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Why wouldn't Ford consider a longer warranty to counter GM price wars?
It seems to me like a good way to stand behind your product, increase resale value of your vehicles and since the negative effects of longer term warrantys wouldn't actually be realized for 3 years, it would mean putting off financial woes until (gulp) Ford is in a more profitable position.
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"Why wouldn't Ford consider a longer warranty to counter GM price wars?"

Whoa we don't want these incentives to spin way out of control! How deep do you think Ford's pockets are?

;-)
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Ford is testing this strategy out on the 2002 Focus. They are offering a longer warranty (70,000 powertrain) with a small deductable. Maybe it will be matched on the other vehicle lines if the pilot program is successful. Ford marketing may feel a need to go against the Koreans, in the small car market, who are dumping cares to build market share with 100,000 powertrain warranties. There is no way they can make money by selling a car for $9,000 with a 10 year warranty. They are just buying market share for the moment. It will interesting to see what happens to Kia/Hyundai in 7 to 8 years when expensive engine components start to go out. Of course, if an auto company has a perfect quality product then the warranty will cost nothing. I really doubt the Kia/Hyundai has much better powertrain warranty than Ford. From a customer standpoint, I wish Ford would go to the 100K powertrain warranty. Ford analysts are masters at analyzing warranty data and reacting to product concerns by improving robustness. Large volume warranty data out to 100k would give the engineers a crystal clear feedback on customer concerns after 36,000 miles.
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Why wouldn't Ford consider a longer warranty to counter GM price wars?
It seems to me like a good way to stand behind your product, increase resale value of your vehicles and since the negative effects of longer term warrantys wouldn't actually be realized for 3 years, it would mean putting off financial woes until (gulp) Ford is in a more profitable position.


I like this idea... but not for the accounting issue as I believe you must accrue for expected warranty costs in the year of the sale... not sure about that. But I like the idea for two reasons. One it shows a definite commitment to the quality of the product, and will cause the company to pay more attention to the quality. The second is that the foreign auto makers have already introduced the concept and it has made a great difference. 100,000 miles is nothing to a car today... except maybe for SOME of the domestic models. I think that a pre-emptive warranty strike would be a great idea!

John
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"Why wouldn't Ford consider a longer warranty to counter GM price wars?
It seems to me like a good way to stand behind your product, increase resale value of your vehicles and since the negative effects of longer term warrantys wouldn't actually be realized for 3 years, it would mean putting off financial woes until (gulp) Ford is in a more profitable position."

They shouldn't consider a longer bumper to bumper warranty because the present product mix isn't reliable, so the warranty costs will go up, and Ford will need to cover those costs with cash they don't know they'll have in 3 years, at a time when they are trying to lower cash outflow. I'd rather they leave the warranty the same, and just build better cars (like Honda/Toyota, who are presently experiencing record sales without a longer warranty. This is because those company's reputations speak for themselves with consumers, and THAT is what sells cars profitably People will actually pay a slight premium for them, in fact).

If a company's reputation for reliability is good, the resale values go up (and the residual values manufacturers set for leases, thus preventing them from having to artifically prop them up or offer subsidized financing on a lease to keep the payments competitive, thus saving the manufacturer money). Ford's residual values on leases are some of the lowest in the industry (which is very bad).

Hyundai made it's bumper to bumper warranty 5 years/60k a few years back, and sales doubled. Although this seems good at first, I hope for Hyundai's sake they actually build better cars now, or they are going to take a bath in a few years covering their warranties.
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Why wouldn't Ford consider a longer warranty to counter GM price wars?

New TV advertisement:

"Hey, kids! Buying a new Mega-Size SUV? Of course you are! But why buy a more affordable SUV with CASH BACK into YOUR POCKET TODAY, when you can PAY MORE and get a better warrenty, which MIGHT PAY OFF YEARS DOWN THE ROAD!"

Nah. America is too short-sighted to value a warrenty over a price cut. Between two similarly-priced vehicles, yes, its a big issue. But how many Americans can make a good quantive evaluation of an extended warrenty, taking into account time-value of money, etc?
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You're forgetting------most American consumers don't care about a 10 year warranty because they wouldn't be caught dead driving a car over 4 or 5 years old! crpurdum
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You're forgetting------most American consumers don't care about a 10 year warranty because they wouldn't be caught dead driving a car over 4 or 5 years old! crpurdum

I disagree, for the people who live here on the left coast, a 10 yr/100,000 mile warranty is really a 5 yr/100,000 mile warranty. I think that is part of the reason for the big increase in sales for those companies that increased their warranty length. People realize that a 36,000 mile warranty is only going to protect them for 2 years or less unless they use the vehicle very little.

As much as I love my F150, I will switch to Dodge when I replace it unless Ford matches their powertrain warranty. I drive about 24,000 miles a year.

Nu
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As much as I love my F150, I will switch to Dodge when I replace it unless Ford matches their powertrain warranty. I drive about 24,000 miles a year.


If you love the F150 so much, I think you would be fooling yourself to get a Dodge just for the warranty. After all, it isn't free. You pay for it one way or another. Why not get an extended powertrain warranty on the car you like instead of chosing a car just for the warranty?

tjt
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"Nah. America is too short-sighted to value a warrenty over a price cut. Between two similarly-priced vehicles, yes, its a big issue."

It's not just the value of the extended warrantee but the assurance that the company has confidence in it's product. This adds mindshare to the brand.

"But how many Americans can make a good quantive evaluation of an extended warrenty, taking into account time-value of money, etc?"

Well, to start you could measure that by looking at the numbers of extended warranties sold (6/60 or 6/75 or whatever the terms are). If people buy such plans for $1500 to $1800 then that's applicable data of perceived warrantee value. With it being a post sale out of pocket expense from the customer it has added significance (blood from the consumer stone).
B
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Why not get an extended powertrain warranty on the car you like instead of chosing a car just for the warranty?

My buying an extended warranty seems to be a death sentence for the company I purchase it from. The last 3 extended warranties I purchased were from Silo, Future shop, and Wards.

Nu
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