By on September 11, 2009

In three day’s time, General Motors customers can (may?) buy a new car from any of the nationalized automaker’s four remaining brands safe in the knowledge that they can (may?) return the car for a full refund. The exact details of the deal will hit GM stores this weekend. While we await a look at the fine print (a.k.a. “other restrictions”), I called up GM to get as much inside dope as I could snort. GM’s Director of Communications for Vehicle Sales, Service and Marketing, Pete Ternes, told me dissatisfied car owners can return their GM whip between 30 and 60 days after purchase, as long as the customer doesn’t damage the car or put more than 4k on the odo. The refund covers the purchase price and sales tax and . . . that’s it. If you’ve got negative equity rolled into the deal, you’re still on the hook to the finance company. If you go for any dealer add-ons, kiss that cash goodbye. This much we knew from the press release. Here’s the new bit: GM has budgeted for a three percent return rate, although Ternes says New GM expects the number of bounce-backs to be “one percent or lower.” So, what happens to the car and who pays for the depreciation?

“The vehicle then becomes a used car,” Ternes told me. “The dealer buys it back at a pro-rated price. Our insurance company [Cynosure] covers the difference between the new and used price. That’s what the $500 discount, which the customer can take in place of the guarantee, is for.”

So, anyway, what’s the point of this thing?

“It’s designed to close the perception gap,” Ternes revealed. “The difference between the customer’s perception of GM vehicles’ quality and performance and the reality.”

Ternes said GM had considered other incentive programs to move the metal post-Cash for Clunkers (e.g., the return of 24-hour test drives). One main reason they chose the 60-day guarantee: it reflects Chairman of the Board Ed Whitacre’s personal feelings, his revelation, if you will, about GM products. When I pointed out that Whitacre had publicly declared, “I know nothing about cars,” Ternes terse reply: “Most consumers are the same way.”

Ternes meant that in the nicest possible way, but is there a nice way to say your customers don’t know from cars? I don’t think so.

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40 Comments on “GM Expects 1% Return Rate on 60-Day Satisfaction Guarantee...”


  • avatar
    wsn

    Perception gap.

  • avatar
    NickR

    I think reading the small print on this 3x, with a lawyer at your elbow, would be wise. You might want to bring him to the dealership as well. This is one of those marketing ploys that sounds good but could blow up in GMs face. Just one person trying to return their car and getting beat on a technicality and the **** will fly.

  • avatar
    twotone

    “… who pays for the depreciation?”

    The US government taxpayer.

    Twotone

  • avatar
    jkross22

    I suppose this is GM trying to pull a Hyundai and get creative with an incentive plan. Props for the effort.

    GM – You have no mulligans. If you screw up on this incentive program and refuse to take back a single car or try to bend someone over the bicycle rack in the process, it will be all over the news. All the money you’ve (we, the taxpayer) invested in marketing this, all the time spent developing this program will all backfire if this happens. Understand?

    Bob Lutz, are you listening?

  • avatar
    tced2

    Who pays….?

    Consider it a form of advertising. A cost of doing business.

  • avatar
    Bunter1

    twotone +1

    Bunter

  • avatar
    JMII

    Like I said before people don’t return cars after 90 days, its more like a year later when the realization that you bought a POS begins to set in.

    GM is using this program to do two things: 1) make people feel better about their choice, Which is really only valuable if they were on the fence with their purchase in the first place, and 2) use the # of returns to prove buyers (almost 100% of them!) KEEP their new GM. Of course the real number of “returns” is hidden, as it is the number of 2 year old GM vehicles traded in at the local Honda & Toyota dealer.

  • avatar
    spyspeed

    Will GM lovingly restore your credit rating when you back out of a financed deal?

  • avatar
    KixStart

    GM’s problem isn’t 60-day customer satisfaction.

    GM’s problem is 10-year customer satisfaction.

    However, as P.T.Barnum observed, there’s one born every minute. Is that a large enough population to get GM the sales volume it needs to survive?

  • avatar
    FloorIt

    This could backfire in one way by a lot of one model being returned (think Aveo). GM then has already raised production because of initially that model being sold, then a glut of that model on both the new and used markets is the result.

  • avatar
    KixStart

    I think the Chevy dealer across the street should put up a sign that says, “Corvette Rent-a-Center.”

  • avatar

    As a taxpayer, I’d be happier if we could get a 1% rate of return from GM.

  • avatar
    Ken Elias

    When will GM get away from gimmicks to sell vehicles? You’d think they’d have learned that short term tricks destroy brand value and focus people on the deal, not value.

    Frankly, I don’t see this marketing push as making a difference in sales, but certainly not helping build confidence in the brands or vehicles.

