Audit story · public court record · Third Circuit, April 2024
What happened at Mall Chevrolet
Most audit stories in the trade are told second-hand. This one is in a federal appeals court opinion, with the dollar amounts, the dates and the reasons written down. It is the clearest public picture of how a GM warranty audit unfolds and what gets charged back first.
Everything below is taken from the opinion in Mall Chevrolet, Inc. v. General Motors LLC, U.S. Court of Appeals for the Third Circuit, No. 21-2283, filed April 26, 2024. Read the opinion (PDF). We are not a party and have no inside knowledge.
- May 2017 A regional review flags a pattern. GM's review found a high share of warranty claims on vehicles from used-vehicle lots (the opinion names CarMax, Carvana and DriveTime). Audits are rarely random; a statistical pattern is what brings the auditor.
- Then An immediate chargeback of $114,178.60. Of that, about $98,000 was for job cards "lacking required information or an authorized signature". Roughly $16,000 covered out-of-warranty work, parts retention, improper repeat repairs and work not performed. The largest piece was the cheapest kind of failure to prevent.
- July 5, 2017 GM announces a full audit covering August 2, 2016 to July 14, 2017, about eleven and a half months, on-site and electronic.
- April 30, 2018 The Debit Deviation Report: 94 pages, 517 deviations on 346 vehicles, $672,176.59. 186 of the deviations were for what the opinion calls "ghost vehicles".
- After The dealer's response ran about 1,000 pages and cleared 12 deviations worth $16,143.55. The final chargeback was $656,033. GM terminated the franchise. The dealer sued. The Third Circuit upheld the termination in a precedential opinion.
Three things the opinion says that every warranty admin should know
Claims are paid first, verified later
The opinion records that GM lets dealers submit warranty claims without supporting documentation and recovers, by chargeback, anything it "could not verify" after the fact. Payment is not approval.
The first tranche is documentation
Signatures and required information came first and were the biggest single number. Those are fixable on the day the RO is written, and unfixable on the day the auditor arrives.
Responding after the fact barely moves the number
A thousand pages of response recovered about 2.4 percent of the audit. The window to fix an RO is before it is submitted, not after it is audited.
What would GM's checklist find in your last 90 days?
The requirements GM audits against are public, in bulletin 23-NA-154. All 53, with GM's sentence for each. You can check one RO against them in your browser right now, with nothing uploaded, or get the number for every RO from the last 90 days in five days.