Up Your Business - September - 2023

Going Naked?

Just for the fun of it, I’ve been reading a lot of fairy tales and fables lately. It brings back childhood memories, but I also see life lessons and applications I didn’t see when I was younger. Of course, that’s to be expected because now I’m reflecting on life more than charging into it, but as a business writer and speaker, these stories make great segways.

For example, Hans Christian Andersen’s fairy tale, “The Emperor’s New Clothes,” was first published in 1837. However, it lays an excellent foundation for today’s article. Here’s a short synopsis of the tale.

Two swindlers arrive at the capital city of an ultra-egotistical emperor who fancies himself as superiorly intelligent and spends lavishly on clothing at the expense of the empire and its subjects. The crafty duo sees the opportunity to leverage the emperor’s vanity by posing as weavers and tailors. They offer to provide the emperor with a magnificent new suit of clothes. But these clothes have a special attribute. They are invisible to those who are stupid or incompetent. They convince the emperor that this will be a clever way for him to determine who is trustworthy and intelligent.

Of course, the emperor hires them, and the swindlers set up looms and go to work weaving the “magical” fabric for the new clothes. As officials and the emperor, himself check in on the progress, each sees the looms are empty, but they all pretend otherwise to avoid being discovered to be incompetent fools.

Finally, the tailors report that they’ve finished the emperor’s new suit. They pretend to dress him and liberally praise him for how magnificent he looks in the new clothes. To his dismay, he can’t see the clothes, but not wanting to be exposed, he pretends and poses as he admiringly looks at himself in the mirror.

He excitedly sets off in a parade procession to show off his new garments to all the town’s citizens. The townsfolk uncomfortably go along with the pretense, not wanting to appear inept or stupid. Suddenly, a child blurts out, “The emperor is naked.” With that, one by one, the people realize the truth but say nothing. The child’s comment makes the emperor even more confident, and he arrogantly continues the procession, walking more proudly than ever.

You’re no doubt thinking, “Okay, Thom. How on earth will you turn this fairy tale into a business lesson?” This fairy tale is a metaphor that fits any situation or circumstance where business owners or managers press blindly ahead while ignorant of the facts they need. You could say they’re Going Naked.

Some examples include, but are not limited to, such things as setting new sales goals without considering whether they have the production capacity to produce the jobs required to hit the sales goals; increasing your advertising budget without knowing if your sales staff is capitalizing on the inquiries you’re already getting; fi ring an employee for poor productivity without considering whether there are systematic obstacles or bottlenecks; the list is almost inexhaustible.

However, today I’m going to apply this fairy tale to warranties. I hope to pique your interest in warranties and learning about the hidden pitfalls related to them. On Thursday afternoon, at this year’s Powertrain Expo, I’m presenting a workshop called “The History, Mysteries, and Myths about Warranties.” I’ll be able to go into more detail and answer your questions in the 2 1/2 hour workshop than I can in this article. Plus, you’ll receive the detailed handout material as well. Here are a few of the topics that I’ll cover.

I became a student of warranty law in the late 1980s. I had a surprising adverse ruling in court regarding a warranty matter, and I decided not to let that happen again. That incident and my subsequent research led me to the Better Business Bureau. They had a nationally accredited training program for arbitration and mediation to develop arbitrators and mediators to serve on the alternative dispute resolution teams. That training was deeply entrenched in warranty law.

It’s a little-known fact that the BBB originated in response to helping businesses self-regulate against false advertising and false or unfulfilled guarantee claims.

The history of warranties and guarantees is probably different than you imagine – if you’ve even given it any thought. Warranties and guarantees have their roots in British Common Law. In the late 1800s, warranties and guarantees were not much more than empty puffed-up performance claims. “This elixir is guaranteed to cure whatever ails you!”

When consumers started pressing businesses to make good on their claims, the company’s first response was to create warranties that protected the firm by saying what isn’t covered or other disclaimers. Things like: Must be used as directed; Must return unused portion at your own expense; Not valid if (Insert your favorite).

Warranties that included consumer benefits and value didn’t fully evolve until the mid-1900s. This is important because it explains why specific provisions are included in most warranties that do not benefit the customers or adequately protect the businesses issuing them. The first attempt to regulate warranties and guarantees was with the Uniform Commercial Code (UCC) in 1952. It was difficult to enforce because it was adopted on a state-by-state basis. Finally, the Magnuson-Moss Warranty Act of 1975 was passed in an attempt to harmonize and bring unity to the various state statutes under the UCC.

The mysteries about warranties and guarantees are like trying to understand our laws – our constitution. The laws of our nation and those of our local jurisdictions are written to guide our societal behavior. However, a multilayer court system culminates in the Supreme Court. The system’s primary purpose is to interpret and accurately apply the laws. As a result, we’ve had many misunderstandings and much confusion when trying to comply with and enforce the rules – especially those related to warranties and guarantees. Our industry is no exception.

The myths about warranties and guarantees are many and varied. Here are a few. Remember, all these statements are false – they’re myths.

  • There’s a difference between a warranty and a guarantee.
  • In the automotive repair and transmission business, we’re required to give a written warranty or guarantee on our work.
  • Giving a written warranty is less risky than giving no warranty and just letting the chips fall where they may if something goes wrong.
  • I can choose to offer no warranty or guarantee. All I have to do is write on the repair order, “There is no warranty on this repair.”
  • If I choose not to offer a warranty, I’m still obligated. Everything we do is warrantied whether we say it or not.
  • I can limit my legal exposure by offering a written warranty or guarantee that limits time and mileage and contains exclusions. For example, when I give a customer a 1 Year – 12,000 Mile ATRA Golden Rule Warranty, and either or both limits are exceeded, the warranty is invalid.
  • After a warranty has expired, if a customer takes their car to another shop for necessary repairs on the work you performed, you’re not obligated to pay for those repairs. The obvious reasons are that the warranty expired, and they didn’t bring it back to give you a chance to fix it.
  • It is not legal to charge extra for a warranty.
  • It is legal to charge extra for a warranty.
  • When it comes to warranty and guarantee law, federal laws prevail over state laws.
  • When it comes to warranty and guarantee law, state laws prevail over federal laws.
  • An extended warranty and a service contract are the same thing.
  • Service contracts are governed under federal warranty and guarantee laws.

Again, all the above statements are myths. If you read them carefully, you probably think there are contradictions, and you’re right. But I’ll do my best to clear it all up in the workshop at Expo.

The Perfect Warranty doesn’t exist. However, in the workshop’s last section, I’ll share a way that the ATRA Golden Rule Warranty or any other written warranty can be enhanced to become as close to a Perfect Warranty as possible. Here are some of the essential elements of a Perfect Warranty.

  • Complies with the Magnuson-Moss Warranty Act.
  • Aligns with the Uniform Commercial Code.
  • Provides valuable benefits and protection to the consumer.
  • Provides significant marketing advantages to the warrantor shop.
  • Provides protection and limits the liability of the warrantor shop indefinitely.
  • Contains clearly written, easy-to-understand terms and conditions.
  • Includes clear instructions to the customer regarding how to use the warranty.
  • All disclaimers, exceptions, and exclusions are reasonable and clearly stated to prevent disputes.

Once upon a time, there was a shop owner who thought he had the best warranty in the business. He didn’t know he was Going Naked. I guarantee that anyone attending this workshop will get something priceless from it. Once your eyes are opened to the truth about warranties, you’ll see your legal exposure, and how you might be missing out on the competitive advantages of warranties.