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seems to come to the same conclusion, because the technology in this area is still emerging.
In the area of diagnostics, the problems are becoming complicated ones because of the rapidly changing systems used in automobiles. Because the technology in this area is still emerging, predictions on the type of test equipment that will be used cannot be made at this time. The DOT study seems to come to that same conclusion.
In reviewing some of the previous testimony made before this committee, it is evident that there is a strong leaning toward the concept of diagnostic centers. Before rushing into any extremely expensive program, it is well to consider a few facts.
First, the state of the art of manufacturing equipment to diagnose and test complex automobile systems is still evolving, as are the systems themselves. In short, until the vehicle manufacturers themselves have designed vehicles to meet the 1985 emissions and fu economy standards, we will probably not have the equipment to test them.
Second, fixed diagnostic facilities are extremely expensive. The outlay of capital to purchase land and equipment, and to build buildings in enough quantity to cover even a portion of the 137 million vehicles on the road is astronomical.
Third, nowhere have we read or seen statistics on the independent diagnostic lanes which came out with such fanfare in the 1960's. To our knowledge few, if any of them, exist today. Heavy commitments to this concept were made by certain vehicle manufacturers, oil companies, and dealers. The facts are, they failed, and we suspect the reason was the American motoring public would not support a concept which required payment for a complex diagnostic procedure. We submit, therefore, that no decision to commit public funds to a project as questionable as separate diagnostic facilities should be undertaken until a study is made of why the independent centers failed, and why the public did not support them.
To summarize, Mr. Chairman, American Motors has been and will continue to be committed to improving the overall quality of service to its owners. We have demonstrated our concern with innovations and programs that directly benefit owners of AMC products. These include:
The buyer protection plan, a comprehensive warranty that protects the owner, and is the only full warranty offered in the automobile industry.
A wealth of warranty and service information easily understood by the owner.
A comprehensive program to upgrade dealer service through technical training.
A fair and equitable owner relations policy with accessible points of contact when problems occur.
We think it is good business to provide the owner with an estimate of the repair cost prior to the repair, a call to the owner if the cost of the work needed is increased, and the return of replaced parts. Any vehicle owner or an owner of any mechanical or electronic device deserves to know what has to be done and how much the cost is going to be before he or she has to pay for it. Again, this
is just good business practice and compelling legislation should not be required.
Just as automobile designs are changing, so are our responses to our owner expectations. We do not believe that this problem is totally amenable to a legislated solution. Only the efforts of the service industry will solve these problems. We think American Motors is responding with positive programs, aimed at improving customer satisfaction. It is simply good business to do so. Thank
Mr. ECKHARDT. Mr. Mizak, in outlining your general warranty, you pretty well described, with certain additions, the standards under the Magnuson-Moss Act.
Mr. MIZAK. Yes, sir.
Mr. ECKHARDT. And also, you described things which are specifically applicable to the motor vehicle industry, for instance, the question of making facilities available where persons are away from home.
Has your program worked out? Does it seem feasible, financially, to comply with the requirements of the Magnuson-Moss Act and the requirements of the Federal Trade Commission, respecting the general warranty provisions?
Mr. MIZAK. Well, of course we see very little difference from Magnuson-Moss to when we originally introduced the buyer protection plan in 1972; they are basically the same.
Mr. ECKHARDT. Of course, it still is voluntary because MagnusonMoss says you either can choose a general warranty or you can provide, if you so specify clearly on the warranty, limited warranties.
But, you went into a program voluntarily which essentially complies with the general warranty provisions of Magnuson-Moss. Let me rephrase that statement since I did not make myself clear. As I understand it, you put into effect a warranty system prior to Magnuson-Moss which is essentially the same as you have now.
Mr. MIZAK. Yes.
Mr. ECKHARDT. And of course, the one you have now is not designated as a limited one. Therefore, it must comply with Magnuson-Moss. You are saying that your previous system, even before having the choice between the general and limited warranties, was substantially in compliance with Magnuson-Moss.
