Promises and Profits

Why is a manufacturer’s failure to produce a reliable product and failure to maintain adequate parts to honor its warranty, now the consumer’s problem? It shouldn’t be.

Manufacturer’s Empty Promises to Repair Defective Transmissions

As a method of defense, automakers often stonewall consumers who demand that they live up to their warranty promise of providing a vehicle free of defects. But why would a manufacturer resort to stonewalling? The short answer is profits.

Consumers need to understand the motives behind the puzzling conduct automakers engage in from time to time—conduct that can (and does) destroy customer satisfaction and the possibility of repeat business—and how it all ties into more profits for them.

Having been treated with such disdain by an automaker or one of its dealerships, our clients ask such questions as:

• “Why would an authorized dealer refuse to receive my vehicle for warranty repairs, even though they have taken it in the past?”
• “Why would a dealer not issue a repair order receipt for all the visits I made concerning my vehicle?”
• “How come the manufacturer won’t stand behind their product and give me a new vehicle or a refund?”
• “When is enough, enough?”

Why is Your Dealership Stonewalling? 

There are several explanations for this bizarre anti-consumer and unfriendly conduct, but they all have one thing in common: It is a way to keep costs down and profits up, at the expense of the consumer.

Unexpected Warranty Repairs 

When a consumer buys or leases a new vehicle (or sometimes in the case of a Certified Pre-Owned vehicle), it comes with a promise from the manufacturer that they will repair it for free if anything goes wrong with it within a certain time frame. 

In other words, as part of your bargain, you were promised a vehicle free of defects for a certain term and, failing that, they would take care of you at no cost.

Manufacturer “bean counters” have factored all of this into their price-setting as part of the cost of doing business. But, when management has grossly underestimated or miscalculated the number of vehicles that will require warranty service, the manufacturer starts losing money. 

And for a manufacturer to lose money… Well, that is a cardinal sin in their world. 

The CEOs and CFOs and Directors are beholden to shareholders who look to them quarterly to increase the value of their stock holdings. If they aren’t making a profit, they aren’t doing their job, which usually means bad publicity for the automaker. Job security is threatened.

So, when a particular model comes off the manufacturing line with inherent bugs, dealers for the manufacturer suddenly become glutted with warranty repairs. 

Manufacturers have budgets within which to operate. They have limits on how much they are willing to put out for warranty repairs and Lemon Law buybacks. 

Where there is a particularly disastrous production and too many warranties or Lemon Law claims, it could cause their profits to suffer if they didn’t have budget restraints or ways to “fight back.”

The “Hurt” Rolls Downhill

So, how does an automaker remedy a situation where they have put garbage into the stream of commerce and resulting failures requiring warranty repairs? Or when Lemon Law buyback demands begin to far exceed their budget calculations? 

To start, the automaker can put the “hurt” on the dealerships by pushing their problem downward: They can make the warranty repair reimbursement line to the dealership more difficult [flat rate system]. They can also refuse to pay for repeat repairs on the same defect on the notion that it “should have been done correctly the first time.”

Car Dealerships Fall Victim to the Manufacturer 

While on its face this sounds perfectly reasonable, dealerships often find themselves the victims of arbitrary cuts to their reimbursements for warranty repairs. 

While the dealership may have performed more than one repair for the same problem, sometimes the manufacturer’s own engineers don’t have an answer for how to repair it correctly the first time. 

So, dealerships can be abused on the reimbursement line by arbitrary denial of payment for warranty work they performed in earnest, trying to serve the customer on behalf of the manufacturer, who promised a defect-free vehicle in the first place.

Customers Start Getting Stonewalled 

With that in mind, how do you think putting the hurt on the dealer might affect customer service? 

One can easily imagine how a dealership might create various means of stonewalling customers so as to avoid doing warranty work for which they believe they won’t get paid (or will have to fight the automaker to get paid). 

They don’t want the hurt from the automaker, so the less scrupulous dealerships take it out on their customers. After all, dealerships are also profit-driven, and too often fall to the temptation of taking it out on the consumer to keep their profits up.

