The Devil's in the Details: Understanding Truck Warranties

Bob Deierlein

Do you understand the warranties on your trucks? Do you know exactly when to submit a claim or whether you should send it to the vehicle original equipment manufacturer (OEM) or the component supplier? Do you train your technicians on warranty specifics?

If you don't, you're not alone. But you might start worrying about the money you could be losing, in addition to the downtime, wages, transportation, overtime, miscellaneous ancillary repairs and parts replacement.

There are three types of warranties:

* the basic warranty included with the purchase;

* the "no-charge, extended warranty" which usually requires some specific components or using certain products, such as synthetic lubes, to qualify; and

* the "extended warranty for an additional cost."

Also, the more imaginative managers are negotiating pre-funded warranties - either a payment up front, such as a credit or a vehicle price reduction - and only submit claims when they affect a component/system on 10 percent of the total number of vehicles purchased. Then, it becomes a fleet item covered by the supplier.

A successful warranty program requires proper specs, savvy negotiating, understanding of warranty coverage, timely, documented preventative maintenance and technicians' attention to all repairs with warranty claims in mind.

It also can be used to help set the specs and brand selection for the next purchase.

Warranty Ins and Outs Knowing and understanding the details of your warranty is the biggest part of the battle. Notice that many suppliers have personalized their warranties.

For example, one truck OEM covers "each major system or component for up to 60 months/750,000 miles and the entire vehicle for 12 months/ 100,000 miles." Its standard warranties cover "100 percent of the parts and labor and notes that the limited warranty is fully transferable to subsequent vehicle owners."

In addition, the OEM offers optional and custom warranty packages to extend the truck's coverage. Optional warranties are available for certain models that increase coverage for the entire vehicle up to 500,000 miles.

Similarly, coverage can be extended for major components, structural members and other key parts on these models as well as specific pre-packaged components. Custom warranties allow the user to specify the type of coverage needed to meet its unique operating conditions.

Policy Adjustments When there is not clear-cut proof that a particular repair performed outside the normal warranty period is indeed "warrantable" and not abuse, neglect or misapplication, then a policy adjustment may be discussed. Depending on the efficiency of a fleet's maintenance program and its warranty record, a policy adjustment may be offered. The fleet's size may determine if and how much adjustment is given.

Even if the OEM has given you permission to do your own warranty repair, it might pay to go to a dealer, especially if you trust that he can have the vehicle back as quick or quicker than you could manage.

If you are set up to do your own warranty repairs, training technicians is essential. They must know what repairs are warrantable, then do the diagnostics and repairs efficiently to assist in swift cost recovery. Finally, parts should be cleaned and tagged.

You need to record the vehicle number, repair date, mileage, and order (noting a warrantable repair) and the technician completing the repair.

There must be a separate bin set up for warrantable parts, and the claim paperwork must be completed timely, neatly and accurately. If a claim is denied, explain to the mechanics exactly why; tell them about the successful claims also.

Shipping parts back to the supplier irritates fleet managers because when an unfavorable determination is made, and a discussion ensues, the manager does not have the suspect part.

Extended Warranties Extended warranties that must be purchased are priced depending on the conditions and length.

There value, however, is debatable. Some fleet managers feel this type of warranty places a ceiling on maintenance costs and allow a better planning of its economic life.

Others claim that extended warranties are just the result of supplier studies on fleet costs that show it would cost them very little to offer extended warranties, essentially as product features.

Also, many managers say that fleets can make an error when justifying the cost of an extended warranty by dividing the cost by the number of miles offered under the extended warranty. Instead, they should divide the cost of the extended warranty only by the extra miles covered, since they are getting most of the miles under the basic warranty.

Some fleets don't purchase extended warranties if they get cooperation from manufacturers or component suppliers when problems develop out-of-warranty.

These type of settlements are usually considered "policy adjustments." Bob Flesher, general manager of fleet maintenance for AGA Gas Inc., Broadview Heights, Ohio, opts for policy adjustments when appropriate. "I don't like the theory of paying for extended coverage," he says. "Why should I pay more for it, especially if they're going to cover it for someone else on policy alone.