Mr. Mizak. We believe, being the consumer-sensitive company that we are, that we could do no other thing than to classify it as a full warranty.
Mr. ECKHARDT. Yes. And you say that it works. As a matter of fact, you felt it was good business even before Magnuson-Moss, and you identified the full warranty and the limited warranty.
Mr. Mizak. Yes, sir.
Mr. Mizak. No more than we anticipated, or had previous to that.
Mr. ECKHARDT. At least, whatever problems you have had, you have been able to meet, as one would normally have to meet, problems in accommodating a warranty system.
Mr. MIZAK. Yes, that is a fair statement.
Mr. ECKHARDT. Do you think it has proved successful as a marketing technique? In other words, does the public respond to it favorably, so that you feel it is advantageous with respect to your position in competition with other automobile manufacturers?
Mr. MIZAK. I think that is very difficult to measure on the basis of the numerous other factors that are common in the industry, and the difference of other products.
Mr. ECKHARDT. But at any rate, you obviously are willing to take a chance with it as a marketing technique, and you have not found it to be unworkable.
Mr. Mizak. We think it is an advantage.
Mr. ECKHARDT. Now, there is a question that has been raised by dealers about the method of compensation. Indeed, Mr. Pansa was answering that, to a certain extent, with the optional devices which he said General Motors put into effect.
Some complaints have been voiced in these hearings as well as in discussions that staff and I have had with dealers, suggesting that a rigid determination of the amount of compensation sometimes results in warranty work being compensated at a lower rate than what is ordinarily charged.
We also have heard complaints by customers that they sometimes are not treated properly when they bring a car in under warranty because the other work of the garage is more profitable, and it is likely to be set aside for the time.
That reminds me of experiences in the dentist's office. My father was a doctor, and I got my treatment free. However, I always had to wait until about 5 o'clock before the dentist got to me. I suspect the same thing may be true with regard to warranties, if the compensation is at a different rate.
I would assume, Mr. Pansa, that the optional proposal which you described would reasonably obviate that possibility.
Mr. PANSA. That is correct, Mr. Chairman; it has.
Mr. ECKHARDT. Also, it seems to me, it would have a salutory effect by creating some inducement to your dealers to give prior notice of the charges for repairs and the method for charging them.
Mr. PANSA. Yes, sir.
Mr. ECKHARDT. It also might be useful to those persons having car repairs after the warranty expires.
Now, what about the other manufacturers? Do you follow a similar optional course? How do you solve the problem and what do you plan if there is such a problem?
Mr. CHAVE. I will speak for Ford Motor Co. first. We offer essentially the same two options that General Motors does for warranty labor rates; and a third option whereby a dealer can, rather than filing peridocally for changes in his warranty labor reimbursement rates, as economics change we will update him regularly, based on government indexes. So, warranty labor reimbursement is not a hot issue with our dealers at the present time.
Mr. HAZELROTH. As far as Chrysler, Mr. Chairman, our formula is 220 percent times the technician's average base hourly rate, plus 150 percent of the specified voluntary fringe benefits. We think that our warranty rate at the present time is a good one.
I will state that we are reviewing the warranty labor rate program which I have just outlined for you in light of our competitions' new program.
Mr. ECKHARDT. That is very similar, is it not, Mr. Pansa, to the one option used by General Motors?
Mr. PANSA. No quite. What he said was 220 plus 150 percent of voluntary. Our formula is 240 percent, plus 100 percent of all legislated and voluntary fringe benefits.
Mr. ECKHARDT. In addition to that, you have the other option.
Mr. PANSA. The other option is, if the dealer is willing to post the rate, we will pay that rate; yes, sir.
Mr. ECKHARDT. Does Ford use approximately the same standard on the first option?
Mr. CHAVE. Yes, sir.
Mr. MIZAK. Well, obviously, our dealers have to operate in this competitive atmosphere created by our competitors. We basically use an average of the area to determine a dealer's rate, which effectively takes these formulas into consideration.
