US Government’s New Warrantees Commitment Program
By Marc Brandes
In an effort to prevent the further erosion of consumer confidence from becoming an insurmountable obstacle to the viability plans of GM and Chrysler, the Treasury Department announced a new Warrantee Commitment Program. Essentially, anybody purchasing a new GM or Chrysler vehicle during the restructuring period will have their warrantee backed by the Federal Government.
The program’s funding will equal 125% of the cost of the warrantee. That amount will be contributed as follows: (a) 15% of the cost of the warrantee will be funded by the manufacturer, and (b) 110% of the warrantee cost will be funded with a Treasury Department loan. A third party administrator will oversee the funds, and should GM or Chrysler go out of business, the administrator will contract with a service provider to service the warrantee obligation.
Having a new vehicle’s warrantee essentially reinsured by the government will definitely appease some consumers. However, there are still some unanswerable questions: Who will be the service provider? How convenient will they be located? Who will be manufacturing parts if the factory is out of business? Lastly, how qualified is the Federal Government to oversee a vehicle warrantee program. Hopefully, these questions will never become issues in the future.
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