"If it's a quality product, I expect the manufacturer to stand behind it, in or out of warranty," he continues. "Most extended warranties will pay for parts, but not for the labor cost or the downtime expense. A 'personal' policy basis works best for us."

"Insurance is for driving a car, not controlling fleet maintenance costs," says Darryl Stuart, vice president of distribution and equipment for Cumberland Farms, Canton, Mass. "Written warranties do not cover most component failures, which usually are attributed to wear and tear. And, once you pay for extended coverage, you're funding that warranty program.

"When you buy 50 or 100 trucks, a $1,200 to $1,400 option for extended engine coverage is a lot of money," he continues. "Bank that and collect interest and you can afford to buy some engines. If it's my problem, I don't want a warranty, extended coverage or even a policy adjustment that is not mine. But, if it's a manufacturer's responsibility or if it falls someplace in between, I want them to take care of it, regardless of mileage. Extended warranties or not, if a manufacturer doesn't deliver, fleets will switch."

You pay for extended coverage up-front, and it may take two to three years before it takes effect, Stuart notes. Thus, you lose the cost of those dollars for that period.

On the other hand, Dick Sippl, fleet superintendent for Barry Trucking, Milwaukee, says his company purchases extended warranties because they "help our planning to know we won't have any surprises, such as a $5,000 major expense, before replacing a component at 500,000 miles."

Sippl negotiates these extended warranties at the time of purchase, and the cost is included in the purchase price. He also gets some extended warranties directly from the component suppliers.

Parts Analysis A comprehensive part failure analysis is a necessary part of a warranty program, and there are five major steps to conducting component analysis, according to The Maintenance Council, Alexandria, Va.:

1. Understand the problem. Completely understand the problem before any analysis of the failed parts begins. Understand how components function independently and as a system.

2. Evaluate the system. Be certain that all failure modes noted in the system are explainable by the final analysis.

3. Remove and carefully check the faulty component. Too often a component submitted for warranty is a good operational part; suppliers claim it runs as high as 40 percent on some components/systems.

4. Conduct an internal/external analysis. Managers should participate in any analysis process; always look first at the obvious.

5. Document analysis findings. Record all information gathered during the analysis to be sure findings are available for future review.

To accomplish these five points effectively, you should:

* Collect available information. All information is significant.

* Reevaluate. Be willing to go over known facts as many times as necessary to establish a complete chain of events that led to the failure.

* Develop a written failure analysis. Written procedures help reduce poor analysis. Technicians should all follow the same procedures.

* Have a failure analysis strategy. A written plan should state the purpose as well as define expected results and responsibilities.

* Test the complete unit whenever possible. Often, important information is lost because the failed system is no longer available.

* Never "lose" or destroy evidence. Be sure to keep parts and/or units safe until all analysis is done.

* Don't deviate from the written plan, even if the failure mode seems obvious.

* Communicate pertinent information about the analysis to all appropriate persons.

In addition, the basic human senses are the best failure analysis tools:

* sight can be used to see details not detectable by other means;

* smell can detect an overheated unit and can determine fluid types;

* certain sounds can indicate misalignment or inadequate lubrication; and

* touch can indicate roughness not easily detectable except with expensive testing equipment.

Finally, the documentation during the analysis should include assigning a serial number to each component analyzed for further review if needed and photographs when appropriate.

If you feel your fleet is too small to have a good negotiating position or you do not have the warranty expertise or time required to recover the warranty reimbursement, consider outsourcing duties to warranty consultants.

These specialized consultants:

* screen all repair orders and service invoices for warranty work;

* follow all claims submissions and confirm reimbursements received;

* set up and meet manufacturers to negotiate warranties;

* establish a parts return system;

* establish on-line claims submissions;

* submit a monthly statement of claims submitted and warranties recovered (no recovery, no charge); and

* administer factory recall campaigns.