  • avatar
    afabbro

    First, it’s not really a 60-day return. It’s a 31-to-60 day return. You can’t return it before 31 days. I assume that’s an actuarial decision, given that some percentage of eligible cars will be involved in accidents (ineligible to return, no doubt), stolen, or otherwise damaged by their owners.

    Second, customers will be offered $500 at time of sale to wave the return option. Expect dealers to “make your first payment” by talking customers into this. And probably pocketing the $500 from GM and rolling it into the financing anyway…

    Honestly, I just see this as GM lowering prices by $500.

    And finally, as has been pointed out, isn’t everyone’s immediately reaction “what’s the fine print”? Think about your typical dealership…do you really think you’ll be able to stroll in on day 59, drop off the keys, and walk away scot free? Something tells me there will be a sit-down with the sales manager (or three) in a small room and a conversation that starts with “Bob, we here at Courtesy Chevrolet understand that you have some concerns, but whatever it takes to make it right, we’re going to make it right…”

  • avatar
    CyCarConsulting

    Sounds good, as it always does on paper. In keeping the car on the road, creative dealers will load up the back end insuring customers the inability to return the car without a huge loss to them. Misconception of the program,, as mentioned above, will create a bad relationship with consumer to dealer. This will not help GM or it’s image. Getting more cars on the road will, but this is a risky play.

  • avatar
    gohorns

    This reeks of Mark Laneve and/or some hair brained MBA. My god it so simple to fix a perception gap just do what Hyundai did plus a bit more.
    #1 Actually fix the cars (GM says they have done this so okay).
    #2 Reset the bar for your warrenty and/or service. Think big not bean counter cheap
    #3 Simplify the pricing structure its to damn complicated with to many rebates and to many gimmicks. You can never tell if you have the right price or not. Stop the idiots gimmicks.
    #4 Mea Culpa : look you burned the heck out of some consumers stop blaming them and pony up. This is a win back situation you have to bend over backwacks.

  • avatar
    wsn

    # The Comedian :
    September 11th, 2009 at 12:36 pm

    As a taxpayer, I’d be happier if we could get a 1% rate of return from GM.

    —————————————

    I don’t even dream to have my money back or any interest. If only GM doesn’t need more bailouts paid by me (and most of you), I will live happily ever after.

  • avatar
    John Horner

    I don’t think the program is going to move the needle on GM sales, but at least they are trying something different. If it works, keep doing it. If it doesn’t measurably raise sales, kill the program.

    Rapid experimentation is a good thing is business. It is easy to nay-say every idea. GM’s insiders have been the experts at that for a long time.

    I have my doubts about how well this program will work, but if I had a vote on the board I would still vote for trying it out.

  • avatar
    Autosavant

    Second, customers will be offered $500 at time of sale to wave the return option

    If a customer buys the car and just does 4,000 miles as reimbursed business travel over the 60 leisurly days, he or she will be reimbursed to the tune of $0.55/mile, totaling $2,200 for 4,000 miles.

    That’s four and a half times the $500, which everybody could easily get anyway while haggling, regardless of this desperate program.

  • avatar
    Autosavant

    Maybe GM should try Hyundai’s series of cheap gimmicks, which, as much as I scorn them, seem to have worked.

    Such as gas at $1.49, payment protection etc etc.

  • avatar
    Ken Elias

    Hyundai’s “gimmicks” aren’t all gimmicks. The warranty has essentially stayed the same since they announced it. The payment protection program was widely copied and addressed personal circumstances, not anything to do with the vehicle. And the gas payment protection – something that Chrysler tried first but has limited value in stable gas price environment.

    But Hyundai vehicles have shown a trajectory of improvement – both styling and reliability – and are coming very close to the Japanese. The brand still suffers from early negative perceptions but these are being slowly erased with improving product.

    GM on the other hand keeps making promises about better vehicles – and some certainly are – but still suffers from long product cycles, certain vehicles which still remain non-competitive, and brand confusion.

  • avatar
    Conslaw

    Spyspeed raises a serious question. How will the report the return to the credit bureaus? A voluntary repossession is rated the same as an involuntary repossession.

  • avatar
    BostonDuce

    I’m upside down about $6k on my present transport that is becoming a service headache.

    Can I roll the $6k into a trade for a GM-something with a 0% 60 month loan, drive it for 32 days while I’m looking for a real replacement ride, return it, and be left with a no interest $6k loan???

    I get rid of the white elephant, and $100/month is easier to handle than a $6k all at once slap.

    My only expense would be the license/doc fees ($200??). Seems too easy.

    BD

  • avatar
    Autosavant

    Hyundais and Kias had nowhere to go but up, and sure they did imporove from their dismal 1988 Yugo-like Hyundai Accents, which sold for $5,000 apiece when a Yugo went for $4,000.

