Warranty claims cost DCX $6.1 billion last year
08-14-07, 07:38 AM
#1
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Warranty claims cost DCX $6.1 billion last year
Warranty claims cost DCX $6.1 billion last year
Posted on Tuesday 14 August 2007
One of the key challenges of turning around the misfortunes at Chrysler will be to improve the levels of warranty claims, which last year cost it and German parent Daimler a staggering $6.1 billion. Though the data didn’t separate which carmaker within the group had the highest claims, Chrysler’s vehicles have consistently ranked below industry averages for quality. Even Mercedes-Benz has stumbled in recent years with major quality issues in its usually bullet-proof passenger vehicles.
The results were a shocking 36.8% higher than the second worst ranked company, GM, whose claims totaled $4.46 billion last year. Close behind was Ford on $4.10 billion and Toyota with $2.37 billion, according to Automotive News.
Considering that Chrysler has just offered a lifetime warranty for its powertrains, the issue of escalating claims costs is an even bigger factor in seeing Chrysler return to profitability. Things are looking up. According to Chrysler’s executive vice president Frank Klegon, warranty costs have fallen 40% over the past five years and that most of the $6.1 billion total is actually due to the expensive repairs for Mercedes branded models.
Posted on Tuesday 14 August 2007
One of the key challenges of turning around the misfortunes at Chrysler will be to improve the levels of warranty claims, which last year cost it and German parent Daimler a staggering $6.1 billion. Though the data didn’t separate which carmaker within the group had the highest claims, Chrysler’s vehicles have consistently ranked below industry averages for quality. Even Mercedes-Benz has stumbled in recent years with major quality issues in its usually bullet-proof passenger vehicles.
The results were a shocking 36.8% higher than the second worst ranked company, GM, whose claims totaled $4.46 billion last year. Close behind was Ford on $4.10 billion and Toyota with $2.37 billion, according to Automotive News.
Considering that Chrysler has just offered a lifetime warranty for its powertrains, the issue of escalating claims costs is an even bigger factor in seeing Chrysler return to profitability. Things are looking up. According to Chrysler’s executive vice president Frank Klegon, warranty costs have fallen 40% over the past five years and that most of the $6.1 billion total is actually due to the expensive repairs for Mercedes branded models.
08-14-07, 05:25 PM
#6
last year, Toyota and GM about equaled on sales and Toyota spent 2 billion less in waranty costs... when we also add that in most countries Toyota has longer warranty coverage it becomes clear why Toyota is what it is...
08-14-07, 06:25 PM
#7
Lexus Fanatic
The Ford Fusion/Mercury Milan/Lincoln Zephyr triplets have been as reliable as many Hondas and Toyotas....and MORE reliable than the 2006 or 2007 Camry. Several recent Buick models have also been better-than-average in reliability for several years.
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08-14-07, 06:31 PM
#8
Lexus Fanatic
The main problem with many Dodge/Chrysler/Jeep vehicles, the way I see it, is not so much the way the cars are built or sloppy assembly in the auto plants. It seems to be primarily the cheapness and the poor quality of the materials used in the design of the vehicles. The people on the assembly line, from what I can tell, are doing their jobs with what they got....they are just given substandard sheet metal, hardware, plastic, and paint equipment to work WITH.
Compare, for instance, the Chrysler 300 with the Hyundai Azera, a car which sells roughly in the same price range as a V6 300. Both cars are pretty well-built at the factory as far as the individual workmanship of assembly-line workers go, but the Azera has noticeably better paint, door solidness, hardware, quality of interior trim, and body sheet metal. Why? Not because of the people at the factory or on the assembly lines, but because of the designers......they simply use better materials in the design of the Azera than Chrysler did with the 300. The 300, yes, has a lot of flash inside.......especially the Hemi 300C, but it is all superficial, a layer coated on top of cheap plastic. The Azera, inside, is not quite as flashy, but is more solid underneath.
Compare, for instance, the Chrysler 300 with the Hyundai Azera, a car which sells roughly in the same price range as a V6 300. Both cars are pretty well-built at the factory as far as the individual workmanship of assembly-line workers go, but the Azera has noticeably better paint, door solidness, hardware, quality of interior trim, and body sheet metal. Why? Not because of the people at the factory or on the assembly lines, but because of the designers......they simply use better materials in the design of the Azera than Chrysler did with the 300. The 300, yes, has a lot of flash inside.......especially the Hemi 300C, but it is all superficial, a layer coated on top of cheap plastic. The Azera, inside, is not quite as flashy, but is more solid underneath.
Last edited by mmarshall; 08-14-07 at 06:47 PM.
08-14-07, 07:50 PM
#9
Pole Position
Yes but part of the problem is the labor cost. Estimate 17 man hours to assemble a car (old Taurus number) at Union rates vs. 19 man hours at South Korean rates and you end up with ~$300 per car in additional costs. $300 per car will buy you really, really nice interior improvements.
Remember too that the Azera sells in much lower volume than a 300. So for every dollar you can squeeze out of the car the additional profits as you multiply by volume becomes huge! Azera 27K sales 2006, 300+Magnum+Charger (same plant and materials) 143K+40K+114K=297K. Difference 270Kx$300 per vehicle = $81M!!!
Remember too that the Azera sells in much lower volume than a 300. So for every dollar you can squeeze out of the car the additional profits as you multiply by volume becomes huge! Azera 27K sales 2006, 300+Magnum+Charger (same plant and materials) 143K+40K+114K=297K. Difference 270Kx$300 per vehicle = $81M!!!
08-14-07, 07:53 PM
#10
Pole Position
I am unaware of the general public being privy to the real warranty costs for any of the automakers (other than Chrysler now). Consumer reports is a good indicator/barometer of the problems a vehicle may have but it doesn't estimate the actual cost of doing a repair. Consider the cost of repairing the LS460s for the wind noise. How much does it cost to make that fix vs. another "noise" type fix?
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