Manufacturers Use Faux “Arbitration Programs” 

Manufacturers facing the threat of lost profits use delay tactics to stave off claims by consumers who appeal directly to them. 

Sometimes they refer vehicle owners to arbitration programs, which are tantamount to walking into a fixed poker game: They use a faux justice forum with arbitrators who are paid by the manufacturer to appear neutral and follow the law. In reality, in a vast majority of instances, the arbitrators are performing a stonewall task for the manufacturer. This means they don’t really follow the law and rarely, if ever, award a buyback.

Methods of Stonewalling

Dealers feeling the pressure on several fronts from their manufacturer begin to take their frustrations out on the unsuspecting consumer. 

They employ stonewall tactics—anything to ultimately cause the consumer to give up and go away. What does that look like?

Here are some examples:

• Pretending they’re too busy.The authorized dealership states, “We can’t take your vehicle right now; we are too busy” or refuses to accept your vehicle for warranty repairs because “You didn’t buy it here.”
• Writing inaccurate repair orders. The service writer alters the repair order to make the defect appear to be a different problem than what you reported. In the event of a future Lemon Law case, this creates an argument in their favor that they claim they only had “x” number of chances to repair when in fact they had a reasonable overall opportunity to repair the same problem you complained of all along.
• Pretending it’s meant to be that way.The dealership informs you that “That’s the way it was designed to operate.” The more gullible consumers accept this and go away.
• Saying they don’t see the problem. Frequently, the diagnosis of “No Problem Found” is given: “We test drove it (drove it around the block) and found nothing wrong. If we can’t replicate the problem, we have nothing to fix.”
• Not giving you a repair order. The dealer tells you that you don’t need another repair order—it was covered by the last one—all the while knowing that they are depriving you of evidence needed to prove a Lemon Law case (i.e. record of how many times you gave them a chance to repair your defect[s]).
• Trying to fix your head. Dealerships employ multiple methods of trying to “fix your head instead of your car,” all in an effort to get you to give up and go away.
• Trying to get you into a new car. Dealerships try to upsell you into another vehicle—get you to trade in your lemon and roll over the deficiency balance into a new loan on your new vehicle. Another sale = more profit at your loss.
• Getting you to sign a Release. Manufacturers offer to make one month’s payment for you for “all your troubles,” in exchange for signing a Release. They will later argue that this Release extinguishes any future claims for a Lemon Law buyback, which they likely should have offered to you in accordance with the law in the first place.
• Lying about your lemon law rights.Dealerships lie to you by saying that you don’t qualify for the Lemon Law, or that you must go through arbitration before you have any Lemon Law rights. Some believe this and go away.
• Pretend you’re being awarded something.Manufacturer arbitration processes “award” you another repair, when in reality it isn’t an award at all because your warranty is still intact and you are entitled to the repair.
• Sending you in circles.Dealerships tell you “We don’t know how to fix it,” but refuse to put it in writing. Instead, they give you a contact number for the manufacturer’s consumer assistance but when you call, they either don’t respond or, when they do, your inquiry is met with bureaucratic double-speak.

California Law Protects Auto-Owners

The Song-Beverly Consumer Warranty Act, better known as California’s “Lemon Law,” specifically states that “The warranty period will also be extended if the warranty repairs have not been performed due to delays caused by circumstances beyond the control of the buyer…” 

So for those of you who have been told your vehicle cannot be taken in for weeks because parts aren’t available, or were given vague time periods to push out your repair service orders, your warranty time period is automatically extended by virtue of the unavailability of parts.

A cumulative big bite out of any manufacturer’s budget is having to buy back “lemons.” Once budgets have been exceeded or are on the brink, the above-described stonewalling methods come into play.

Did a Dealership Deny You a Repair Order on Your Vehicle?

Part of the battle consumers face is being denied their actual repair history. 

