Excerpts from "Lemon-Aid"

The following is incredibly helpful information, posted here by permission of its author, Phil Edmondston. We appreciate his authorizing us to share this with you.

The following is the CompuServe help sheet I posted about a year ago, and Text from my latest 1997 Lemon-Aid book.

Secret warranties: Paint

"Businesses and politicians hear better through their rears than their ears." - Saul Alinsky, grass-roots advocate

"Regulatory Agencies: In youth they are vigorous, aggressive, evangelistic and even intolerant. Later, they become mellow; and in old age-after some 10 or 15 years- they become, with some exceptions, either an arm of the industry they are regulating or senile." - John Kenneth Galbraith, The Great Crash

Free repairs or your money back-if you're lucky and persistent. Paint flaking, or delaminiation as it's called in the industry, occurs when the top coat of paint separates from the primer coat, mostly along horizontal surfaces, often as a result of intense sunlight. When the paint peels, the entire vehicle must be repainted after a new primer resurfacer has been added. For some vehicles, the labor alone can run about twenty hours at a cost of $50-$75 an hour.

Confidential US dealer service bulletins shows us one important benchmark the auto industry uses to accept or reject secret warranty paint claims. They show that, with Corsica and Beretta paint defects, for example, GM lets dealers repaint the entire car, at no charge to the owner (up to $650 US), regardless if it was bought new or used. Interestingly, vehicles as old as six years are still eligible and head office permission isn't needed before work commences.

Ford's more generous than GM (at least in theory), although its dealers first need head office authorization. Ford has been repainting 1983-93 cars, minivans, vans, F-series trucks, Explorers, Rangers and Broncos free of charge for the past five years under a little-known "Owner Dialogue" program. Ford says it discontinued the program in January '95, but owners who cry foul and threaten small claims action are still getting compensation. Brandishing some of the same internal dealer bulletins found in the summary below, Ford owners argue convincingly that secret warranty programs are unfair because not everyone has an equal chance of being told they exist. They insist these programs should be used as compensation to owners for the company's factory negligence-not as so-called "goodwill" marketing tools that can be arbitrarily cut off.

Chrysler's paint problems are more recent and more severe. The company's latest paint glitch called "shadowing" produces a blotchy shadow or spotting all over the vehicle. All of Chrysler's '95 lineup of dark- colored models, except for Jeeps, minivans, and Canadian-made vehicles are affected. Cars that are kept in a heated garage and then driven in sub-zero temperatures are especially vulnerable. Chrysler won't be repainting its vehicles with the "shadowing" problem. Instead, the automaker says it will buy back all affected vehicles and sell them at auction as used vehicles-with the paint defect disclosed. Chrysler's other paint deficiencies, affecting older vehicles, and minivans in particular, include paint cracking and fading between the third and fifth year of ownership. Unlike Ford and GM, no service bulletins or dealer memos detailing Chrysler's secret warranty guidelines for older vehicles have yet turned up, but owners involved in out-of-court settlements with the automaker say refunds have been offered up to six years of ownership.

The following summary based on service bulletins and owner feedback has been set up to give you an easier understanding of which vehicles have paint defects, the nature of the defect, and what euphemism is used by the manufacturer to describe the secret warranty program that applies.

*Refers to GM's Pontiac Division dealer letter sent on October 16, 1992, signed by Perry S. White, Director of Service/Customer Satisfaction. A follow-up dealer service bulletin (Bulletin N0: 57-05- 01, "Dealer/Retailer Administration of Case-by-Case individual Goodwill Adjustments") was sent throughout the GM dealer network on April, 1995, giving all dealers authorization to carry out "goodwill" repairs for any problem free of charge, with no mileage limitations or deductible up to two years beyond the vehicle's bumper-to- bumper base warranty. Both documents should be subpoenaed if you go to small claims court.

GM All vehicles Problem as stated by the company "Clearcoat degradation," "Chalking," "whitening" Confirmation *Dealer letter Bulletin #331708, "Clearcoat degradation," issued November, 1993 Euphemism Special Policy Automaker solution Partial repaint/full repaint Limitations 100% up to 6 years (optional 60,000 miles)

GM 1988-92 trucks, vans 4X4s (blue, gray, silver, and black metallic) Problem as stated by the company "Delamination," peeling Confirmation *Dealer letter Bulletin #231054R, "Delamination," issued October, 1992 Euphemism Special Policy Automaker solution Full repaint Limitations 100% up to 6 years (optional 60,000 miles)

GM Corsica/Beretta Problem as stated by the company "Delamination," peeling, fading Confirmation *Dealer letter Bulletin #9034110, "Delamination," issued September, 1990 Euphemism Policy Adjustment Automaker solution Full repaint Limitations 100% up to 6 years (optional 60,000 miles)

