Chrysler Vows To Become Detroit Quality Leader

AUBURN HILLS, Mich., March 5 Reuters reported that Chrysler set aside more than $1 billion last year to address quality concerns, including recalls on millions of vehicles, just as it began a painful cost-cutting drive to return to profitability.

But executives vow that the quality of Chryslers, Dodges and Jeeps rolling out of factories today nearly matches that of major Japanese competitors, and have set a goal of pulling away from their Detroit competitors on quality.

The $1 billion was for ``the sins of the past,'' said Don Dees, Chrysler's vice president for quality, in an interview with Reuters. ``We still have way too many campaigns (recalls) right now, but most of our campaigns in '02 are quality rather than safety campaigns. We're trying to do the right thing for the customer.''

Chrysler spokesmen said on Tuesday the $1 billion figure included safety recalls, customer complaint issues and warranty costs, including the cost of offering a 7-year/100,000 mile (160,930 km) powertrain guarantee on new models.

Chrysler has pledged to improve quality many times before, sometimes with mixed results. But the world's fifth-largest automaker has to emphasize quality once again to save money, cut losses and compete for buyers in a U.S. market flooded with high-quality vehicles.

DaimlerChrysler announced in February that its corporate warranty reserves had been increased last year by 1.5 billion euros, but declined to specify how much of that contribution had come from Chrysler. Some analysts speculated the increase prevented Chrysler from posting an operating profit in the fourth quarter.

On industry surveys of quality problems that crop up while the car is new, Chrysler has made some strides. On the last J.D. Power survey, Chrysler's passenger cars ranked slightly better than those of Honda Motor Co. Ltd., and beat offerings from General Motors Corp. and Ford Motor Co. Several Chrysler and Dodge models also score high on surveys by Consumer Reports magazine.

Dees said Chrysler had cut both its warranty costs and the number of problems in half between 1996 and 2001, and wanted ``double-digit'' annual improvements going forward. He said the company's other goals included matching Toyota Motor Corp.'s industry-leading quality levels, and have all its models rank in the top quarter of their segment for quality. Last year, only 38 percent did.

``We are improving faster than the industry and faster than our major competitors,'' he said. ``We are continuing to improve, and we're trying to pull away from the Big Three.''

COMING AROUND AGAIN

Quality has been a battle at Chrysler for years, and one the automaker hasn't always won. In the 1950s and '60s, Chrysler cars earned a reputation as high on style and low on reliability. In 1986, then-chairman Lee Iacocca was touting the quality of the company's K-cars in TV ads.

His successor, Bob Eaton, along with then-CEO Bob Lutz, made improving quality a top priority. Six years ago, Chrysler's marketers were complaining that the company's quality was much better than what customers thought.

But over the past few years, Chrysler has been forced to recall millions of vehicles, many made in the Eaton-Lutz era. Chrysler actually cut the volume of its recalls in 2001, calling back roughly 2 million vehicles after two years where the total was more than double that, according to U.S. National Highway Traffic Safety Administration records.

But it has already beat that number this year, recalling 2.3 million vehicles so far -- the largest chunk coming from a transmission fix for 1.6 million 1993-1998 model Jeep Grand Cherokees. And NHTSA still has an engineering analysis pending of a suspected wiring defect in 2.8 million minivans.

Worries about Chrysler's quality still carry weight with many buyers. According to J.D. Power and Associates research, about 20 percent of buyers reject Chrysler vehicles for reliability concerns, with 25 percent rejecting Dodge and Jeep vehicles.

``A relatively higher percentage of Chrysler shoppers, compared to other (automakers') shoppers say this vehicle is great, it meets my needs, but they have concerns over the long-term reliability,'' said Chris Denove, a partner at J.D. Power.

RED X AND HARDY PERENNIALS

Dees said the company was splitting its quality efforts into three areas: design, manufacturing and service.

As part of a revamping in its vehicle design process, Chrysler adopted Mercedes' ``quality gates'' system, which requires vehicles to pass periodic quality checks as they're designed. Chrysler also plans to pare the variety of parts it uses -- cutting fuel pumps from 10 to 3, for example -- which should lead to fewer problems, Dees said.

In manufacturing, Chrysler has a program similar to those at GM and Ford, where about 230 workers are assigned to root out quality problems. Chrysler's approach uses a theory known as ``red X,'' which holds that most quality problems have one major culprit. Dees said the company was using the program on ``hardy perennials'' first -- problems that keep cropping up year after year.

``It's really about trying to identify the issues you've got, where can you get your biggest bang for the buck in improving your quality,'' Dees said.

The company also has software to model an assembly line, complete with vehicle parts and even workers, with an accuracy up to 0.1 millimeter. The program is designed to predict trouble spots before the assembly line is built, and can cut development time by as much as a year.

Dees said Chrysler was convinced it was improving, but faced a tough time with consumers. He said internal surveys showed buyers lumped Chrysler, GM and Ford together on quality, while giving Japanese competitors and Mercedes far higher marks.

``I'm the product guy and I know the product's there and its getting better and better and better, but we've got to get the market to believe us,'' he said.

Shares of DaimlerChrysler closed down 55 cents, or 1.26 percent at $43.15 a share on Tuesday on the New York Stock Exchange