GM Must Continue Incentives

December 18, 2002; The AP reported that General Motors Corp. needs to stick with aggressive incentives and marketing to overcome consumer perceptions that the automaker's quality still lags rivals, GM's top market researcher said.

Paul Ballew called the automaker's long-time reputation for building low grade products a "legacy cost" that has not been completely overcome, despite improvements in recent years.

"We are paying for sins of the past," Ballew told The Detroit News for a Tuesday story.

Since the Sept. 11 terrorist attacks, and in response to a sluggish economy and uneasy consumer confidence, GM has unleashed a wave of incentives to spark sales. Other automakers followed with similar deals.

But recent studies show GM continues to be held back by consumer concerns about long-term quality and reliability, Ballew said.

In a May 2001 study commissioned by GM, 55 percent of those who avoid the automaker's vehicles said they did so because of concerns about reliability or durability, while 52 percent said they had concerns over the quality of workmanship.

But while consumer perceptions may be lagging, GM is gaining among recent customers. GM was third only to Toyota Motor Corp. and Honda Motor Co. in the latest initial quality study by J.D. Power and Associates.

The study measured complaints on 2002 models during the first 90 days of ownership.

"Reputation and image can take many years to turn around. This legacy GM is facing will be around for a while," said Brian Walters, director of product research at J.D. Power.

Between 1998 and 2002, GM improved initial quality 30 percent compared with an industry-wide average gain of 24 percent, Walters said. Toyota improved 31 percent, DaimlerChrysler by 27 percent, Honda by 24 percent and Ford by 13 percent during the four-year period.

Despite GM's quality strides, the perception of quality for its auto brands among those who say they would not consider one of the automakers products lagged behind actual quality, according to surveys by a national market research company.

The research by Allison-Fisher International LLC showed actual and perceived quality were about even for cars built by Ford Motor Co. and DaimlerChrysler AG's Chrysler Group, while perceived quality for Volkswagen AG cars was more that double the German automaker's showing in the J.D. Power study.

"GM has a gap that no other manufacturers face," Ballew said.

He estimated that when the year ends, GM will report about a 0.2 percent increase in market share, which would be the first time since 1976 the automaker would record back-to-back years of market share gains.