators can say to me: "I'm not paid to check oil!" (True comment.)

  3. 3. Mark O'Brien [ November 01, 2013 @ 08:16AM ]

    Here is all you need to know.

    http://www.consumer.ftc.gov/articles/0138-auto-warranties-routine-maintenance

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Author Bio

Mike Antich

Editor and Associate Publisher

Mike Antich has been covering the fleet management and vehicle remarketing markets for more than 20 years. During this period, Mike has written or edited more than 4,600 articles on the subjects of fleet management, manufacturer fleet activities, the fleet leasing industry, and vehicle remarketing. He was inducted in the Fleet Hall of Fame in 2010.

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