Study: Incentives Hurt Perceived Value of Domestic Vehicles for Customers

DETROIT August 23, 2004; John Porretto writing for the AP reported that the cash rebates and financing deals that Detroit's Big Three automakers have used to drive business in recent years are diminishing the value of their vehicles in the eyes of consumers, a new quarterly survey of customer satisfaction indicates.

The latest American Customer Satisfaction Index, compiled by the University of Michigan, shows that satisfaction among owners of domestic brands continues to lag that of Japanese and European companies, despite significant quality improvements in the past few years by the Big Three.

The new survey, released Tuesday, is based on telephone interviews with roughly 6,000 vehicle owners in the April-June period, ACSI official said.

"Major recalls notwithstanding, the Big Three are basically holding their own with foreign automakers when it comes to quality and reliability," said Claes Fornell, a business professor at the Ann Arbor, Mich. university who oversees the index. "Where they fall short is on value for money."

The primary culprit, Fornell said, is incentives, which started in earnest soon after the 2001 terrorist attacks and continue to be an industry hallmark -- plus a drain on automaker profits.

In July, the average outlay per vehicle from General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group was $4,088, up from $4,000 a year earlier, according to Autodata Corp. Japanese automakers were offering far less last month -- $1,498 per vehicle on average -- as were the European brands -- $2,783.

"What customers are perceiving is they get more value for their money from the Japanese," Fornell said. "Once you resort to that type of promotion, it's difficult to get out of it."

At Ford, spokesman Dave Reuter said the company hopes the upcoming introduction of several new vehicles, such as the next-generation Ford Mustang and Five Hundred flagship sedan, will allow it to sell with lower incentives.

"Nothing is more important to a customer's perception of a product than how well it holds its value," Reuter said. "With the many new products we're introducing this year, we expect to see continued improvements in residual value and customer satisfaction."

The findings in the latest index were not all bad for domestic automakers.

In terms of overall customer satisfaction, Ford's Lincoln and Mercury brands (paired together) ranked highest among the 20-plus nameplates in the survey. On a rating scale of 0 to 100, Lincoln/Mercury scored 86 in the survey, 7 points higher than the industry average and a 6.2 percent improvement from 2003.

Lincoln/Mercury was followed by Honda Motor Co. (85); BMW and Toyota Motor Corp. (84 apiece); and GM's Buick and Cadillac nameplates (83 each).

Among those scoring below the average of 79: Mazda (78), DaimlerChrysler's Jeep and GM's Chevrolet (77), Ford (76) and Dodge (75).

The index was established in 1994 as an economic indicator for measuring consumer satisfaction. Tens of thousands of consumers are polled each year for the study, which tracks attitudes toward the products and services of about 200 companies in 40 industries.

The automotive industry survey takes place in the second quarter each year. The latest index also provides information on personal computers, appliances and Internet search engines.

American Customer Satisfaction Index: www.theacsi.org