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Tesla may call warranty repairs goodwill due to lemon laundering

111 points by tempsy 6y ago

vvanders 6y ago
Only experience I had with a goodwill repair was way out of warranty for a non-safety item(stuck exterior door handle) so they definitely aren't limited to warranty or lemon issues.
- somethingwitty1 6y ago
  staying with the theme of the article, by doing this repair as goodwill, it changes how they have to report it (if at all). So if there really would need to be a recall to fix a fault/safety issue with the exterior door handle, the data wouldn't be there for regulators to make it mandatory. Warranty doesn't apply in these cases. If a recall defect is discovered 5 years after warranties expire, the manufacturer is still required to fix it on all cars impacted. One of my vehicles had a seat belt recall 10 years after. So your "goodwill" could be just them trying to avoid a costly recall. Note: this was just staying with the theme of the article and not that I agree with the accusations.
  - cptskippy 6y ago
    Additionally goodwill repairs can be used to cover up engineering defects that only manifest themselves in limited circumstances to avoid a full recall. I took an out of warranty Honda Accord in for service at a Dealership and they discovered a cracked engine block. They performed a goodwill repair under the auspices that "that shouldn't happen".
- Nexxxeh 6y ago
  Is "stuck exterior door handle" not a safety issue?
osamagirl69 6y ago
Given all of Tesla's shady business practices, this doesn't surprise me in the slightest. Tesla has really made huge progress in modernizing cars (making them electric and not terrible, getting rid of middlemen, continuous/rolling product updates, infotainment that is not slow/terrible, etc) I just really wish they would have focused on the positive parts of the future and left the negatives behind (remote lockout of features, vendor lockin for service, and generally trying to screw your customers at every possible turn...)
- notRobot 6y ago
  A list of many such claims made by Elon Musk can be found here: https://elonmusk.today/ https://elonmusk.today/ Ctrl+F for "tesla".
  - camjohnson26 6y ago
    Elon Musk is unethical and it’s amazing how he has gotten away with so much simply by associating himself with positive trends. People see him and they think about clean energy and space colonization, but they ignore his casual disregard for human life evidenced by misrepresenting autopilot’s current and future capabilities, leading to at least 5 deaths at this point. He has also promised to cure autism via Neuralink, a baseless claim. He claimed that a monkey has controlled a computer at Neuralink, almost certainly untrue. He has destroyed his skeptics through questionable tactics, Fossi, Martin Tripp, skabooshka, Vernon Unsworth. The man is a disgrace, but his fans defend him as if he was the Messiah. How people can rail against Trump while supporting Elon Musk is mind boggling.
    - cameronbrown 6y ago
      Most founders keep to themselves because they don't want to overpromise. Musk does the total opposite, by tweeting all the random thoughts in his brain and I suspect it mirrors his thinking and the thinking of other founders (Zuck, Page, etc..) closely. The latter are just much quieter. Anyone would look stupid with their unfiltered thoughts broadcast to millions, but it's one of the things that people like about the dude.
      - camjohnson26 6y ago
        People say the same thing about Trump. I say when you’re a billionaire and have millions of followers it’s important that you self-filter and choose your words carefully. Quite literally people may die if you don’t.
        radu_floricica 6y ago
bryanlarsen 6y ago
Another good article about Tesla warranty accounting: https://cleantechnica.com/2020/07/10/tesla-tsla-has-a-warranty-accounting-mystery/ https://cleantechnica.com/2020/07/10/tesla-tsla-has-a-warran...
- camjohnson26 6y ago
  That entire article is an appeal to authority and doesn’t address classifying warranty repairs as goodwill. If the author wasn’t claiming to be working directly with a warranty accounting expert it would have nothing to say.
  - bryanlarsen 6y ago
    The article contains a large number of assertions and numbers derived from public records. Instead of a middle-brow dismissal, how about you attack something specific? The author talked to an expert about a subject that few people understand, and this is portrayed as a bad thing? I guess it's better to speculate out of thin air? Maybe you were an expert on warranty accounting before reading the article so you didn't learn anything. But I doubt it because if you were you would have had more concrete criticisms of the article. But even warranty accounting experts would probably appreciate the author working out the claims capacity ratios for almost a dozen different companies. The article is obviously days of work from the author. It may be worthy of criticism. If so, please do so substantively. Just a few of things I learned from the article: - what warranty accounting is - what warranty margins Tesla keeps - how that compares to others in the industry - what will happen to Tesla's financial statements in the future if Tesla adjusts their warranty margins closer to their industry peers P.S. There's lots of good discussion about goodwill in the comments to the article.
