The last few years have been rough ones for Detroit automakers, as they have seen their market share erode in the face of competition from their Asian and European rivals. Some of the reason is a more fragmented auto industry, with more and more models coming down the pipeline every year, offering shoppers a much larger set of options. But another part of the problem has been a perception among car buyers -- whether accurate or not -- that the U.S. automakers are lagging when it comes to quality and dependability. Ultimately, would-be domestic buyers look at rival import vehicles instead.
In that context, Detroit carmakers should be thrilled about the results of the 2007 Vehicle Dependability Study conducted by J.D. Power and Associates. For the first time in 12 years, a brand -- an American brand, no less -- tied with Lexus for the highest ranking in long-term dependability.
That brand is Buick, which obviously augurs well for General Motors and its other nameplates. But, just as significant for the domestic auto industry is the fact that three of the five top spots are American brands. Following top-ranked Buick and Lexus were, in order, Cadillac, Mercury and Honda.
The study was based on responses from more than 53,000 original owners of 2004 model-year vehicles, and was conducted from January through April of this year. It measured the number of problems reported by these owners. Lexus and Buick each posted a "top score" of 145 problems per 100 vehicles.
Also significant is that three of the top five brands (Buick, Mercury and Honda) are not pricey premium brands but instead are more affordable brands that cater to mid-range buyers.
"With three non-premium nameplates -- Buick, Honda and Mercury --ranking within the top five, and particularly with Buick tying with Lexus for the top rank, consumers seeking a vehicle with strong dependability have good choices at various price levels," said Neal Oddes, director of product research and analysis for J.D. Power and Associates. "Consumers don't necessarily need to pay premium prices to obtain high quality and dependability."
The study also revealed that long-term dependability is now more important than ever.
"Sixty two percent of buyers now cite long-term dependability as their number one reason for buying the car they bought, compared to their second choice," said Joe Ivers, .J. D. Power's executive director of automotive quality and customer satisfaction research. "That is now the number one issue by far, and it's been growing. In 2003, only 52 percent cited long-term dependability as the reason -- and back then, that factor wasn't even the number one reason they made the choice they made."
|Most Dependable Models by Segment*|
|Sub-Compact Car||Compact Car||Midsize Car||Large Car||Large Premium Car|
|Scion xA||Honda Civic||Buick Century||Ford Crown Victoria||Lexus LS 430|
|*Based on J.D. Power & Associates 2007 Vehicle Dependability Study, problems per 100 vehicles|
Ivers confirmed that high marks for 3-year-old models should translate into similarly high quality in the brand's new models.
"That's something the consumer will definitely want to know, and it's a good question," said Ivers. "Of course, there are no guarantees, but it is unusual when an automaker misses an opportunity to improve on quality from one generation to the next.
"Subsequent generations of a model, or new models from that carmaker, do tend to be much better than the previous ones," Ivers continued. "And in the case of Buick, that's reflected in the new-car quality rankings we're seeing in studies of current models. So, the indication is that this new generation of Buicks are likely to be in the same range or better than the old ones when it comes to long-term dependability."
The study also broke down the data by model and market segment, and handed out "segment awards." Lexus led the pack with five awards for the GS 300/GS 430, GX 470, LS 430, LX 470 and SC 430. Toyota followed with four segment awards for the RAV 4, Sequoia, Tacoma and Tundra. Ford won segment awards for the Crown Victoria and Mustang, while Honda earned awards for the Civic and S2000. Oldsmobile models also received two segment awards, for the Bravada and Silhouette.
One finding that is significant to consumers and carmakers alike is that models with strong dependability may retain up to 15 percent of their value after three years -- that may increase their resale value. Models that demonstrate strong dependability lose their value less rapidly compared with vehicles which are not as dependable. Plus, vehicles that retain higher residual values appeal more to dealerships who may be able to sell those models two to three times during the lifetime of the vehicle.
The study used the Scion xA as an example. The Scion xA, which won an award in the study's sub-compact car segment, maintains an average residual value of 71 percent, much higher than the industry average of 56 percent. After three years, the 2004 Scion xA may retain value up to $10,607 of its initial average price of $14,939, according to the study. That would drop to $8,366 if the model's residual value rate matched the industry average.
"Automakers may reap numerous benefits from producing dependable vehicles," said Oddes. That's not only true in terms of "higher residual values, decreased warranty costs and opportunities for remarketing their vehicles," he said, but also applies in areas like "higher customer satisfaction and increased likelihood of customers recommending or purchasing newer dependable models.
"This is why it's especially important for automakers to successfully launch new vehicle models with high initial quality and appeal." Models that perform well in this regard "tend to exhibit particularly strong dependability later in their life cycle," explained Oddes.
The dependability study also found that approximately 65 percent of the vehicle owners had experienced one or more problems that required components to be replaced. Owners who had to replacement components within the first three years were significantly less satisfied with their vehicles than owners who didn't. Satisfaction was further diminished if owners were required to replace a major component, such as a transmission, or if minor components needed to be replaced frequently.
The failure of components and the resulting drop in satisfaction can lead to decreased customer loyalty, the study found. Owners who had to deal component failure expected to keep their vehicle approximately one year less than owners who experienced problems but didn't need to replace components.
"As owners experience vehicle problems -- particularly ones that require components to be replaced -- they are less likely to repurchase or recommend their current model," said Oddes. "Automakers can improve upon customer loyalty by working closely with their component suppliers to monitor quality, since failure of a component ultimately reflects upon the quality of the vehicle brand in the minds of consumers."