Ford 1983-93 trucks, 4X4s, minivans, vans, all cars Problem as stated by the company "Microchecking," peeling, fading, hazing Confirmation Ford PR statements to Action Line columnists Bulletin #93-8-4, "Microchecking," issued April, 1993 Euphemism "Owner Dialogue" (Broncos, F-series, and Mustangs) Automaker solution Full repaint Limitations 100%/Program discontinued-Jan. '95

Chrysler/Mitsubishi 1995 vehicles/none made in Canada Problem as stated by the company "Shadowing" Confirmation Automotive News, May 8, 1995 Bulletin None issued Euphemism "Goodwill" Automaker solution Buyback/Mitsubishi will repaint Limitations None

Chrysler 1989-94 vehicles Problem as stated by the company "Chalking" Confirmation Owner feedback Bulletin None issued Euphemism "Goodwill" Automaker solution Repaint Limitations None

Chrysler 1990 Shadow/Sundance with clearcoat paint Problem as stated by the company Alkaline spotting, industrial fallout, chemical "etching" Confirmation Owner feedback Bulletin # 23-11-90, issued Sept 10, 1990 Euphemism "Goodwill" Automaker solution partial repaint Limitations Reimbursable under the base warranty

Getting a Settlement

1. First take your vehicle to the dealer and ask for a written, signed estimate. When handed the estimate ask that the paint job be done for free under the manufacturer's "goodwill" program (Ford's euphemism for this secret warranty is "Owner Dialogue Program; GM's term is "Special Policy," and Chrysler just calls it "goodwill." Don't use the term secret warranty, yet).

2. Your request could be met with a refusal, or an offer to repaint the vehicle for half the cost, or an agreement to repaint the vehicle free of charge. If you accept half-cost, make sure your cost is based on the original estimate you have in hand, since some dealers jack up subsequent estimates to the point whereby your 50% is really 100% of the true cost.

3. If the dealer/automaker has already refused your claim, and the repair hasn't been done yet, get an additional estimate that shows the problem is factory-related from an independent garage.

4. If the repair has yet to be done, send a registered claim letter/fax to the automaker (copy the dealer) claiming the average of both estimates. If the repair has been done at your expense, send a registered claim letter/fax with a copy of your bill. A sample claim letter/fax is printed below.

Sample Paint Complaint Letter/Fax WITHOUT PREJUDICE Date

Dealer Gentlemen:

I wish to hereby advise you that I am dissatisfied with the paint delamination on my__________________. This is a factory-related defect confirmed by internal service bulletins sent to dealers and covered under your __________________program.

If your "goodwill" program has ended, I ask that my claim be accepted, nevertheless, inasmuch as I was never informed of your policy while it was in effect and should not be penalized for not knowing it existed. I hereby put you formally on notice under the federal Magnuson-Moss Act and state consumer protection statutes that your refusal to apply this extended warranty coverage in my case is an unfair warranty practice within the purview of the above cited laws. I have enclosed several estimates (my bill) showing that this problem is factory-related and will (has) cost $___________to correct. I would appreciate you refunding me the estimated (paid) amount, failing which, I reserve the right to have the repair done elsewhere and claim reimbursement from you in small claims court.

Awaiting your earliest convenient reply, within the next five (5) days, before initiating a small claims lawsuit, I remain

Sincerely yours,

Name Address and Tel #

5. If a satisfactory response isn't received within 5 days, deposit a copy of the estimate or paid bill and letter/fax claim before the small claims court and await a trial date. This means automaker/dealer will have to appear, no lawyer is required, costs should be minimal (under $50) and a mediation hearing or trial will be scheduled in a few months, followed by a judgment a few weeks later (time varies among different regions) Things that you can do to help your case: pictures, maintenance work orders, previous work orders dealing with your problem, dealer service bulletins, and an independent expert (best is garage or body shop that did estimate or repair; you can also use a local teacher/professor who teaches automotive repair).

Other situations

*If the vehicle has just been repainted but the dealer says "goodwill" coverage was denied by the automaker, pay for the repair with a certified check and write "under protest" on the check. Remember, though, if the dealer does the repair, you don't have an independent expert who can affirm the problem was factory related or was evident of premature wearout. Plus, the dealer can say you or the environment caused the breakdown.

*If the dealer/automaker offer a partial repair or refund, take it. Then sue for the rest. Remember, if a partial repair was already done under warranty, this is an admission of responsibility, no matter what "goodwill" euphemism is used. Also, the repaired component/body panel should be just as durable as if it were new. Hence, the clock starts ticking again, no matter what the dealer's repair warranty limit says.

