Detroit All Shook Up Over Consumers Perception Of (Lack Of) Domestic Product Quality

Reuters reported that there were more than a few gasps of surprise were heard around Detroit last month after Car and Driver magazine tested eight mid-sized sedans and rated the four American models behind the rest of the field.

It's common for new models from Nissan, Honda and Toyota to do well in such comparisons. What shocked this time was that Hyundai placed fourth -- ahead of Dodge, Chevrolet, Ford and Buick.

Unfortunately for the Big Three U.S. automakers, a growing number of American consumers share those conclusions.

For the past several years, the Big Three have blamed a rising tide of import sales on the foreign companies' better quality and lower costs, and put their focus on improving both. General Motors Corp., Ford Motor Co.and the Chrysler side of DaimlerChrysler AG have made solid gains in reducing defects and overhead costs.

Measured by total sales, American buyers still prefer home-grown vehicles. But by several other standards, foreign automakers appear to have surpassed Detroit at satisfying American tastes.

And there's a new realization in the cubicles and boardrooms of the Motor City that simply building cheaper and sturdier vehicles won't be enough. That's backed up by four major studies of satisfaction among new vehicle buyers this year, all of which found foreign automakers holding or increasing their standings over the Big Three.

Some, such as Volkswagen AG and Hyundai Motor Co. , outperformed Detroit in customer satisfaction even though the domestics offered fewer defects in many models.

Experts say one cause for the disparity could be an attention to detail and engineering in foreign vehicles -- from fold-flat rear seats in the Honda Odyssey to noise-reducing steel panels in the Toyota Camry -- that is only starting to show up in vehicles from the Big Three.

``There's something that Detroit has failed to pick up,'' said Daniel Gorrell, vice president of Strategic Vision, a California consulting firm that measures customer satisfaction. ''It's the notion of delighting consumers, something they fail to do consistently.''

Whatever the cause, such surveys suggest that once customers turn away from Detroit, they're hard to win back. And the trend is growing. This year, foreign automakers will capture over half of U.S. retail car sales, excluding the fleet sales that domestic automakers rely on for volume.

CLOSING RANKS

Unlike vehicle defects, there's no consensus about how to measure satisfaction in new vehicle owners. But the trend from this year's studies is unmistakable.

Strategic Vision conducts an annual study that tries to measure overall customer satisfaction by model, including not just quality problems but what ``delights'' a buyer.

In 1999, the top scores in 16 categories were evenly divided between American, European and Asian vehicles. This year, only four vehicles were from a U.S. company, and they were all Chryslers.

AutoPacific, a California-based auto industry research firm, also does an annual satisfaction survey. Among 20 vehicles honored for top scores in their categories this year, 12 were imports. Of its top 10 overall scores, only three were domestic models.

Another indication comes from the latest edition of the American Consumer Satisfaction Index, a quarterly survey of thousands of consumers compiled by the University of Michigan business school.

It found that among buyers of 2001 models, Japanese and European consumers were more satisfied than Big Three buyers. Among large manufacturers, Honda Motor Co. Ltd. and Toyota Motor Corp. led the way.

And J.D. Power's 2001 survey of automotive satisfaction released in October awarded Toyota and its Lexus brand top honors in seven kinds of vehicles, more than GM, Ford and Chrysler combined.

There are other indirect measures to suggest a growing American preference for foreign vehicles. Automotive Lease Guide, a California firm that forecasts used vehicle values, annually names the top value-holders in 11 categories. This year, Honda and Toyota had three, Volkswagen had two and European luxury brands held the remainder.

Raj Sundaram, the firm's vice president, said the awards reflect ``not only the ability to retain great value and that (the vehicles) are priced very, very well ... but by definition they're also much more appealing, especially to used consumers.''

QUALITY IS JOB TWO?

Detroit's auto executives have contended for years that the showing of Asian and Europeans in defect surveys accounted for much of their sales gains with U.S. buyers. Automakers have stressed ``quality'' with a passion, spending millions on various efforts to reduce defects, and U.S. companies have closed the gap in the J.D. Power quality surveys.

But building quality doesn't just mean, in the words of one Ford dealer, ``giving every screw an extra turn at the factory.'' Those same J.D. Power surveys also show the No. 1 gripe of U.S. car buyers isn't broken parts or bad paint or fuel economy. It's wind noise -- a problem created by the design of the vehicle.

Another can be found in the recall lists tracked by the National Highway Traffic Safety Administration. BMW AG often scores high in customer satisfaction, yet it has done seven recalls of its X5 sport utility vehicle since last September.

David VanAmburg, managing director of the University of Michigan survey, said recalls did not appear to hurt customer satisfaction rankings.

``It suggests, on the one hand, consumers may not like recalls, but on the other hand they may feel the company is doing due diligence to fix problems,'' he said.

Gorrell agreed, saying Ford's high-profile series of recalls in the past year had not weighed heavily on buyers' minds.

``The bigger problem at Ford that no one is picking up is them failing to achieve top of lists in various segments,'' he said, with new vehicles showing ``too mild an evolution, with too much common denominator in them.''

IN THE DRIVEWAY

Worries about bland vehicles were behind GM's hiring of former Chrysler executive Bob Lutz as a product czar, with wide-ranging powers to change the company's lineup. Since his hiring, Lutz has pointed to Honda, Toyota, Audi and VW as companies doing well in the market, and offered a few suggestions why.

``A vehicle with a single-minded focus on 'absence of things-gone-wrong' will fail miserably if it is dull, unexciting, a dog to drive, and ugly,'' Lutz said in a GM memo leaked to reporters. ``Even if it's the best ever found by J.D. Power!''

Ford's ``back to basics'' mantra, part of an expected restructuring to be announced in January, appears ready to give a renewed prominence to vehicle design. And Chrysler has also revamped its product-development process in recent months to re-create the Lutz effect.

``It's got to be a package that is really thrilling, that the customer loves to buy,'' said Wolfgang Bernhard, Chrysler's chief operating officer. ``He puts it not in his garage, but in his driveway and the neighbors see it. That's what we need, and we have some of those.''