doggydogs94 6y ago
“... Chrysler also erased computer records that would allow people that eventually bought these cars to discover they were lemons ...” I am sure that a system manager had backups (perhaps a tape buried in his desk drawer), no matter what Chrysler said.
newacct583 6y ago
Can someone point me to the spot in the article where they actually allege that Tesla has resold a lemon buyback on which goodwill repairs were done? There's a ton of text here, but the actual allegation seems to be completely unsubstantiated.
- notRobot 6y ago
  Did you read the article in its entirety? > "Tesla provides express warranties. Under state lemon laws and the federal Magnuson-Moss Act and other provisions of state and federal laws, they are required to ensure that they comply with the warranties, or provide a refund. It appears they are attempting to evade state lemon laws by claiming their so-called 'goodwill' repairs don't count toward the criteria for buying back lemons. In addition, Tesla has been requiring lemon owners to sign onerous settlement agreements that silence them and make it easier for Tesla to engage in lemon laundering: the illegal resale of defective lemon vehicles, without branding the titles or taking other steps to protect consumers."
  - Supermancho 6y ago
    > It appears they are attempting to evade state lemon laws "Appears" how? Where is the substantiation? I came away wit the same concern. I can see the "onerous" terminology in the settlement agreements, which is standard lawyer CYA in these kinds of disputes.
    - hwillis 6y ago
      from the article: https://www.reddit.com/r/teslamotors/comments/ct284e/tesla_just_listed_my_buyback_model_3_for_33k/ https://www.reddit.com/r/teslamotors/comments/ct284e/tesla_j... The article also noted a former employee is involved in a lawsuit accusing Tesla of reselling lemons.
      - newacct583 6y ago
        But... that link clearly says it was not a lemon buyback! It's not illegal to voluntarily buy a car back and then resell it. Lemon laws are a very specific thing, that effectively force a manufacturer to buy the product back. If it wasn't invoked, then it doesn't apply.
notatoad 6y ago
I'm having a really tough time following this article. what are they actually alleging here? What is a "goodwill repair"?
- mdoms 6y ago
  I agree, this article was extremely hard to follow.
  - camjohnson26 6y ago
    From the article: “Cars without issues repaired under warranty don't need to be reported to the NHTSA – National Highway Traffic Safety Administration. After all, warranty repairs are due to manufacturing issues and are, therefore, an OEM's responsibility. Goodwill fixes are something automakers do to please their clients.” Seems like if they classify a repair as goodwill they can avoid a car receiving a lemon designation. There’s also a link to an article that alleges Tesla classifies warranty expenses as goodwill in order to lower their warranty accruals per vehicle, boosting profit margins.
- hwillis 6y ago
  > Before these experts gave us the lemon laundering perspective, though, the most likely explanation for the goodwill repairs was an article written by Montana Skeptic, a famous Tesla short-seller. He claims that labeling warranty repairs as "goodwill" is a way Tesla found to cheat its financial results. > This would happen because warranty costs are included in financial results as "Cost of Revenue," a number that affects gross profit and net income, according to that article. Instead of naming them as such, Tesla would say they are goodwill repairs, so these expenses would appear as "Operating Expenses," which get diluted in the company's results for as long as the car is under warranty. > If a company labels a warranty repair as goodwill, it may claim in court that it was not due to a defect, but rather to the way the clients used their cars. In short, it could not be framed as something the automaker had to fix, according to lemon laws.
  - to11mtm 6y ago
perl4ever 6y ago
This is really confusing to use the term "goodwill" here. It's a term of art in accounting, and despite this story being partly about accounting, it appears to have nothing to do with accounting goodwill...? Maybe there is a reason why these repairs relate to accounting goodwill, but otherwise, I suspect journalistic malpractice.
