Keep Red Flags Furled

Wishing for a warranty audit would be today's equivalent to wishing the flesh-eating disease on oneself. Long and painful.

There are ways to avoid this dastardly situation. Sometimes, most times, human error leads to warranty audits. That's especially true if your dealership has recently lost its warranty clerk or service manager.

I've seen service managers who quit while knowingly or unknowingly leaving warranty claims paperwork unfinished or unchecked before submission for payment.

Chances are the warranty will get rejected and will be sent back for further information or justification. It raises a red flag.

Another red flag: the manufacturer notices that your warranty claims are higher than other stores in your region, especially if your store has been doing more major engine or transmission work that increases your warranty dollars per repair orders.

This is why many service managers direct their advisors to check for small warranty concerns. Doing that work brings down the overall warranty-claim average.

Red flag No.3: No signatures on work orders. Yes we can say that it was a late-night drop off. However too many no-signature cases can attract auditors' attention.

Red flag No.4: Replacing vs. repairing major components. This does not a happy manufacturer make. Most who have been in the industry know that typically manufacturers like small failed parts repaired rather than complete units replaced. It doesn't matter if we know that another part of that component will come back months or weeks later for more warranty repairs.

Red flag No. 5: Additional labor must have proper approval. If a problematic vehicle requires additional labor to fix it, and this additional labor is not justified properly, then auditors will see red in the form of a flag.

Usually a mini audit or a series of them will occur before two humorless “suits” show up for a lengthy visit. Settle in.

Those auditors will pull work orders for the last quarter, in some case the last year. They see things as white, black or gray. The white ones are cut and dry, no problems, no questions asked and no explanation given.

The black will be the out and out unjustified repairs. You lose there.

Then there are the gray-area claims. These are the ones that you will have to research and justify. Request the appropriate information from the shop foreman, the respective technician and others. This is the time we certainly have to make sure that we have our cause and corrections in order.

Speaking of which, a perennial problem with many technicians (no matter what dealership) is that the quality of their accounts is second rate.

They shouldn't be asked to fib. But they should be expected to give credible, clear and unambiguous accounts in cases of disputed warranty claims.

It is a subject for weekly service department meetings. Unfortunately, many employees don't feel the wrath of the warranty like the service manager or dealer principal.

Of course, it is all financially frustrating. The rule of thumb with warranty audits is that the auditors will find enough charge backs to more than pay for their efforts and travel costs.

The worst I've seen is hundreds of thousands of dollars in charge backs. One manufacturer even had it so that if the charge backs found in one month equaled $10,000, the auditors would look extra hard over an entire year of paperwork to find more months like that.

It can add up quickly.

Dave Skrobot is vice president of fixed operations training for the Automotive Sales College and co-author of the book Sales Meeting Companion. He is at [email protected].