Do good auto quality scores produce sales and profits?

By: Mark Phelan/Detroit Free Press

Should you care if a new Chevrolet is less than 1% more likely to have a problem than a new Toyota? If a new Honda is 2.8% more likely to have a problem than either?

Some people who follow the auto industry carefully found themselves asking those questions recently after J.D. Power revealed the latest edition of its closely watched Initial Quality Study of new cars.

“The margin from the best cars to average and below average has diminished dramatically,” senior analyst Michelle Krebs said.

It’s not like the 1980s, when vehicles with atrocious dependability and reliability were as common as oil leaks. J.D. Power’s surveys became industry benchmarks then, but are they relevant today?

“You’re talking about a fraction of a defect per car,” said John McElroy, host of the TV show “Autoline This Week.”

Automakers follow J.D. Power’s findings closely, but do quality scores translate to sales or profits? McElroy pointed out that Ford’s sales, market share and profits rose in recent years while the company’s quality ratings tanked because of complaints about touch screen controls and new transmissions.

Despite that, automakers await Power’s reports with anticipation and dread. CEOs clear their schedules for the briefings. Executives and engineers pore over Power’s data on what customers like and why. They seek the consultant’s advice on vehicles they’re developing.

“Virtually every automaker subscribes” to the incredibly detailed reports, said Dave Sargent, vice president of J.D. Power’s global automotive practice. The 2014 report was based on 86,000 customer responses. It gave automakers a stunning 6,000 data points on each vehicle line — all models of Ford Fusion, for instance — they build.

“It’s the study automakers get most anxious about,” Sargent said. “All the evidence says it matters.” Some automakers base executives’ bonuses and promotions on the results.

Over the years, the Initial Quality Study (IQS) has evolved from a simple catalog of things that broke and cars that wouldn’t start to an evaluation of how new features work.

About two-thirds of the problems in this year’s IQS are what Power calls design problems — anything from poor voice recognition to rough-shifting transmissions and bad fuel economy. Power is reworking its long-term dependability study of three-year-old cars to reflect the same factors.

“These are things the consumer cares about,” Sargent said. Vehicles “breaking down is not the differentiator anymore. Controls, voice recognition, navigation systems and using the phone are the things that either please customers or drive them nuts.”

But, as GM’s ignition crisis shows, old-fashioned mechanical failures still happen, and they matter. None of the independent quality watchdogs — not IQS, not Consumer Reports, nobody — uncovered that time bomb. Consumers should use IQS scores when they look for a new vehicle, but remember the level of detail that might reveal a specific problem is reserved for Power’s paying customers, the automakers.

In IQS’ early years, it wasn’t unusual to hear executives and workers from the Detroit Three complain that Power favored Japanese brands unfairly. The shoe’s on the other foot since domestic and South Korean brands caught, and often surpassed, the former leaders.

Despite occasional complaints, automakers’ behavior shows they take IQS very seriously.

“All the companies’ leadership wants is the truth,” Sargent said.

If there’s one figure to watch year in and year out, it’s probably the industry average number of problems per vehicle. Brands above it generally do well in other rankings. Brands below it struggle unless they have some unique appeal. Jeep and Land Rover, for instance, never fare well in IQS, but their styling, history and rugged capability help them overcome that handicap.

The billion-dollar question is how they’d do if they combined that appeal with top quality ratings. Automakers want the answer. That’s why they subscribe to IQS and make engineering and design decisions based on it.

Published by CityFella

Moved to the Big Tomata in the nineties from San Francisco. No Suburbs for me with its single colored houses and lawns and the excitement of pulling out my trash can once a week. I'm a CityFella , a part time New Yorker. I'm happiest in the Center City where people the streets and people are alive. I'm still waiting to buy a 34th floor condo somewhere downtown/Midtown with a nightclub. "Hurry I'm old" My politics are somewhere in the middle with a needle that constantly moves. I'm too liberal to be a Republican and too conservative to be a Democrat. Everything interests me . I've come to love Sacratomato, Its a nice town in cheap sensible shoes .

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