- deleted 6y ago
  [deleted]
- b-team 6y ago
  That’s what Tesla calls it. Source: I have had a Model S for many years and repairs I have had under warranty have been listed as “goodwill.” e.g., Torn sunroof seal (presumably, due to manufacturing defect).
  - perl4ever 6y ago
    I'm sure they do, and the meaning is obvious, it's just that when you get into the issue of accounting for it, it ought to be clarified that it's not accounting goodwill.
xfactor973 6y ago
This article is BS. Every repair I’ve had in the past was marked as a warranty repair.
SahAssar 6y ago
> That doesn't mean Tesla is entitled to follow a similar path just because legacy automakers have. Isn't it sorta weird that companies other than tesla are called "legacy"? I know that term is almost uniquely bad within software, but considering the site I'd think they know what connotation it carries for many people.
- smnrchrds 6y ago
  In college admissions, it is certainly positive. https://en.wikipedia.org/wiki/Legacy_preferences https://en.wikipedia.org/wiki/Legacy_preferences
  - SahAssar 6y ago
    Yeah, in almost everything except software it's a positive word. That's why I included the bit about the software connotation there. There's a whole separate discussion to be had why the word has so different meanings too.
  - touristtam 6y ago
    > Something handed down from an ancestor or a predecessor or from the past That is the more common sense you will find, which implies the predecessor's passing. Not very positive state for the ancestor.
- projektfu 6y ago
  It’s accepting Tesla’s framing. A nicer term would be “established”. Legacy used here has the sense of being a white elephant.
  - Traster 6y ago
    Or 'Viable' or 'Profitable'. Legacy is used in the sense of "Companies that make money are considered legacy in silicon valley"
    - rcMgD2BwE72F 6y ago
tlb 6y ago
The notion of a lemon is a car that was made on a bad day, so there are lots of defects that show up over time. The laws vary but generally say that if a car needs several major repairs in its first year you can demand a buyback. The underlying assumption that justifies a category of "lemon" is that needing N repairs is evidence that it is more likely than other cars of its model year to need an N+1st repair because failures are not independent. This may have been true of earlier technology, but it doesn't match the way modern cars are made. Mainly, the granularity of subassemblies is much higher, so for example in a Tesla they replace the entire rear powertrain or entire battery pack as a warranty item. Lemon laws should have required some periodic statistical adjustment to determine whether lemoniness actually exists in a given brand or not.
- ytdytvhxgydvhh 6y ago
  What if manufacturing isn’t the source of end-user lemoniness? These cars go through QC - maybe some QC folks are more slipshod than others, and the main source of lemons are the ones who were inspected by terrible QC inspectors? Or maybe the lemons are perfectly fine cars that were damaged in shipment and were repaired badly? Regardless, the lemon laws still protect the consumer.
  - cptskippy 6y ago
    Wouldn't sloppy QC also be a signof manufacturing issues?
- mlyle 6y ago
  Rework of QC fails and post-sales service are also imperfect. You can easily have a couple excess failures trigger excess service, and if you're unlucky with the quality of one episode of that rework or service, end up on a never-ending rework treadmill. Even on the brands with the best quality.
- ctvo 6y ago
  Can you share your position on Tesla mislabeling repairs to evade this law as stated in the linked article?
- 6y ago
sunstone 6y ago
When you look at Consumer's Reports owner satisfaction scores for Tesla vehicles they are surprisingly high. In which case there can't be vary many getting the goodwill lemon treatment, possibly none.
- smt88 6y ago
  NHTSA data is a better indicator. Many owners are 100% satisfied with a dangerous or buggy car if A) it hasn't killed them yet, and/or B) the manufacturer makes it easy to replace the lemon.
- foepys 6y ago
  If you are under the impression to.buy something "new" and "experimental", you are more willing to put ok over the shortcomings. When you buy a Ford, VW, BMW, Fiat, Toyota, you expect it to work perfectly because it's "old tech". When you buy a Tesla, you expect it to behave a little wonky sometimes because it's new and exciting except that it's basically exactly the same just with electric motors.
- mehrdada 6y ago
  Well, as a satisfied customer, I can tell you that the one time I got a new car and had my old one bought back under "goodwill repurchase" without too much trouble, net-net increased, not decreased, my satisfaction knowing that they stand by their product.

