GM picks up tab to reward and create loyalty
Last month, the service department at McGuire Chevrolet-Cadillac in Newton, N.J., replaced corroding wheels on a 2003 Cadillac DeVille DTS that was out of warranty.
But the owner didn't pay the $3,500 bill. In a goodwill gesture to a loyal customer, the dealership charged General Motors -- with GM's blessing.
"I guarantee you he will not look anywhere else ever for a car after we did that for him," dealer Michael McGuire says. "He was speechless."
The move is an example of how GM is loosening the purse strings to give service managers more latitude to take care of customers. It's part of GM's broader customer-retention push under Mark Reuss, president of GM North America.
GM long has had a dealer-empowerment program that covers repair costs when service managers agree to fix out-of-warranty items for loyal customers. But dealers say they never felt "empowered" to use it because they feared repercussions from the factory.
"We were always leery," says Carroll Smith, owner of Monument Chevrolet in Pasadena, Texas. "But now they're encouraging us to open the pocket book. They've pretty much said: "Just make the customer happy. We don't care.'"
Smith says he used the program recently to replace the door hinges on a 2001 Chevy Silverado pickup with 317,000 miles on it.
Steve Hill, GM's North American vice president of customer care and aftersales, says the automaker began emphasizing greater use of the empowerment program about a year ago.
"We've tried to drive a very consistent message through our dealers that we need to take care of the customer," Hill says. "It's too competitive a marketplace out there."
He won't put a dollar amount on the good will extended to service customers or say how much GM's costs might have increased.
GM and other automakers have had warranty costs drop sharply in recent years because of improving vehicle quality. The number of GM warranty repairs in North America has fallen 45 percent since 2007, the company said.
Not spending enough
Hill said GM's analysis of how dealers are using the empowerment program reveals one disappointment: They aren't spending enough.
"In a lot of cases, our retail folks are tighter with our checkbook than we would be," he says.
A July 22 bulletin from GM directs service managers to "consider the full array of goodwill tools to help rectify the customer's issue and to prevent the customer from defecting to the competition."
The document offers several generic examples to guide dealers. For instance: A customer whose vehicle has 33,000 miles on it complains that the vehicle is pulling to the right. The service tech notices a small bend and impact mark on the right front wheel rim -- not a problem that the warranty covers.
If the service manager would like to cover it, no problem, according to the GM document. Just make sure to document the problem and the repairs when filling out the paperwork, it says.
A "seismic shift'
Mike Zorn, service director at Classic Chevrolet in Grapevine, Texas, the nation's top-selling Chevy dealer in 2010 based on new-vehicle sales, says GM is much more willing than in the past to consider gray areas when covering repairs. "If you think the customer deserves it, it's not a hard sell," Zorn said.
Old habits die hard, though. Before agreeing to cover his customer's DeVille DTS wheel repair, McGuire in Newton, N.J., first ran it by his GM field rep. "It's almost like we're still looking over our shoulder," he says. He calls it a "seismic shift" in GM's approach to keeping customers happy.
Hill says he has faith that the revenue generated through customer retention will far outweigh the costs.
"If that guy walks away and he's upset and he never brings his car back or he never buys an- other Chevy, Buick, GMC or Cadillac," Hill says, "that's very expensive."
You can reach Mike Colias at firstname.lastname@example.org.