- The Washington Times - Saturday, September 12, 2009

DETROIT | For years, General Motors Co. and its Detroit rivals have argued that their cars are as good or better than those made by Japanese brands, but consumers either didn’t believe them or didn’t hear the message.

So in a desperate attempt to lure back skeptical buyers, GM is introducing a 60-day guarantee offering customers their money back if they aren’t satisfied with its vehicles.

The deal, aimed mainly at car buyers who fled GM because of quality problems in the 1970s and ‘80s, is a bold move that could boost sales and repair a tarnished image. But it also could cost the automaker dearly if its cars don’t measure up to those made by Honda and Toyota, which consumers now view as superior.

“We’ve got to earn the consumer’s confidence and demonstrate why buying one of our products is a wise choice, and we’re actually trying to make it a risk-free choice,” GM Vice Chairman Robert Lutz told reporters when he rolled out the campaign this week.

Here are some questions and answers about the company’s offer.

Q: How does the guarantee work?

A: Consumers who buy new 2009 and 2010 Buick, Chevrolet, GMC and Cadillac models can return them with no questions asked, between 31 and 60 days after purchase, for a refund of the purchase price and sales tax. Cars cannot have more than 4,000 miles on them and the owners must be current in their payments.

Only one return is allowed per household. Leased vehicles are not covered. The refund does not include equipment added outside the factory or fees charged during the purchase.

The program starts Monday and runs through Nov. 30, which is the last day customers can take delivery of their new vehicles to qualify for a refund.

Q: Has this been tried before, and has it worked?

A: Mr. Lutz said GM’s British Vauxhall brand ran a similar program a few years ago. Saturn had a 30-day, 1,500-mile money-back guarantee from the time the brand was launched by GM in 1990 to the beginning of the 2004 model year. Saturn is up for sale now, and Vauxhall likely will be sold with GM’s Opel brand.

Other brands also have similar programs, but the offers generally have had too many restrictions to be successful, said John Wolkonowicz, senior automotive analyst for the consulting firm IHS Global Insight in Lexington, Mass. It appears that GM will give refunds without many strings, so the program could work, Mr. Wolkonowicz said.

Q: What are the risks for GM?

A: Mr. Lutz said Vauxhall customers returned 2 percent to 3 percent of the cars it sold during its offer. If those numbers hold true for GM, the company could wind up taking back around 14,000 vehicles and having to sell them as used - though that’s not a huge number for an automaker the size of GM.

(The 14,000 estimate was calculated by taking 3 percent of GM’s sales for 2 1/2 months, the length of the money-back guarantee program, based on July’s monthly sales.)

If people judge GM’s products as inferior and return even more cars, the cost to the company could be higher and it could have a difficult time coming up with another way to convince people that its cars are better.

But David Koehler, a clinical marketing professor at the University of Illinois at Chicago, said it’s worth a try for GM because other campaigns haven’t changed people’s perceptions that GM’s cars are lousy. Mr. Wolkonowicz said there is little risk to GM because its products have improved and stack up well against competitors.

“Maybe a few of their older products aren’t quite there yet, but even the worst and oldest of their products are really quite good,” he said. “And the newest and best of their products is outstanding, if not class leading.”

Q: How will GM benefit if it works?

A: GM will get publicity and generate interest in its products. It could sell more cars and again become profitable, making its stock attractive when it goes on sale next year. Proceeds from the sale will help repay at least part of the $50 billion it has received from the U.S. government.

Also, by showcasing new products, GM could rebuild consumer loyalty and confidence and help erase memories of bankruptcy court protection.

“It’s like asking for a date,” Mr. Koehler said. “You just try to get your foot in the door.”

If people buy GM cars and trucks, they are likely to stick with the company, according to data from J.D. Power and Associates. Through August, 65 percent of consumers who bought or leased GM products traded in another GM vehicle. At Toyota, 37 percent of its customers traded in another Toyota. The industry average is 44 percent.

Q: What happens when cars are returned?

A: Dealers will give refunds to consumers and will put the returned vehicles up for sale on their used car lots.

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