111 points by tempsy 6y ago

Only experience I had with a goodwill repair was way out of warranty for a non-safety item(stuck exterior door handle) so they definitely aren't limited to warranty or lemon issues.

somethingwitty1 6y ago
staying with the theme of the article, by doing this repair as goodwill, it changes how they have to report it (if at all). So if there really would need to be a recall to fix a fault/safety issue with the exterior door handle, the data wouldn't be there for regulators to make it mandatory. Warranty doesn't apply in these cases. If a recall defect is discovered 5 years after warranties expire, the manufacturer is still required to fix it on all cars impacted. One of my vehicles had a seat belt recall 10 years after. So your "goodwill" could be just them trying to avoid a costly recall. Note: this was just staying with the theme of the article and not that I agree with the accusations.
- cptskippy 6y ago
  Additionally goodwill repairs can be used to cover up engineering defects that only manifest themselves in limited circumstances to avoid a full recall. I took an out of warranty Honda Accord in for service at a Dealership and they discovered a cracked engine block. They performed a goodwill repair under the auspices that "that shouldn't happen".
Nexxxeh 6y ago
Is "stuck exterior door handle" not a safety issue?

osamagirl69 6y ago

Given all of Tesla's shady business practices, this doesn't surprise me in the slightest. Tesla has really made huge progress in modernizing cars (making them electric and not terrible, getting rid of middlemen, continuous/rolling product updates, infotainment that is not slow/terrible, etc) I just really wish they would have focused on the positive parts of the future and left the negatives behind (remote lockout of features, vendor lockin for service, and generally trying to screw your customers at every possible turn...)

notRobot 6y ago
A list of many such claims made by Elon Musk can be found here: https://elonmusk.today/ https://elonmusk.today/ Ctrl+F for "tesla".
- camjohnson26 6y ago
  Elon Musk is unethical and it’s amazing how he has gotten away with so much simply by associating himself with positive trends. People see him and they think about clean energy and space colonization, but they ignore his casual disregard for human life evidenced by misrepresenting autopilot’s current and future capabilities, leading to at least 5 deaths at this point. He has also promised to cure autism via Neuralink, a baseless claim. He claimed that a monkey has controlled a computer at Neuralink, almost certainly untrue. He has destroyed his skeptics through questionable tactics, Fossi, Martin Tripp, skabooshka, Vernon Unsworth. The man is a disgrace, but his fans defend him as if he was the Messiah. How people can rail against Trump while supporting Elon Musk is mind boggling.
  - cameronbrown 6y ago
    Most founders keep to themselves because they don't want to overpromise. Musk does the total opposite, by tweeting all the random thoughts in his brain and I suspect it mirrors his thinking and the thinking of other founders (Zuck, Page, etc..) closely. The latter are just much quieter. Anyone would look stupid with their unfiltered thoughts broadcast to millions, but it's one of the things that people like about the dude.
    - camjohnson26 6y ago
      People say the same thing about Trump. I say when you’re a billionaire and have millions of followers it’s important that you self-filter and choose your words carefully. Quite literally people may die if you don’t.
      - radu_floricica 6y ago

bryanlarsen 6y ago

Another good article about Tesla warranty accounting: https://cleantechnica.com/2020/07/10/tesla-tsla-has-a-warranty-accounting-mystery/ https://cleantechnica.com/2020/07/10/tesla-tsla-has-a-warran...

camjohnson26 6y ago
That entire article is an appeal to authority and doesn’t address classifying warranty repairs as goodwill. If the author wasn’t claiming to be working directly with a warranty accounting expert it would have nothing to say.
- bryanlarsen 6y ago
  The article contains a large number of assertions and numbers derived from public records. Instead of a middle-brow dismissal, how about you attack something specific? The author talked to an expert about a subject that few people understand, and this is portrayed as a bad thing? I guess it's better to speculate out of thin air? Maybe you were an expert on warranty accounting before reading the article so you didn't learn anything. But I doubt it because if you were you would have had more concrete criticisms of the article. But even warranty accounting experts would probably appreciate the author working out the claims capacity ratios for almost a dozen different companies. The article is obviously days of work from the author. It may be worthy of criticism. If so, please do so substantively. Just a few of things I learned from the article: - what warranty accounting is - what warranty margins Tesla keeps - how that compares to others in the industry - what will happen to Tesla's financial statements in the future if Tesla adjusts their warranty margins closer to their industry peers P.S. There's lots of good discussion about goodwill in the comments to the article.