    But Hyundai’s marketing BS are indeed despicable gimmicks, and, what’s worse, their labeling of some of their products is downright dishonest and a total FRAUD.

    I am speaking of course of the SO CALLED “GEnesis” coupe, which is a RWD Tiburon that has NOTHING to do with the far larger, more powerful (V8 NOT available on the Coupe, and the tiny 2.0T NOT available on the REAL Genesis Sedan),

    and moreover it sells for FAR LESS than the sedan, the 2.0T is almost half the price of the V8 Sedan.

    Maybe the oft-replaced recently Hyundai of America Execs think that Hyundai buyers are a bunch of uninformed morons?

  • avatar
    ClutchCarGo

    I think that the buyer’s down stroke, whatever form it takes, will certainly deter the casual kind of sham buying that some have suggested. I’m really wondering about the trade-in issue, tho. There’s no way that the dealer can keep a trade around, just waiting for the 60 day grace period to expire. Buyers would have to accept that while they can get the purchase price back, taking a haircut on the extraneous fees, they would need to immediately find a new set of wheels. This might not be too bad of a deal if you can pressure the dealer into giving you a really high trade-in value by not haggling on the purchase price, e.g. trade in a car worth $3.5K, get a $5K credit by paying full price on the new car, shop for the car you really want for 45 days, then return the GM car and pocket $1.5K.

  • avatar
    NickR

    What the hell do those cufflinks represent?

  • avatar
    rnc

    Perhaps it will work like the when the last generation camero came out and I watched all of the $8/hour production employees pull up one after another wondering how in the hell they were affording them only to see them pull up 3 months later in a used cavalier, but still paying for the camero (which were still so hot that the dealer could sell for still near new $).

    As I’ve said this is really just a negative equity play, after they’ve got you on that you might as well keep it.

    Now if this is aimed (restricted) to the credit worthy, would normally pay 20% down and would sell thier old car themselves types then GM may be onto something positive.

  • avatar
    ryv

    I like this:

    JMII :
    Like I said before people don’t return cars after 90 days, its more like a year later when the realization that you bought a POS begins to set in.

    Yet most people take the JD Power studies pretty seriously in their new car purchasing decision and thats done at 90 days of ownership (Initial Quality Study). Fact is as someone else pointed out GM needs to show they’ve improved their 10 year quality, their long term quality. Unless back in 2000 they had started a plan to improve quality and recognized the perception gap as a problem then we are years off from a GM that generates the word of mouth advertising to get people to purchase again.

    I have to give props to GM for this though, people will trade their car in, feel secure in their purchase, and any small items that come up will be written off by mostly happy customers – if any small issues pop up – because the only option is to return the car, pay back the loan, and start over from scratch without a vehicle at all.

  • avatar
    Deepsouth

    @NickR, I watched some documentary a few months ago on the History channel or PBS or whatever. The highlighted motorcycle gangs. I think one was called the 1% or they were a sub culture of a motorcycle gang. I do remember they were very violence prone. Must have something to do with that group.

  • avatar
    gslippy

    @Autosavant: I don’t get the hate for Hyundai/Kia’s gimmicks and the supposed linkage to their product naming convention.

    Their 10/100 warranty has been in place for a long time. The Assurance program isn’t about misplaced bragging, nor is the $1.49 gas.

    And none of H/K’s ‘gimmicks’ costs the consumer $500. That’s what kills me – GM is effectively making the buyer pay $500 for this guarantee.

    And their insurance company is budgeting for a 3% return rate?! That seems high to me, something on the order of 14000 cars being returned, or 4500 if only 1%. Doesn’t seem like the paperwork is worth it – the unhappy customers won’t be converted anyway, and the happy ones are already happy.

  • avatar
    oldlt43

    This may help NickR out a little. Years ago the American Motorcycle Association came out with the comment than the vast majority of bike riders were law-abiding up-right citizens and only about 1% were of the Mongols/Bandidos/etc. outlaw persuasion. The outlaws took this as a mark of pride and utilized the 1% patch to proclaim to the world they were, indeed, a small and select group and proud of it. The “FTW” has traditionally been shorthand for “Fuck The World”, another position many outlaws groups are found of holding.

  • avatar

    It’s actually the obverse and reverse of a commemorative coin celebrating, I suppose, murder, rape, mayhem, pimping, drug selling and general anti-social behavior.

    http://www.salem-news.com/articles/june232009/one_percenters_6-23-09.php

  • avatar
    joeveto3

    First off, this won’t sell more cars. In so many ways, when you lead with an apology, as this little scheme certainly is, you chase away as many buyers as you earn.

