CPVS & Goodwill

Should Goodwill be included in Cost Per VIN Serviced (CPVS) calculations? Warranty Matters received a call from Consumer Reports magazine several years back. Their question was simple: Do manufacturers pressure dealers NOT to perform Goodwill (or After-Warranty-Adjustments) on vehicles?

I was surprised to find the reporter assigned to this story so well-versed in one of the industries’ best-kept secrets. Obviously, he’d done his research. Although he had suspicions that it could be true, contacts with spokespersons from various manufacturers had been fruitless. In almost every case, he was stonewalled with, “We never pressure our dealers to avoid meeting ‘contractual obligations’ of vehicle warranty.”

He was suspicious of the double talk, however, and called us for an opinion. We were pleased to offer one. Without doubt, Goodwill repairs are not part of contractual obligations of vehicle warranty. This has been pounded into our heads for years. I recall a rep that would go ballistic if we referred to a Goodwill repair as “warranty.” “It’s NOT warranty,” he would exclaim anytime we made the mistake of calling it such.

Clearly, Goodwill is intended for repairs beyond the scope of warranty. With the majority of manufacturers, this usually includes repairs that would have been covered only if the vehicle was within time and/or mileage limits of warranty. Some manufacturers may also consider items such as broken windshields, scratched paint, etc. eligible for Goodwill consideration.

Punished?

Regardless of their use, they all have one purpose: Retain customers. Why then, are Goodwill repairs included with CPVS calculations? Honestly, we don’t feel they should be. Customer retention is a primary concern of all of us. Why then should we be punished for making a decision in the best interest of customer retention and satisfaction.

Think “punished” is too strong a word? Well, look at it a minute. Let’s say your store has already replaced four warranty transmission assemblies this month. Near the end of the month a customer’s vehicle is towed-in with a transmission problem just beyond warranty coverage and s/he’s asking for help.

Because of circumstances beyond your control, you’re put in the position of adding a $2,000+ repair to your CPVS calculations. While the manufacturers are always emphatic that a single repair shouldn’t, in itself, bring on an audit, the fact remains that a $2,000 repair doesn’t help!

Even though we’ve touched on this before, I will remind manufacturers that a customer doesn’t normally ask for Goodwill consideration over a dome lamp bulb. More often than not, it’s a substantial hit in the engine or transmission category. Can one really make an unbiased decision about a Goodwill repair knowing that it will affect CPVS numbers? The answer is: not really.

Service Directors often tell me they, or their counterparts in different parts of town, will sometimes avoid certain repairs—acutely aware of warranty expense ramifications. They’re not denying contractual obligations mind you. It might be that their transmission technician is “backed up,” or “in a two-week school.” Chances are that everyone reading this has either used one of these excuses or knows someone who has.

Even though manufacturers claim they leave Goodwill decisions to the dealership service managers, who hasn’t been asked or told to, “help someone out,” or “take care of it,” by their rep or Customer Assistance? Most managers routinely make a walk-around of a potential Goodwill vehicle, not to evaluate the condition, but to see where it was purchased. Customer loyalty is, and should be, a three-way street—good for the customer, good for the dealer and good for the manufacturer.

The majority of dealers recognize this, and spend Goodwill dollars wisely. Often I find dealers are tighter than the manufacturer when it comes to Goodwill. More often than not, they’re in the best position to make the best decision anyway.

Editor’s note: Shortly after Consumer Reports published the article regarding Goodwill/AWA repairs, Ford Motor Company removed After-Warranty-Adjustments from the Cost Per VIN Serviced calculations. Unfortunately, FMC again (April 2002) started using these calculations as part of dealer warranty expense calculations. Warranty Matters strongly disagrees with this practice. In the end, only the customer will suffer. GM recognized this problem a number of years ago and no longer includes Goodwill in the CPVS calculations, allowing dealers the freedom to make fair decisions regarding Goodwill repairs —Dave

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