doggydogs94 6y ago

“... Chrysler also erased computer records that would allow people that eventually bought these cars to discover they were lemons ...” I am sure that a system manager had backups (perhaps a tape buried in his desk drawer), no matter what Chrysler said.

newacct583 6y ago

Can someone point me to the spot in the article where they actually allege that Tesla has resold a lemon buyback on which goodwill repairs were done? There's a ton of text here, but the actual allegation seems to be completely unsubstantiated.

notRobot 6y ago
Did you read the article in its entirety? > "Tesla provides express warranties. Under state lemon laws and the federal Magnuson-Moss Act and other provisions of state and federal laws, they are required to ensure that they comply with the warranties, or provide a refund. It appears they are attempting to evade state lemon laws by claiming their so-called 'goodwill' repairs don't count toward the criteria for buying back lemons. In addition, Tesla has been requiring lemon owners to sign onerous settlement agreements that silence them and make it easier for Tesla to engage in lemon laundering: the illegal resale of defective lemon vehicles, without branding the titles or taking other steps to protect consumers."
- Supermancho 6y ago
  > It appears they are attempting to evade state lemon laws "Appears" how? Where is the substantiation? I came away wit the same concern. I can see the "onerous" terminology in the settlement agreements, which is standard lawyer CYA in these kinds of disputes.
  - hwillis 6y ago
    from the article: https://www.reddit.com/r/teslamotors/comments/ct284e/tesla_just_listed_my_buyback_model_3_for_33k/ https://www.reddit.com/r/teslamotors/comments/ct284e/tesla_j... The article also noted a former employee is involved in a lawsuit accusing Tesla of reselling lemons.
    - newacct583 6y ago
      But... that link clearly says it was not a lemon buyback! It's not illegal to voluntarily buy a car back and then resell it. Lemon laws are a very specific thing, that effectively force a manufacturer to buy the product back. If it wasn't invoked, then it doesn't apply.

notatoad 6y ago

I'm having a really tough time following this article. what are they actually alleging here? What is a "goodwill repair"?

mdoms 6y ago
I agree, this article was extremely hard to follow.
- camjohnson26 6y ago
  From the article: “Cars without issues repaired under warranty don't need to be reported to the NHTSA – National Highway Traffic Safety Administration. After all, warranty repairs are due to manufacturing issues and are, therefore, an OEM's responsibility. Goodwill fixes are something automakers do to please their clients.” Seems like if they classify a repair as goodwill they can avoid a car receiving a lemon designation. There’s also a link to an article that alleges Tesla classifies warranty expenses as goodwill in order to lower their warranty accruals per vehicle, boosting profit margins.
hwillis 6y ago
> Before these experts gave us the lemon laundering perspective, though, the most likely explanation for the goodwill repairs was an article written by Montana Skeptic, a famous Tesla short-seller. He claims that labeling warranty repairs as "goodwill" is a way Tesla found to cheat its financial results. > This would happen because warranty costs are included in financial results as "Cost of Revenue," a number that affects gross profit and net income, according to that article. Instead of naming them as such, Tesla would say they are goodwill repairs, so these expenses would appear as "Operating Expenses," which get diluted in the company's results for as long as the car is under warranty. > If a company labels a warranty repair as goodwill, it may claim in court that it was not due to a defect, but rather to the way the clients used their cars. In short, it could not be framed as something the automaker had to fix, according to lemon laws.
- to11mtm 6y ago

perl4ever 6y ago

This is really confusing to use the term "goodwill" here. It's a term of art in accounting, and despite this story being partly about accounting, it appears to have nothing to do with accounting goodwill...? Maybe there is a reason why these repairs relate to accounting goodwill, but otherwise, I suspect journalistic malpractice.

deleted 6y ago
[deleted]
b-team 6y ago
That’s what Tesla calls it. Source: I have had a Model S for many years and repairs I have had under warranty have been listed as “goodwill.” e.g., Torn sunroof seal (presumably, due to manufacturing defect).
- perl4ever 6y ago
  I'm sure they do, and the meaning is obvious, it's just that when you get into the issue of accounting for it, it ought to be clarified that it's not accounting goodwill.

xfactor973 6y ago

This article is BS. Every repair I’ve had in the past was marked as a warranty repair.

