A Lesson From The Old West

[Editor’s note: This letter is in response to the letter titled “A Necessary Evil,” May 13.]

I really don’t know where to begin to express my thought about this guy’s Feedback letter. I may be too soft when it comes to consumers’ rights, but even I like a product to perform for a reasonable amount of time after I paid earned money for this product.

I suppose if you’re a manufacturing company, no warranty would be very profitable with no additional workload. Hey, the salesmen that sold hair tonics and healing syrups used to conduct business this way and still could today. Back in the Old West days, it was lucrative, but one paid a heavy price when he crossed the wrong cowboy!

Now with that said, I would like to say this to the person who wrote that letter: With today’s computers, cyberspace resources for direct sales, the most efficient product delivery services of our time, and the distributor services providing product boxes without knowing any info on the product, I now find it even harder to understand your purpose.

David Olenick Jr., Owner/Operator, C&C Air Conditioning Services, Peoria, AZ

No Profit In Extended Warranties

I’d like to respond to John R. Hall’s March 11 column regarding extended warranties [“Who Is The Winner Of The Extended Warranty Sweepstakes?”]. The percentages that were reported need some clarification.

First of all, it is important to identify what is a “residential contractor.” Many residential contractors are “installation based” and some are “service based.”

To the installation-based residential contractor, these extended warranties are wonderful. For both the manufacturer and the installation-based contractor, these extended warranties enhance sales.

The manufacturers’ wish to increase market share was the sole reason for introducing the extended warranties. The manufacturer was greatly influenced in this area by the installation-based contractor.

Service-based contractors objected to extended warranties from the manufacturer. However, due to the fact that installation-based contractors sell “more boxes” than service-based companies, the decision for the manufacturer was simple.

As a service-first company, we lose money on manufacturers’ extended warranties and have stopped selling them. The pitfalls are many!

They include fixed labor time allowances which can’t be met if the part is not in the truck, extremely low mark-up allowances, heavy administrative costs, and taxes that are, in fact, actual costs on parts that are not recognized as costs. Hourly rates, in some cases, are far below industry standards. There’s no allowance for diagnosis or intermittent problems.

In short, for my company, the least profitable (by a large margin) service call we get is a residential service call on a manufacturer’s extended warranty.

Andy Clowes, Vice President, Advantage Airtech Ltd., Toronto, ON, Canada

Publication date: 06/17/2002