Reuters
August 20, 2008 - 12:00 a.m. EST

DETROIT (Reuters) - General Motors Corp on Tuesday said it was extending a warranty offer on certified used cars and trucks, citing gains in quality and a drop in warranty-funded repairs.

GM said it would begin offering a 12-month, 12,000-mile "bumper-to-bumper" warranty on all used cars and trucks certified as eligible for the repair coverage by participating GM dealers.

The change, which takes effect on September 13, extends the term of the GM warranty on late model used cars in good condition by an additional 9 months and 9,000 miles.

The move comes a day after GM announced it was rolling out a sweeping new discount program on new cars and trucks that will offer employee-level pricing for any buyer.

U.S. automakers, including GM, have long argued that improvements in the quality of their vehicles have not been fully recognized by American consumers.

In response, all three Detroit-based automakers have rolled out more generous warranties over the past several years in a bid to raise consumer confidence.

GM's sales of new cars and trucks have dropped 18 percent so far this year, pushing its dealers to rely more heavily on sales of used cars, which typically carry higher margins.

"This is a clear indication of the confidence in the quality and value of our cars and trucks," Brian McVeigh, GM's manager of fleet and commercial operations, said in a statement about the revamped warranty offer.

GM has seen a drop of 40 percent in warranty-funded repairs over the past two years and a decline of 14 percent this year alone, Jamie Hresko, the automaker's vice president of quality, told reporters and analysts.

GM said it expected that the new warranty offer, which can be transferred to subsequent buyers, would support resale values for GM vehicles but declined to provide a target.

Auto brands with higher resale values are able to command higher prices on new car sales, a key advantage in profitability for Japanese automakers like Honda Motor Co and Toyota Motor Corp in the U.S. market.

A year ago, Chrysler LLC began offering a "lifetime" warranty on the powertrain on almost all of its new vehicles to address a longtime concern of dealers.

In February 2007, GM extended a five-year, 100,000-mile powertrain warranty to its certified used cars, the same offer that the automaker extends on new car sales.

That portion of the GM warranty remains unchanged.

In addition, the "bumper-to-bumper" portion of the GM warranty will now run for 12 months or 12,000 miles of additional driving from the time of purchase. The warranty covers all repairs due to defects but excludes items like tires and brake pads that suffer normal wear and tear.

The new GM warranty terms apply to Chevrolet, GMC, Buick, Pontiac and Saturn certified used vehicles. The automaker's upscale Saab, Hummer and Cadillac brands carry a longer 6-year, 100,000-mile warranty that remains unchanged.

(Reporting by Kevin Krolicki; Editing by Gary Hill)