SahAssar 6y ago

> That doesn't mean Tesla is entitled to follow a similar path just because legacy automakers have. Isn't it sorta weird that companies other than tesla are called "legacy"? I know that term is almost uniquely bad within software, but considering the site I'd think they know what connotation it carries for many people.

smnrchrds 6y ago
In college admissions, it is certainly positive. https://en.wikipedia.org/wiki/Legacy_preferences https://en.wikipedia.org/wiki/Legacy_preferences
- SahAssar 6y ago
  Yeah, in almost everything except software it's a positive word. That's why I included the bit about the software connotation there. There's a whole separate discussion to be had why the word has so different meanings too.
- touristtam 6y ago
  > Something handed down from an ancestor or a predecessor or from the past That is the more common sense you will find, which implies the predecessor's passing. Not very positive state for the ancestor.
projektfu 6y ago
It’s accepting Tesla’s framing. A nicer term would be “established”. Legacy used here has the sense of being a white elephant.
- Traster 6y ago
  Or 'Viable' or 'Profitable'. Legacy is used in the sense of "Companies that make money are considered legacy in silicon valley"
  - rcMgD2BwE72F 6y ago

tlb 6y ago

The notion of a lemon is a car that was made on a bad day, so there are lots of defects that show up over time. The laws vary but generally say that if a car needs several major repairs in its first year you can demand a buyback. The underlying assumption that justifies a category of "lemon" is that needing N repairs is evidence that it is more likely than other cars of its model year to need an N+1st repair because failures are not independent. This may have been true of earlier technology, but it doesn't match the way modern cars are made. Mainly, the granularity of subassemblies is much higher, so for example in a Tesla they replace the entire rear powertrain or entire battery pack as a warranty item. Lemon laws should have required some periodic statistical adjustment to determine whether lemoniness actually exists in a given brand or not.

ytdytvhxgydvhh 6y ago
What if manufacturing isn’t the source of end-user lemoniness? These cars go through QC - maybe some QC folks are more slipshod than others, and the main source of lemons are the ones who were inspected by terrible QC inspectors? Or maybe the lemons are perfectly fine cars that were damaged in shipment and were repaired badly? Regardless, the lemon laws still protect the consumer.
- cptskippy 6y ago
  Wouldn't sloppy QC also be a signof manufacturing issues?
mlyle 6y ago
Rework of QC fails and post-sales service are also imperfect. You can easily have a couple excess failures trigger excess service, and if you're unlucky with the quality of one episode of that rework or service, end up on a never-ending rework treadmill. Even on the brands with the best quality.
ctvo 6y ago
Can you share your position on Tesla mislabeling repairs to evade this law as stated in the linked article?
6y ago

sunstone 6y ago

When you look at Consumer's Reports owner satisfaction scores for Tesla vehicles they are surprisingly high. In which case there can't be vary many getting the goodwill lemon treatment, possibly none.

smt88 6y ago
NHTSA data is a better indicator. Many owners are 100% satisfied with a dangerous or buggy car if A) it hasn't killed them yet, and/or B) the manufacturer makes it easy to replace the lemon.
foepys 6y ago
If you are under the impression to.buy something "new" and "experimental", you are more willing to put ok over the shortcomings. When you buy a Ford, VW, BMW, Fiat, Toyota, you expect it to work perfectly because it's "old tech". When you buy a Tesla, you expect it to behave a little wonky sometimes because it's new and exciting except that it's basically exactly the same just with electric motors.
mehrdada 6y ago
Well, as a satisfied customer, I can tell you that the one time I got a new car and had my old one bought back under "goodwill repurchase" without too much trouble, net-net increased, not decreased, my satisfaction knowing that they stand by their product.