Some people come to us and report they have been to the dealer many more times than the repair orders show. Why? Because the dealer refused to issue a repair order each time after the vehicle was picked up, or equally as bad, refused to take the vehicle in, thereby depriving the consumer of an opportunity to have repairs performed.

Evidence of the number of repair attempts a manufacturer has made is key when it comes to showing that a reasonable opportunity to repair a defect has taken place. 

Manufacturers are Trying to Avoid Buying the Vehicle Back 

If there has been a reasonable opportunity to repair, the manufacturer may be looking at obligations under California law to buy the vehicle back. Manufacturers know this. As an incentive to dealers, they sometimes offer rewards to those dealerships who have the fewest Lemon Law claims.

A dealership may be well rewarded by simply performing high-quality warranty repair work so people don’t have to come back for more repairs. But when there is a widespread problem/defect, a scarcity of parts to repair the volume of complaints, and dealerships becoming glutted with warranty repairs for like problems, the writing is on the wall. There are a lot of potential Lemon Law buybacks in the works.

To combat this, and to keep them in the running for the reward for the fewest lemon claims, a dealership may abuse their complaining customers by engaging in many of the stonewall tactics described above—one of which is to avoid issuing repair orders each time a customer comes in with a complaint covered by warranty. 

Repair Orders are Key Pieces of Evidence

Repair order receipts are the primary evidence used to show that one has given the manufacturer a reasonable opportunity to repair the vehicle. Indeed, the law in its essence states:

If the manufacturer or its representative is unable to repair your vehicle after a reasonable number of attempts, they shall either promptly replace or buy back your vehicle.

How do you show that you’ve given them a reasonable opportunity to repair? Your repair orders! So you can see why not issuing a repair order would be to their advantage. Don’t let it happen to you or your friends. Fight back.

Document All Attempts to Repair

The most effective method of combating the repair order stonewall is by writing a letter to the dealership with a copy to the manufacturer documenting the fact that you came in on a particular date (or dates) for a warranty repair and explaining the circumstances under which you were denied a repair order.

California law requires that manufacturers maintain sufficient service repair facilities to honor their warranties [Civ. Code Section 1793.2(a)(1)] and requires the warranty work be commenced within a reasonable time by the manufacturer or its representative (dealer) in this state.

The manufacturer is required by law to make available to their dealerships sufficient service literature and replacement parts to effect repairs during the consumer’s warranty [Civ. Code Section 1793.3 (a)(3)].

California law also says that unless the consumer agrees in writing to the contrary, the vehicle shall be serviced or repaired so as to conform to the warranty within 30 days (i.e. be free of defects). Delay caused by conditions beyond the control of the manufacturer or its representatives shall serve to extend this 30-day requirement. (I added emphasis to “beyond the control of…”) [Civ. Code Section 1793.3 (b)].

The Dealership Should Be Issuing Repair Orders

One can see when reading the above two sections together, that a dealer or manufacturer cannot legitimately claim they are not required to issue a repair order to document the fact that you brought your vehicle in for repair. 

Whether they claim there is no fix, or that parts won’t be available for 8-10 weeks or longer is beside the point. That you brought your vehicle in for repair—giving them an opportunity to repair, which should be documented—is all that is truly relevant.

“No parts” or lack of a known fix are issues within their control, not yours! It is not your problem. It is their problem and they are trying to give it to you. 

Document it! If you are ever going to get a buyback or replacement, you need to give them a reasonable opportunity to repair and you show that through repair orders. Don’t let them covertly “play” you by depriving you of your evidence.

Sample Letter for Denial of Repair Service 

Not sure how to write up a document that details your attempts to have your car repaired? We put together three auto service agency sample letters you can use. 

All you’re going to do is fill out some information about the dealership, manufacturer, and your car. Then, you’ll write out exactly what happened. This could range from the dealership telling you they didn’t have the parts to straight-up refusal to accept your vehicle or issue a repair order.

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Contact our experienced Lemon Law attorneys today! Norman Taylor & Associates, California Lemon Law Attorneys wants to help.