General Motors pulled down a barrier to the gray market March 17 by saying it will honor the factory warranties on GM gray-market vehicles - those imported by a dealer or broker from another country, primarily Canada, and resold in the United States.
But GM said it is not endorsing the gray market and will continue to prohibit its dealers in Canada from knowingly selling new vehicles to wholesalers and brokers who intend to resell the vehicles in the United States.
GM's policy change is a welcome surprise to some GM dealers who are desperate for product but afraid to buy gray-market GM vehicles. But at least one Chevrolet dealer near the Canadian border would rather see GM improve its U.S. allocation system and send him more vehicles.
The move leaves American Honda Motor Co. Inc. as the only major U.S. car company that does not honor the Canadian factory warranties on gray-market vehicles.
A booming U.S. car market and a weak Canadian dollar caused imports of gray-market vehicles from Canada to rise to about 78,000 units in 1998, more than triple the 1997 figure. The majority of the vehicles were light trucks, said the U.S. National Highway Traffic Safety Administration, which oversees registered vehicle importers.
During the first two months of 1999, about 21,000 Canadian vehicles were imported into the United States, NHTSA said.
Although automakers discourage their franchised Canadian dealers from selling new vehicles to known import/export companies, a growing number of new vehicles have come to the United States - where most states require they be sold as used - through wholesalers, brokers and fleet companies.
The vehicles must go through a registered U.S. vehicle importer that verifies the vehicles meet U.S. regulations and insures the vehicles against past and future recalls. Typically, the importer installs a new odometer that reads miles instead of kilometers.
Ford Motor Co., DaimlerChrysler, Nissan North America Inc. and Toyota Motor Sales U.S.A. Inc. say they honor the factory warranties on their vehicles imported from Canada.
American Honda has said otherwise. American Honda sent a letter to its dealers this month restating that Honda vehicles imported from any country are not eligible for warranty coverage from American Honda.
Art Garner, an American Honda spokesman, said U.S. Honda and Acura dealers who resell Canadian vehicles typically buy extended warranties from independent companies to replace the factory warranties.
Until now, GM stuck by its service policy manual, which stated that the customer must be charged for warranty repairs if the GM vehicle was allocated originally to a Canadian dealer and resold in the United States.
The exception was Canadian citizens who had relocated to the United States with a GM vehicle.
In its new policy, GM has softened the language by saying that the warranty 'may be void' on imported vehicles, and that GM reserves the right to address each warranty on a case-by-case basis.
Despite the caveat, Brian Hoglund, director of warranty operations at GM, said GM will honor the factory warranty whether or not the consumer knew the vehicle originally was sold in Canada. The policy change is 'purely for customer satisfaction,' Hoglund said.
Even before GM changed the policy, some GM dealers risked buying Canadian vehicles to fulfill demand and to compete with non-GM dealers who also were buying gray-market GM vehicles.
A Chevrolet dealer near the Canadian border, who asked not to be named, said several independent used-car dealers and the local Dodge dealership have nearly new 1999 Chevrolet Silverado light trucks on their lots from Canada.
If GM cannot get him vehicles, he said, he has no choice but to buy gray-market cars and light trucks.