Built in warranty $$$$$

TeJay · 02-20-2013, 11:25 AM

Hi,
I'd like to share with you some interesting information that came my way from a very reliable source. I don't want to name the source because I respect him and I didn't ask if the info was to be shared.
There is a built in cost % assigned to each coach that the manufacturer expects the dealer to fix and then claim. That warranty % is around 12%. If you paid $50,000 for a unit then they expect the dealer to fix $6,000 worth of problems and claim that back to the manufacturer. If a dealer only claims 6% on a unit then they are ahead by $3,000. Here are some examples. A drawer slide is installed improperly and the drawer won't close completely. A molding is installed either not flush or short. A hinge is installed at a slant. A door is misaligned and tilts up or down. A slide won't close all the way or it is uneven when closed. Roofing material is cut an inch short so they fill the gap with caulk and eventually it allows water to enter causing internal damage. OK, why not stop the production line to fix these items???? It costs $$$ to do that. So they'd rather have the dealer fix it, if they catch it or if you bring it to their attention.
They are banking ($$$) on several things. The owner fixing little items or not complaining loud enough about larger problems. The dealer not searching and fixing each unit when it comes in. If the dealer only claims 6% of the cost of a unit back to the manufacturer that's a 6% profit for the manufacturer. A lot of companies would die for a 6% profit margin. I'm sure they know which items (cosmetic VS structural) they have to fix on the line because of the eventual liability or cost to fix down the road.
Thanks,
TeJay

dustman_stx · 02-20-2013, 12:15 PM

Everything that is made with a warranty has a built in cost to cover those potential warranty claims. I can also understand how it would be much cheaper to have dealers fix it than to stop production lines to do it. Only downside to this practice in my mind is that repairs on RV's typically take a while to do and we as consumers miss out on the use of the RV during repairs. Also the headaches involved in getting it to the dealer. Very good info to have, though. Thanks.

TeJay · 02-20-2013, 03:16 PM

Thanks,
I was aware of the built in cost issue. What I did find interesting, at least in my mind is why not improve production techniques and fix these little things instead of turning out a less than real good product. A car manufacturer would not last long if the doors didn't fit, paint was scratched, body was dinged, glass seals leaked, lights were misaligned, alignment was incorrect and tires wore. They strive to make the production process flawless. The fit and finish of a car is heads above the TT industry. I guess this is their way of improving the bottom line while still staying in business and perhaps trying to improve the production process.
TeJay

dustman_stx · 02-20-2013, 03:32 PM

I keep hearing comparisons being made to the car industry, but I think that's an apples to oranges comparison. For one thing, there are infinitely more of a particular model of car made. One line of travel trailer might have 25 different floor plans. We aren't talking just swapping out options like on a vehicle- the entire trailer is different from where pipes run to where wiring is located, etc. For another, much of a car is built on computer controlled machinery because of the high quantities. This allows for exact copies of everything whereas the construction of a trailer does not allow this. I will also throw out there that there have been some massive problems in the auto industry- just take a look at recalls and you'll see what I mean. Remember the accelerator issue on Toyotas? Do a little research on the Ford Powerstroke 6.0. If you owned a GMC product in the 80's or 90's you very likely had major A/C problems. Dodge trannies in the late 90's to early 00's had lot's of issues. Lots of seat belt problems on late 90's to early 00's GMC products. Early Ford 4.6 and 5.4 engines had major issues with spark plugs blowing out or breaking when being changed. And the list goes on. I do agree that some improvements could be made to the RV manufacturing process, but don't expect the level of precision you will encounter in the automobile industry.

TURBS · 02-20-2013, 03:36 PM

Well said!
Can't compare rv's to anything BUT rv's

Turbs

**huntr70** · 02-20-2013, 03:47 PM

Well, your informant is wrong.

There is no built in warranty money. Our warranty clerk does a full inspection of each unit as it arrives. She then submits all the claims into the manufacturers for approval. If they deem it an issue,(they want it fixed) they pay us to fix it. If they don't care that a drawer front is crooked, they don't pay us to fix it, and then you complain it at the demo.

Sorry, have to call it out on that theory.......

I can tell you exact $$ breakdown on the invoices....raw cost of the unit, freight, fuel surcharges, and tolls.

dustman_stx · 02-20-2013, 04:04 PM

I can't argue specific numbers here, but the point that I was making with my original post is that manufacturers know there will be warranty claims and they account for that in pricing. I don't think he was trying to say there are markups by dealers to account for warranty claims, but rather the manufacturer.

TeJay · 02-20-2013, 08:14 PM

My source for this information has nothing to gain from me. I did buy from the last place he worked but he has since moved. He and I were just talking about the industry in general. He has also been in the industry for probably 15 to 20 years. That does qualify him be be informed. He also told me that he does not know the base cost of producing one of these units.

If the manufacturer does build a 12% cost for production problems and dealers/owners do not take the time to check and fix those items then that is $$$ in their pockets. Yes there are many dealers that probably do but that still leaves those that don't. I have worked in those auto plants in Detroit and I know how they operate. I only mentioned cars to draw a comparison. They may be apples and oranges and yes there are significant differences but they are production vehicles subject to quality issues and warranty repairs. From that perspective they are the same.

This does make for a good discussion.

TeJay

**huntr70** · 02-21-2013, 06:50 AM

I see your point, but if they are building in warranty $$$, why are they paying for warranty claims on unsold units?

Just like every other business in the world, they are here to make money, the dealerships are here to make money, and everyone in between would like to make money.

I'm sure their profit margin is there, and we, as a dealership are not paying raw cost for them to build the trailers. I wouldn't call that warranty $$$, I would call that profit. If they have to pay out warranty, it cuts into the profit margin, but that is how a business runs.....

TeJay · 02-21-2013, 08:34 AM

I also understand your point as a dealer. Lets look at it this way. They install something sloppy on the line & don't stop the line to fix it. There's profit built in, we understand they have to make $$$$, & they are willing to let the dealership fix it. That is if it's noticed & if the owner doesn't fix it first. The company might say (speculation on my part), "We can withstand about a 12% margin for warranty repairs but if it goes much beyond then we can't live with it." Even if they have to pay the 12% out on warranty items there is still profit to be made but not quite as much. The dealer still makes $$$ & if they collect an additional 12% on warranty items they make even a little more & the company expects it. The person who was telling me this said that his current warranty claims were around 5.4% & he was having every unit looked over very carefully so he could increase that percentage because he knew that they were willing to pay out up to 12% without to much complaining.

Three years ago we decided to sell our MH, buy a new pick-up & get into a travel trailer. We looked everywhere for 2 years before we bought. Since then we have had three. We have looked at many, many units that had interior fit & finish problems & they were displayed at the dealer with these flaws instead of being repaired. Most salespersons said in so many words,, "We'll fix all these things if you buy the unit." When we did buy a unit some of the items were fixed correctly & others were not. Our first item was a leaking shower. We missed it on the PDI & the dealer did not check it either. We were 100 miles away but I took it back. How many live even further and silicone the problem instead of taking it back?? Sometimes once they get your $$$$ they stopped working for you. Those are warranty claims that were not collected. That was more profit for the manufacturer & lost claims for the dealer.

TeJay

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