    And as far as the real value to GM or the consumer? I’m doubtful.

    Honestly, we all know what a pain in the ass it is to buy a car, even when the process is straightforward. By the time you choose the car you want, do the test drives, mix it up with the various sales people, and possibly, finance people, do you really want to go back, return the car, and go through it all over again? Shitty sales process is not unique to GM, nor to the domestics. It’s universal.

    Yes, there will be those a-holes who try to work the system. That will be a tenth of a percent. Then you’ll have those who are truly so miserable in the car, possibly it’s a lemon, that will return the car. But overall? I don’t see this as being a big deal.

    So then the question begs to be asked: Why do it at all? Certainly whatever money that’s at risk could be better spent on improving the cars.

  • avatar
    highrpm

    I can’t wait to hear how GM actually manages to weasel out of taking cars back on this deal. And most likely, this is the only site that will provide any good coverage on it.

    Why not just offer a 10/100k warranty like Hyundai? A real warranty that covers the entire car without an asterisk at the end. Even in the past five years, too many people have been burned by Chrysler’s 7/70 and Lifetime warranties. Everyone expects GM and Chrysler deals to have a weasel clause. And that’s not a perception gap.

  • avatar
    Autosavant

    “Author: gslippy
    Comment:
    @Autosavant: I don’t get the hate for Hyundai/Kia’s gimmicks and the supposed linkage to their product naming convention.”

    I sure never used the word hate. I don’t get why you see it in my posts. Here are my comments again:

    “Hyundais and Kias had nowhere to go but up, and sure they did imporove from their dismal 1988 Yugo-like Hyundai Accents, which sold for $5,000 apiece when a Yugo went for $4,000.

    But Hyundai’s marketing BS are indeed despicable gimmicks, and, what’s worse, their labeling of some of their products is downright dishonest and a total FRAUD.

    I am speaking of course of the SO CALLED “GEnesis” coupe, which is a RWD Tiburon that has NOTHING to do with the far larger, more powerful (V8 NOT available on the Coupe, and the tiny 2.0T NOT available on the REAL Genesis Sedan),

    and moreover it sells for FAR LESS than the sedan, the 2.0T is almost half the price of the V8 Sedan.”

    If I were a happy owner of the Genesis SEDAN (which fortunately I am not), how would I feel when, after shelling out $40k for my V8, Hyundai Deliberately and Misleadingly sells a far smaller, 500 lbs lighter, coupe, which is far more similar to their old cheapo TIBURON, and call it the “Genesis” coupe (LOL!), AND sell it for HALF the $ the REAL Genesis V8 sedan goes for? And sell it with tiny engines such as the 2.0 T that is not even an OPTION on the Genesis Sedan?

    I would be mad as hell and complain bitterly to Hyundai for the dilusion of the “Genesis” brand name.

    and as for the $1.49 gas, it is a cheap gimmick any way you slice it, and you will never convince anybody that it is not. These are selling techniques associated with the cheapest domestics and desperation. But in this crazy economy, and thanks to the utter incompetence of the domestics and the econ crisis, they have worked for a few months.

    If Hyundai had any GUTS, it would tell you, ouru cars are the besat in the world in their price range, their reliability record is stellar, and we will not discount them to sell them, because they are a far better value than the similarly priced competition.

    But of course Hyundai cannot tell you that, and even if it did, I would laugh for a long time.

  • avatar

    pretenders, wannabees, and copycats. Return to Greatness is the answer.

  • avatar
    JSF22

    Amen to GM for this. Now my wife WILL let me have a Corvette for our Christmas vacation in Florida!

  • avatar
    Bridge2far

    “Spyspeed raises a serious question. How will the report the return to the credit bureaus? A voluntary repossession is rated the same as an involuntary repossession”

    GM will buy back the vehicle at sale price. Customer responsible for any negative equity, add ons. If you didn’t finance over that amount you have nothing to worry about.

  • avatar
    Bridge2far

    “There’s no way that the dealer can keep a trade around, just waiting for the 60 day grace period to expire.”

    Trade in to dealer is unaffected.

  • avatar
    adamphillips411

    Bought a car found out it did not handle well in the snow so I thought well I have 60 days I will go get somthing else…NO not that easy. When I was signing the papers a INCENTIVE was brought to me of $500.00 off my purchase price if I would not bring it back within the 60 days. I thought ok and if I take it back I will have to repay the $500.00. The catch is that if you sign that $500.00 gift then you WAIVE your right to return the vehicle in 60 days which was never mentioned to me  nice smoke and mirrors. Both the dealer and GM basicly laughed and said too bad so this will be my last dealing with Government Motors (GM).

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