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Domestics gaining ground on quality, Toyota rating crushed

By Claes Bell, CFA · Bankrate.com
Tuesday, June 22, 2010
Posted: 9 am ET

Last week product research firm J.D. Power released some surprising news: Not only did the initial quality of U.S. cars increase less than the usual 3 percent, but the lackluster performance overall was attributed to Japanese automakers, particularly Toyota.

Toyota Yaris crushed by a boulder

A Toyota Yaris crushed by a boulder. Photo courtesy: The Daily Mirror.

J.D. Power uses a simple formula to measure a car's initial quality -- it divides the number of problems owners have with their new cars by 100, creating a metric called PP100, or problems per 100. For the first time since J.D. Power began the survey in 1987, domestic vehicles overtook foreign automakers as a group.

Ford had a new first, too -- for the first time, it made the survey's top 5, along with the likes of Porsche and Lexus, with 93 pp100. Here's what David Sargent, vice president of automotive research for the firm, had to say about domestic automakers' progress in a recent press release:

"Domestic automakers have made impressive strides in steadily improving upon initial quality, particularly since 2007," said David Sargent, vice president of automotive research at J.D. Power and Associates. "This may mark a key turning point for U.S. brands as they try to win the battle against negative perceptions of their quality. However, there is still a long road ahead, and domestic manufacturers need to prove that they can consistently produce higher quality vehicles than import brands. In addition, domestics need to focus their efforts on convincing consumers -- particularly younger buyers -- that the quality of domestic brands rivals, if not surpasses, that of imports."

Meanwhile, Toyota dropped from sixth place last year all the way down to twenty-first place, with a PP100 of 117. Ouch. Part of me thinks this will be good for Toyota. From the sound of some the testimony that came out during the unintended acceleration hearings in Congress, in latter years, Toyota became more focused on preserving the appearance of quality than actually achieving it. Maybe a little tough love from J.D. Power is what they need.

Despite the less-than usual improvement in overall quality of the auto industry's products, these results are good news for U.S. consumers. Losing ground in quality studies like this will push foreign automakers to improve their quality. Higher perceived quality allows automakers to charge more for the same car; foreign car companies won't cede that privilege to U.S. automakers without a fight. That type of fight is a good one for consumers; when automakers fight over who makes the most trouble-free autos, consumers win.

And I think Sargent is right in saying that actually producing quality cars is the "easy" part; convincing customers it's true may be even harder. It's amazing to me that brand perception has such a huge impact on their satisfaction with a car. I mean, it's possible that Toyota really is producing cars that are 20 percent more flawed than they were last year, but my hunch is that Toyota's quality has been declining for years, owners are just paying closer attention now.

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1 Comment
Michael
June 22, 2010 at 10:34 am

The JD Power results are a bunch of baloney. The problem is not the claim that domestic cars are doing well - which they are - but that an automaker can apparently fall so drastically in a single year.

Have Toyota's vehicles really gone from far above to far below the industry average in a single year? No! They are all the same cars as last year, with the same features and the same build quality. Would an incremental improvement among other manufacturers be sufficient to explain such a result? No!

So what has happened to Toyota? They have faced bad press and numerous recalls. But the fact that these can so drastically affect a survey that is supposed to measure "initial quality" prove that the survey is really not measuring initial quality at all.