Conclusion

Very seldom do automakers contest these paint claims before small claims court, opting instead, to settle, once the court claim is bounced from their Customer Relations people to Legal Affairs. At that time, you will probably be offered an out-of-court settlement that will vary from 50-75% of your claim. Stand fast and make reference to the service bulletins you intend to subpoena to publicly contest in court the unfair nature of this "secret warranty" program (automaker lawyers cringe at the idea of trying to explain why consumers aren't made aware of these bulletins). 100% restitution will probably follow. It's been my experience as an auto consumer advocate for almost 30 years, a member of the Canadian Parliament, and author of about 75 auto consumer books (mostly Lemon-Aid), that only about one person in ten will follow through on these instructions to get compensation. Most will pay and then gripe. Too bad, 'cause it really is true, the squeaky wheel does get the grease-read, compensation and justice!

By the way, after following these steps, please describe your experience in a follow-up posting in the Consumer Forum, to assist others.

Best of luck, Phil Edmonston, author Lemon-Aid FAX: 305-563-2448

Lemon-Aid 1997

Secret warranties
Secret warranties have been around since automobiles were first mass produced. They're set up to provide free repairs to fix performance-related defects caused by substandard materials, faulty design, or assembly-line errors. In 1974, Lemon-Aid exposed Ford's J-67 secret rust warranty, which covered the company's 1970-74 models. After first denying that it had such a warranty, Ford admitted two years later that it was, indeed, in place and negotiated a $2.8 million settlement with this author. And you know what? Twenty-three years later Lemon-Aid '97 is still the only consumer publication listing hundreds of current secret warranties covering engine, transmission, fuel pump, and paint defects on cars, 4X4s, trucks, and minivans. Carmakers are reluctant to make these warranty programs public because they feel it would weaken confidence in their product and increase their legal liability. The closest they come to an admission is sending a "goodwill policy," "product improvement program," or "special policy" service bulletin to dealers. Consequently, the only motorists who get compensated for repairs to defective parts are the ones who yell the loudest and who produce automaker service bulletins (see Appendix II to order your own bulletins). In the U.S., Connecticut, Massachussetts, New York, Maryland, Texas, and California have enacted laws prohibiting secret auto warranties under penalty of a $2000 fine. In Canada, provincial and federal legislators have sat on their hands. If you're refused compensation, keep in mind that secret warranty extensions are an admission of manufacturing negligence. Try to compromise with a pro-rata adjustment from the manufacturer. If polite negotiations fail, challenge the refusal in court on the grounds that you should not be penalized for failing to make a reimbursement claim under a secret warranty you never knew existed! An up-to-date listing of secret warranties and service programs that offer free repairs for factory defects in specific models can be found in Part Three under the heading Secret Warranties/Service Tips/DSBs.

Getting free paint repairs through secret warranties: Paint flaking -- or delamination, as it's called in the industry -- occurs when the top coat of paint separates from the primer coat, or turns a chalky colour, mostly along horizontal surfaces and often as a result of intense sunlight. When the paint peels the entire vehicle must be repainted after a new primer resurfacer has been added. For some vehicles, the labour alone can run about twenty hours at a cost of $50-$75 an hour.

General Motors: Confidential U.S. dealer service bulletins show us one important benchmark the auto industry uses to accept or reject secret warranty paint claims. With Corsica and Beretta paint defects, for example, GM lets dealers repaint the entire car, at no charge to the owner (up to $650 U.S.), regardless of whether it was bought new or used. Interestingly, all vehicles as old as six years are still eligible and head office permission isn't needed before work commences.

Ford: Ford is more generous than GM (at least in theory), although its dealers first need head office authorization. Ford has been repainting 1983-93 cars, minivans, vans, F-series trucks, Explorers, Rangers, and Broncos free of charge for the past five years under a little-known "Owner Dialogue" program. Ford says it discontinued the program in January '95, but owners who cry foul and threaten small claims action are still getting compensation. Brandishing some of the same internal dealer bulletins found in the chart on page 35, Ford owners have argued convincingly that secret warranty programs are unfair because not everyone has an equal chance of being told they exist. They insist that these programs should be used as compensation to owners for the company's factory negligence -- not as so-called "goodwill" marketing tools that can be cut off arbitrarily.

Chrysler: Chrysler's paint problems are more recent and more severe. The company's latest paint glitch, called "shadowing," produces a blotchy shadow or spotting all over the vehicle. Chrysler's entire '95 lineup of dark-coloured models -- except for Jeeps, minivans, and Canadian-made vehicles -- is affected. Cars that are kept in heated garages and then driven in sub-zero temperatures are especially vulnerable. Chrysler won't be repainting its vehicles with the "shadowing" problem. Instead, the automaker says it will buy back all affected vehicles and sell them at auction as used vehicles -- with the paint defect disclosed.

