GM threatens predatory dealers with order cancellations, non-transferrable warranties

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General Motors will launch a second salvo against misbehaving dealerships next week with a new set of policies aimed at curbing predatory markup strategies. With the new Chevrolet Corvette Z06, GMC Hummer EV SUV and Cadillac Escalade-V about to head into production, GM is putting its foot down yet again. Dealers that attempt to circumvent GM's markup restrictions by dealing directly with brokers or other resellers could find themselves in a particularly nasty spot, as the company is threatening to withhold future allocations and end the transferability of warranties when dealers facilitate the reselling of vehicles within 12 months.

While this may help curb some dealership chicanery, it's possible the real loser in such a deal could end up being the customer who unwittingly ends up with an un-warrantied vehicle. We suspect GM has accounted for that, but we'll have to wait until next week to find out exactly how these new policies will be enforced. Here is Friday's communication in its entirety:

Dear GM Dealership Team,

 

We are continuing to build momentum as we head into the second half of the year and have started shipments of several of our high demand and limited production products.

 

This letter serves as a follow-up to my communication from January of this year, where we reiterated your contractual requirements and our policies on selling new vehicles for resale.  When vehicles are quickly resold, particularly by unauthorized dealers or other resellers that do not adhere to GM’s standards, the customer experience suffers and GM’s brands are damaged.  As a result, on certain high demand enthusiast products, we are limiting the transferability of certain warranties and barring the seller from placing future sold orders or reservations for certain high demand models (as identified by GM) if the vehicle is resold within the first 12 months of ownership.  These changes are being implemented to ensure an exemplary customer experience, to ensure our brands remain strong, and to help prioritize ownership by brand enthusiasts and loyal customers.  These changes will not impact product recalls in any way.

 

Currently, the products impacted by these changes include the following: 23MY Cadillac Escalade-V, Chevrolet Corvette Z06, and GMC HUMMER EV (SUT and SUV).  Certain warranties will not be transferrable if the original owner resells the vehicle within one year of delivery.

In the coming days, you will receive a message from your respective brands that will outline full details of the warranties and the customer acknowledgement requirements to implement this new process.  Thank you in advance for continuing to do your part in ensuring our customers have great experiences when purchasing these truly special products.

If you have any questions or comments, please reach out to your Zone Manager.

 

Regards,

 

Steve Carlisle
President GM North America

While GM's hands are largely tied in matters of normal dealership sales practices, its franchise agreements include language that allows some flexibility in cases where the dealer is acting against the interests of GM, its brands or its products; or is behaving in a misleading or unethical manner, as GM Vice President Steve Carlisle pointed out in a dealer communication sent earlier in 2022.

"Providing customers misinformation about additional sums being necessary for a customer to keep a reservation, is just one example of a tactic that reflects poorly on all of us," Carlisle said.

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