As GM trims warranties, will buyers even notice?

DETROIT -- Dealer David Ferraez wasn't upset when he heard last week that GM would be doing away with its 5-year/100,000-mile powertrain warranty on Chevrolet and GMC vehicles.

Ferraez, who owns Buick-GMC and Chevrolet dealerships in northern New Jersey, says the long warranty -- in place since model year 2007 -- wasn't on many customers' radars. That was GM's official rationale for reducing it to 5 years/60,000 miles for its two highest-volume U.S. brands, starting with the 2016 model year.

"We tried to use it as a differentiator because the imports didn't offer it," says Ferraez, whose market is dominated by Asian and European brands, most of which offer 60,000-mile coverage. "It didn't really work."

Automotive analyst Alan Baum says that while the powertrain warranty is probably far down most customers' lists of considerations, it was a useful enticement.

"There's no question that many consumers are feeling better about the quality of GM's products than they did eight years ago," Baum says. But, he adds: "For people who are still unsure, that long warranty could be one factor in getting people to consider a Chevy or GMC."

GM also will scale back its offer of two years of free maintenance, including oil changes and tire rotations, on most new Chevy, GMC and Buick vehicles. The brands will reduce the number of free service visits to two, from four, starting with '16 models.

GM said the financial impact of the change will be "immaterial," and whatever limited savings come from it would be reinvested in features and technology.

Even so, GM saw a spike last year in its combined expenses for warranty claims and recalls.

After steadily declining from 2010 to 2013, that cost grew to more than $1 billion in both the second and third quarters of last year, its largest outlays since 2009, according to a November analysis in Warranty Week, a trade publication.

Whatever GM's rationale, Ferraez and other dealers smell an opportunity.

"Selfishly for me, the first thing I thought of was that will probably help me to sell more extended warranties," Ferraez says. "We'll be able to make money doing that instead of the factory."