Good News for U.S. Automakers: Warranty Claims Drop

| About: Ford Motor (F)

The quality of domestic-brand vehicles is way up from where it was just a few years ago. We've seen it in the annual metrics from J.D. Power and Associates, AutoPacific, Strategic Vision, and others, and in annual reliability ratings from Consumer Reports.

However, there's another even stronger indicator that points to improved quality: warranty claims, those costs paid out to address repair issues that arise during (or sometimes after) the factory warranty. According to the Detroit News, warranty claims have fallen by more than 45 percent at GM and more than 40 percent on Ford Motor Co. (NYSE:F) vehicles from 2007 levels through last year. And over the past two years, Chrysler's warranty claims have dropped by 48 percent, to a record low, when looking at issues in the first 90 days of ownership.

Those are from raw numbers, of course. But even after adjusting for sales, which have dropped tremendously during this time, it's a sign that domestic-brand vehicles have fewer repair issues than before.

Beyond customers getting more trouble-free vehicles, there's a silver lining to this: It might help the domestic automakers become profitable once again. In GM's case, warranty payments have fallen by 10.5 percent.

GM has implemented a global database through which warranty claims can be seen in real time by engineers, so that issues can be spotted rapidly. For its upcoming 2011 Chevrolet Cruze, for instance, the automaker is using claims data from other countries and markets—where the sedan has already been launched—to help assure quality for the U.S. version that goes on sale this fall.

Nevertheless, customer perceptions lag reality and, as an annual survey conducted by residual-value experts ALG showed, Buick and Chevrolet still lag several other import brands that have been shown to have lower customer-service satisfaction or lower reliability, typically.

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