General Motors Company (NYSE:GM) said that it intends to reduce its powertrain warranty on Chevrolet, as well as GMC models for FY2016. It considers the offer not strong enough to generate strong sales. The five-year that offers 100,000-mile powertrain coverage will be changed to five years and 60,000 miles for FY2016 models.
The changed perception
General Motors stated that the company discussed with its clients and learned that warranty and fee scheduled maintenance are not important reasons to support a vehicle purchase in non-luxury segment. The savings made from changed measures would be reinvested into other retail programs that are considered as more effective than warranty. The new measures will not have any impact on financials.
Under a powertrain warranty, General Motors and other carmakers make repairs to the transmission and engine for free of cost. General Motor will offer courtesy roadside and transportation assistance during the coverage period. It will even scale back offer of two years of free vehicle maintenance, including tire rotations and oil changes in GMC, new Chevy and Buick vehicles. The number of free services visits will be reduced to two from four on 2016 models. The measures are balanced which will not only reduce costs but also will offer new ways to entice customers.
Warren Buffett has lately been increasing his shares in carmaker and with good reasons. General Motor stocks seem inexpensively valued when measured on forward earnings and robust growth expectations. Also, if the global economy improves it will have a positive impact on financial performance of the company. General Motors Company (NYSE:GM) will benefit from international growth, particularly in Europe. The company reported a 30 basis point increase in market share for Vauxhall and Opel vehicles in January to 5.4%. The combination of two vehicles itself surged 7.2% in sales, and General Motor expects additional strength to come in Western Europe.