CADILLAC WARRANTY ADMINISTRATION

Over the last several years, Cadillac's Central Office Warranty Department has pursued an advanced computer systems approach to assist us in performing our responsibilities. We have significantly enhanced our ability to monitor and analyze dealer warranty/policy claims and expense by utilizing our systems approach. This has resulted in the development of analysis tools that are capable of detecting "itises" and unusual situations in warranty-related areas.

In the future we will be providing you information, through periodic DSIB's, to alert you to some of our findings and concerns. This additional information should assist you in your efforts to effectively administer warranty expense. Establishing and implementing sound internal controls, as detailed in various Cadillac publications, can minimize involvement in warranty review activities.

As you may recall, we initiated chargebacks in the areas of: duplicate catalytic converter replacements; HT4100 Special Policy overcharges; and, several no-charge part and repair/exchange programs. While this activity was substantiated by supportable records, we recognize the need for communicating this type of action in its early stages so that you can correct improper procedures and possibly minimize exposure to this type of debit action. Therefore, warranty investigations and potential chargebacks will be communicated to all parties involved as early as possible.

In keeping with this approach, we are currently conducting an analysis of two specific areas. The following observations are brought to your attention for immediate review and corrective action where applicable:

(1) As you are aware, prolonged vehicle storage has an adverse affect on a vehicle's battery. If the battery is not disconnected or recharged on a regular basis, various active on-board electronic systems will reduce the battery's state of charge. This condition severely curtails the battery's ability to accept a recharge after a month or so of electrical discharge. Eventually, the battery reaches a point where it can no longer accept a recharge and must be replaced. A significant number of dealers have incorrectly charged Cadillac for the recharge and/or the replacement of new vehicle batteries on unsold cars in their inventory. This is contrary to published vehicle storage procedures. Please review your operation to ensure you are following proper vehicle storage guidelines.

(2) A number of dealers have processed campaign claims on vehicles that they were assigned without actually performing the recall correction. This results in the vehicle being removed from the record of vehicles requiring campaign correction. (Dealers could be liable if these vehicles were involved in an accident resulting from a condition that should have been corrected by the campaign.) Rather than follow correct campaign transfer procedures, certain dealers have submitted for and were paid .1 labor hour or a net item amount on a campaign claim. It appears that an effort was made to recover certain internal administrative expenses associated with these campaigns (i.e., owner notification mailing costs) that should have been absorbed by the dealer. It shoud be noted that dealers are entitied to .1 labor hour per vehicle for administrative allowance on actual campaign completions. Please review your campaign processing activities to ensure you are following proper procedures.

In conclusion, both of the above areas are currently under review. In the near future, we anticipate implementing Central Office chargebacks, as deemed appropriate and justifiable, to involved dealers.

General Motors bulletins are intended for use by professional technicians, not a "do-it-yourselfer". They are written to inform those technicians of conditions that may occur on some vehicles, or to provide information that could assist in the proper service of a vehicle. Properly trained technicians have the equipment, tools, safety instructions and know-how to do a job properly and safely. If a condition is described, do not assume that the bulletin applies to your vehicle, or that your vehicle will have that condition. See a General Motors dealer servicing your brand of General Motors vehicle for information on whether your vehicle may benefit from the information.