Does the total cost of warranty have any correlation to product quality?
In something of a surprise, General Motors Corp. and Ford Motor Co. switched places during the first quarter of 2006. GM used to report a slightly higher warranty claims rate than Ford. But now, Ford’s rate is slightly higher than GM’s. And DaimlerChrysler’s claims rate continues to be higher than both. As is detailed in Figure 1, the warranty claims rates of the top auto manufacturers have rarely intersected. Traditionally, for whatever reasons, DaimlerChrysler has always paid out the highest percentage of its automotive revenue for warranty claims, while Toyota Motor Corp. has always paid out the least. Honda Motor Co. Ltd. has always been close to Toyota’s claims rate, while GM and Ford have always been close to each other. Whether this is an indication of the relative quality of their vehicles or a product of the cost and frequency of repairs is something we can only begin to analyze here. Because there are three currencies and three national accounting standards involved, not to m
