Excerpt from “Warranty Week”  October 18, 2006

Warranty Cutbacks at Whirlpool and Electrolux

More recently, word has spread rather quietly that Whirlpool and Electrolux were reducing their warranties to one year, where they used to be two to ten years. While the top-to-bottom warranty was generally one year before, Whirlpool used to warrant specific components for much longer durations, such as a washing machine's outer tub for as long as ten years. Also on washing machines, belts and pulleys were covered for five years. Electronic control boards got two years. On Whirlpool refrigerators, meanwhile, the compressor and condenser got a five-year warranty, as did the electronic control system. So did the nylon-coated dish racks inside a Whirlpool dishwasher. Electrolux had similar policies on its brands. Instead, from now on everything gets just one year, top to bottom, be it a washing machine, refrigerator, or dishwasher.

The Whirlpool change becomes effective on Nov. 1 and also affects most KitchenAid, Roper, Estate and Inglis branded units. The Electrolux change is effective Jan. 1, 2006 and affects all Frigidaire, Frigidaire Gallery, Frigidaire Professional, White Westinghouse, Tappan, Gibson, and Kelvinator-branded appliances. Whirlpool has excepted some of its flagship KitchenAid line, and Electrolux has excepted some of its flagship Icon line from the warranty reductions. The warranty coverages on those brands will remain at five or even ten years for certain components.

These shifts are somewhat troubling, but they also suggest that manufacturers in several industries are beginning to position lengthy warranties as the mark of a premium brand. For even as DaimlerChrysler cut its Chrysler, Jeep, and Dodge brands back to three years, it kept the four-year warranties on Mercedes. And General Motors, as part of its "total value promise," in an effort to reposition Buick and Hummer as luxury brands, recently lengthened the warranties on those brands from three years to four. One would imagine that higher prices and longer warranties will increasingly become part of the luxury package, be it an automobile or an appliance.

Even in the computer business, there's something of an upper, lower, and middle class emerging in terms of warranty. Business computers typically get three years of warranty coverage. Until recently, one year of coverage was typical for the consumer models. But then Dell Inc. began selling some really low-end units such as the Dimension 2400, the Dimension 3000, and the Inspiron 1200 with only a 90-day product warranty, although it also sells extended warranties that can bring coverage back up to one, two, three, or even four years.

Computer Shopper reported in a September article that Dell had reduced to just 90 days its standard warranty on all its Dimension desktops and Inspiron notebooks, as well as its all-in-one printers, MP3 players, and handhelds. A Dell spokeswoman claimed the decision was based on customer feedback. "We know a lot of customers value paying less in exchange for a shorter warranty," the spokeswoman told the magazine. On the budget models, she said, customers figure, "'Why do I want to pay more for a system that I'll probably replace if it breaks, anyway?'" And, she added, most of the breakdowns happen within the first 90 days anyhow.

Time will tell whether 90-day warranties are viable in the home computer industry. Ninety days is fairly typical of the low end of the consumer electronics industry, where replacement is more common than repair. But despite the power of low prices, one would think that customer satisfaction would decline as warranties are shortened. Already, studies such as the TechnoMetrica Market Intelligence survey in September and the ChangeWave survey in late August, both cited in an Investor's Business Daily article last week, show Dell slipping in terms of brand preference. Business Week, in an October 2 article, cited the results of a University of Michigan survey as evidence that the ranks of frustrated Dell owners are growing.