Volkswagen is doubling the bumper-to-bumper warranty on its U.S. Line-up to six years and 72,000 miles, it announced during a Detroit news event on Friday.
The move affects its entire range of models, extending the longer warranty it launched with the debut of the new Tiguan and Atlas SUV models earlier this year.
Hyundai, Kia and Mitsubisi offer have 10/100 warranties, but only for powertrain coverage.
The new warranties come as the German maker struggles to regain momentum lost in the wake of the emissions scandal that meant that it could no longer offer U.S. buyers the diesel options that had accounted for as much as a fifth of its sales in the American market
At the same time, VW announced it was taking an additional $2.9 billion charge to cover costs related to the scandal for the third quarter, bringing to $30 billion the expenses the rigging scheme has so far cost the company.
“By bringing the right cars, at the right time and making the offer very competitive, we believe we’re in the position to grow in the US market,” said Hinrich J. Woebcken, President and Chief Executive Officer of Volkswagen Group of America during his Detroit appearance.
Atlas and Tiguan models launched this year, and will now include the various Beetle, Golf, Jetta and Passat lines.
The choice of an extended warranty not only steers attention away from the diesel scandal, which affected more than 500,000 vehicles sold in the U.S. – and more than 11 million marketed worldwide – but directly addresses one of the biggest concerns many buyers and potential owners have had with Volkswagen: quality and durability issues. The brand has routinely lagged below average in both initial quality and longer-term durability and reliability surveys.
“To keep monthly payments down, consumers are stretching auto loan terms,” noted Michelle Krebs, an automotive analyst with Autotrader.com. “The Volkswagen warranty extends along with those loans to help save the first—and even second buyer of a VW—repair costs.”
The People First Warranty covers the entire vehicle, not just powertrain problems, and it is transferable when the vehicle is sold. Some longer warranties apply only to initial buyers, as was the case with the extended warranty Hyundai introduced a decade ago. Nonetheless, that package was seen as a critical factor in enhancing the image of a Korean brand that long had a reputation for reliability issues.
Industry analysts stress that automakers must work to improve quality and not just count on covering repairs when vehicles break. That was a key step taken by siblings Hyundai and Kia, both now scoring at or near the top in recent quality surveys. Reduce repair costs can more than offset longer warranties – while also meaning that owners are less likely to have to go to the shop in the first place.
VW has been spending heavily to win U.S. buyers back to showrooms in recent months, and that has begun to pay off. The maker’s sales were up 9% in August, and have gained 6.4 for all of 2017, even though overall industry numbers are down for the year. And the maker has picked up momentum without the diesel models that were once a critical factor in its line-up.
While sibling Audi is planning to offer a limited line of diesels, VW officials have said that technology will no longer be marketed in the U.S.
The scandal – which involved the use of surreptitious software to illegally pass emissions tests – has been the costly setback in Volkswagen history. On Friday, the automaker said it was increasing provisions to cover the buyback of diesels sold in the U.S., as well as the retrofitting of some vehicles it can bring into compliance with emissions laws. That is expected to add another $2.9 billion in charges for the third quarter.
All told, VW now has run up over $30 billion in fines, legal fees, settlements and other costs related to the scandal. Seven employees have been hit with criminal charges in the U.S., with another arrested in Germany. A criminal investigation is still underway in the company’s home market and additional fines and arrests are possible, according to German prosecutors and news media reports.
Read the article in The Detroit Bureau.