Mr. ECKHARDT. Now, there was one thing that you said, Mr. Pansa or Mr. Hazelroth, about the service of dealers. I think you mentioned that you felt your dealers provided the best service that could be obtained.
There is an organization called the Washington Check Book which simply asks persons whether or not they are satisfied with the work that was done on automobiles. We had them before us at one of the Washington hearings. They were not making a point of this situation, nor were their figures directed towards proving it. For that reason, I think, they are particularly credible. At least, they raised a very strong question in my mind about dealers as compared to other repair shops regarding warranty work.
Over a given period of time, the Check Book examined about 150 dealers as well as the reaction of the public on several different item-general satisfaction, courtesy, and so forth-and rate them from very low percentages up to a 100 percent. They also examined about 32 independent repair shops.
I asked them on what basis they selected the dealers and independents and they said, in both instances, “the relatively large ones" because they get most statistics on the relatively large ones. The comparison on size was about the same between the two.
They did not raise this issues; however, in looking over the ratings, I found that out of the 32 independents, there were 2 shops which rated 100 percent on all items. But, out of the 150 dealers, there was only 1.
Now, I recognize that these statistics are not broad enough to make ultimate conclusions; however, from personal experience and from comments of others with automobiles ther seems to be a general feeling that you ought to get away from the dealer as soon as the warranty expires. The Check Book figures would indicate about eight times greater satisfaction with a responsible private shop
Now, in discussions we have had in these hearings, we have identified some possible areas which would bear out this experience. In a dealership, one frequently deals with someone at a front desk who is not a mechanic. It may be a couple of lines down the way before you can talk to a mechanic. Possibly, this is a question of a lack of communication. At any rate, there does not seem to be quite the responsiveness from a big shop, or a dealer shop, that there is from the private mechanic.
I am very concerned about this situation. I am concerned whether one can be assured, when one talks to someone at the third level above the person who does the work, that the third person knows anything about it. There may be a good mechanic at that level, but there may be some kid with very little training, and unfortunately, experience indicates the latter.
What do you do to assure yourselves that you dealerships are staffed properly by mechanics? Or, is there anything you can do, or should do? I just do not feel that our hearings have reflected the same confidence with respect to dealerships which you seem to have in your dealers, and I would like to know on what basis you have this confidence.
Mr. HAZELROTH. Well, Mr. Chairman, I will respond since I think you are directing the question to me.
Mr. ECKHARDT. I am directing the question, generally. For example, I happen to have an old Chrysler, but I never deal with the dealer because I see the mechanics.
Mr. HAZELROTH. Well, first of all, we are not satisfied with the way the customer is being handled. We have some good dealers, and we have some dealers that certainly must do a better job with the consumer.
We are very concerned about, when the customer drives in the morning, how he is handled. We have an entire program we are putting together to take care of that customer properly-fast checkin, proper diagnosis of the problem with the car, inform the customer as to what the problem with car is, inform the customer as to what the approximate amount of the bill will be, and when we conclude the servicing of the automobile we expect to do the same thing on a rapid checkout, without harassment or anything else.
Along with that, it will take a great deal of training, and we are doing that now. In our program, we will heavily emphasize service writer training. The service writer generally meets the customer to discuss the problem. He should be technically qualified to understand the problem and transmit it to the mechanic who is responsible for correcting the problem.
One of things we find difficulty with as far as drivability is concerned, a customer sometimes comes in and it is very difficult for him to describe what has happened with his automobile.
Mr. ECKHARDT. May I interrupt for just a moment?
Mr. ECKHARDT. That is the problem. It goes through several hands, and what the customer actually says may not get to the mechanic.
For instance, I have an old second-hand postal Jeep which is a very simple piece of mechanism insofar as cars go today. I have a situation where I try to turn the key and it will not turn the starter. I know that if I cross some wires down there, it will turn over and start. So, I suspected that it had something to do with