Chrysler Group said on Thursday it would begin offering a lifetime powertrain warranty on almost all of its new vehicles to increase sales and address a longtime concern of dealers.
The warranty covers the engine, transmission and drive systems on Chrysler, Jeep and Dodge models for as long as a first-time owner drives the vehicle. It replaces the automaker's current three-year, 36,000-mile warranty.
The extended warranty, not transferable if a vehicle is sold, was being offered as of Thursday and supported by a TV and newspaper advertising campaign starting on Friday, the automaker said.
Chrysler and other U.S. automakers have said that improved quality has not been fully recognized by American consumers. It joins larger competitors in offering more generous warranties to raise consumer confidence.
Last September, General Motors Corp announced a five-year, 100,000-mile warranty on its 2007 models and then extended the offer last February to its certified used cars.
In July 2006, Ford Motor Co increased its powertrain warranty on new vehicles to five years or 60,000 miles.
Chrysler's North American sales chief Steven Landry said the company's consumer research showed that a larger share of new car shoppers said they would consider buying one of its vehicles if offered the new warranty.
The extended warranty answers a call from Chrysler's dealers who pressed for more effective advertising and improved inventory management by the automaker after unsold vehicles piled up on lots last year, Landry said.
We didn't want to just match what was out there in the market. We wanted to go beyond it, Landry said.
Chrysler's U.S. sales were down about 1 percent in the first half of this year as it relied on industry-leading incentives, including interest-free financing, to move an aging line-up of pickup trucks and minivans.
The new warranty comes as Cerberus Capital Management prepares to take Chrysler private in a $7.4 billion deal with DaimlerChrysler AG.
Landry said the warranty could allow Chrysler to reduce some of its incentive spending, although that was not its aim.
The Chrysler move drew immediate praise from the chief executive of AutoNation, the largest U.S. auto dealership group.
When you have good quality, but you have a problem with perception ... you have to do something very dramatic on the warranty side, said AutoNation Chief Executive Mike Jackson. It worked very well for GM, and I'm sure it will work well for Chrysler.
The new lifetime warranty excludes Chrysler's diesel-driven vehicles and its performance-oriented SRT line of vehicles, the company said.
(Reporting by Kevin Krolicki)