Chrysler's other paint deficiencies, which affect older vehicles and minivans in particular, include paint cracking and fading between the third and fifth year of ownership. One Chrysler service bulletin that can serve as a benchmark for paint claims is Bulletin 23-11-90, "Base Clearcoat Paint Damage Resulting From Alkaline Spotting, Industrial Fallout, or Chemical Etching," issued September 10, 1990. It contains a number of illustrations relating to the kinds of paint problems Chrysler will repair under its base warranty on all 1990 model year vehicles, and puts Chrysler on record as accepting so-called environmental paint damage (why only certain models, model years, and colours?). No other specific service bulletins or dealer memos detailing Chrysler's secret warranty guidelines for 1991-94 vehicles have yet turned up, but owners involved in out-of-court settlements with the automaker say refunds have been offered for up to six years of ownership when they've quoted the Chrysler bulletin mentioned above.

Getting a Settlement
The following settlement advice works not only for paint defects but for any other vehicle defect you believe is the automaker's/dealer's responsibility. If you're not sure if the problem is a factory-related deficiency or a maintenance item, have it checked out by an independent garage or order a dealer service bulletin summary for your vehicle (faxed or mailed for $15 from DSB Summary 2805 E. Oakland Park Blvd., Suite 211, Fort Lauderdale FL 33306 -- Fax: 954-563-2448; see Appendix II). The summary may include specific bulletins relating to the diagnosis, correction, and ordering of upgraded parts needed to fix your problem.

1. If you know the problem is factory-related, take your vehicle to the dealer and ask for a written, signed estimate. When handed the estimate ask that the paint job be done for free under the manufacturer's "goodwill" program (Ford's euphemism for this secret warranty is "Owner Dialogue Program; GM's term is "Special Policy," and Chrysler just calls it "goodwill." Don't use the term secret warranty, yet.)

2. Your request will probably be met with a refusal, or an offer to repaint the vehicle for half the cost, or, if you're lucky, an agreement to repaint the vehicle free of charge. If you accept half-cost, make sure it's based on the original estimate you have in hand, since some dealers jack up their estimates so that your 50 percent is really 100 percent of the true cost.

3. If the dealer/automaker has already refused your claim, and the repair hasn't been done yet, get an additional estimate from an independent garage that shows the problem is factory-related.

4. Again, if the repair has yet to be done, send a registered claim letter/fax to the automaker (copy the dealer) claiming the average of both estimates. If the repair has been done at your expense, send a registered claim letter/fax with a copy of your bill. A sample claim letter/fax can be found on page 39.

5. If a satisfactory response isn't received within five days, deposit a copy of the estimate or paid bill and letter/fax claim before the small claims court and await a trial date. This means that the automaker/dealer will have to appear, no lawyer is required, costs should be minimal (under $50), and a mediation hearing or trial will be scheduled in a few months followed by a judgment a few weeks later (time varies among different regions). Things that you can do to help your case: pictures, maintenance work orders, previous work orders dealing with your problem, dealer service bulletins, and an independent expert (best is the garage or body shop that did the estimate or repair; you can also use a local teacher/professor who teaches automotive repair).

Other situations: If the vehicle has just been repainted but the dealer says "goodwill" coverage was denied by the automaker, pay for the repair with a certified cheque and write "under protest" on the cheque. Remember, though, that if the dealer does the repair you won't have an independent expert who can affirm that the problem was factory-related or that it was a result of premature wear-out. Plus, the dealer can say you or the environment caused the breakdown. If the dealer/automaker offers a partial repair or refund, take it. Then sue for the rest. Remember, if a partial repair has been done under warranty it counts as an admission of responsibility -- no matter what "goodwill" euphemism is used. Also, the repaired component/body panel should be just as durable as if it were new. Hence, the clock starts ticking again, no matter what the dealer's repair warranty limit says.

Conclusion

Very seldom do automakers contest these paint claims before small claims court, opting instead to settle once the court claim is bounced from their customer relations people to Legal Affairs. At that time you will probably be offered an out-of-court settlement for 50-75 percent of your claim. Stand fast and make reference to the service bulletins you intend to subpoena in order to publicly contest in court the unfair nature of this "secret warranty" program (automaker lawyers cringe at the idea of trying to explain why consumers aren't made aware of these bulletins). One hundred percent restitution will probably follow.

Confidential service bulletins
Technical service bulletins are sent to dealers by carmakers to advise them of the latest secret warranties and to help them quickly diagnose and correct factory defects. These bulletins also disclose a) how much of the repair the dealer can charge back to the manufacturer, and b) parts that are available free of charge. Armed with these bulletins, motorists can use less expensive independent garages to diagnose and repair their vehicles or to negotiate compensation for defects that the bulletins point out are the manufacturer's fault. The major problem with these bulletins is that they're difficult to get. Dealers and automakers are reluctant to provide this kind of detailed technical information because it allows customers to second-guess a mechanic's work or to buttress their demands for compensation. As long as their involvement isn't disclosed, some dealers will discreetly provide copies of service bulletins to help their customers fight for compensation from the auto manufacturer.

Back to the main page

1