Cadillac: Looser Rules, Happier Clients

It's one of those teeth-gnashing, rage-inducing experiences: Mere miles or months after your car's warranty expires, you find that it needs expensive engine repair. Car companies have for years kept goodwill funds for dealers to draw on in such situations. But until about a year ago, Cadillac, No.3 on our list, had rigid rules that made dealers jump through hoops to get at those funds. Dealers had to call a regional representative at parent company General Motors Corp. for permission to do work free of charge outside of warranty. If the repair was expensive, they had to go even higher up the chain of command, sometimes as far up as Cadillac general manager James E. Taylor himself.

That put dealers at a disadvantage with archrival Lexus. Since Lexus has 221 dealerships to Cadillac's 1,400, each Lexus outlet is more profitable and can better afford to offer such perks as loaner cars and repairs for vehicles that recently went off warranty. So last year Taylor decided to loosen up the rules, giving dealers the power to decide how to respond to customers with repair needs outside of warranty. If dealers become too generous, Cadillac will tell them.

By making that change, Taylor resolved a classic frustration for many customers: Too little decision-making in the hands of employees on the front line. Says Taylor: "Luxury customers are used to staying in five-star hotels and having secretarial staff take care of everything. They expect dealers to take care of them, and we have to give dealers leeway to do that." The brand guarantees its customers a loaner car to drive while repairs are being made and reimburses dealers up to $45 a day for the cost.

Cadillac is also keeping a closer eye on its mechanics. It can track data to find out if certain dealerships or even individual technicians are frequently making the same mistakes in repairs. Taylor says that making the extra effort is worth it. GM research shows that customers who get good service are five times more likely to buy another car from the same brand than those who have had a bad experience. "You have to believe that the added cost comes back to you in spades in customer loyalty," he says. To keep that virtuous cycle going, GM gives its dealers perks for doing the job right. If dealers maintain good customer-service ratings, based on surveys, those with larger operations can get cash rewards of up to $100,000 a quarter.

By David Welch in Detroit

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