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Japanese Cars Hold Power, but Domestics Gain in Study

Toyota's Lexus again tops durability report. U.S. brands beat most European makes.

July 09, 2003|John O'Dell | Times Staff Writer

Not so long ago, it could be downright embarrassing to drive an American car.

People who owned Fords heard the taunts that what the name really stood for was "Fix or Repair Daily." Those offerings from Detroit, along with Chevrolets, Dodges and others, just didn't age as well as imports.

Now the domestics are catching up.

Although Japan's big three automakers captured top honors Tuesday in Westlake Village-based J.D. Power & Associates' latest vehicle durability report, Ford Motor Co. and General Motors Corp. each had two brands that made the top 10. In fact, GM's Buick came in third.

"The proof that domestics are doing better is in our warranty department," said Bob Tuttle, managing partner of Tuttle-Click Automotive Group, whose dealerships in Orange County and Arizona sell domestic and Asian brands.

"Income from warranty repairs in our Chrysler and Ford stores is down about 50% from the heights in the 1990s. They definitely are building them better."

Still, the Japanese ruled once again in the Power report.

For the ninth consecutive year, the Lexus luxury brand, imported by Toyota Motor Corp.'s Torrance-based U.S. sales arm, was deemed the most reliable. Infiniti from Nissan Motor Co., whose U.S. operations are in Gardena, finished second. Honda Motor Corp.'s Acura, imported by the company's U.S. unit, also in Torrance, ranked fifth. The Toyota brand was sixth, and Honda was ninth.

What's more, various Toyota and Lexus models were the highest ranked for reliability in nine out of 17 vehicle categories, ranging from compacts to full-size vans.

Power surveyed 55,000 car owners in the U.S. about 3-year-old vehicles. Results were compiled based on the number of complaints per 100 vehicles.

Lexus registered 163 complaints, for example, and Buick 193. South Korea's Kia Motors Corp. -- whose U.S. headquarters is in Irvine -- had 509, putting it last. Next to last: Land Rover, with 441.

A few years ago, the Tuttle-Click Chrysler and Ford dealerships in Irvine used to buy used Toyotas and other import brands in the wholesale market and resell them to keep revenue up, said George Saad, general manager.

Now 75% to 80% of the dealerships' used-car sales are Fords and Chryslers.

"We've really overcome the quality and reliability issue," Saad said.

Having a reputation for durability can help keep prices high and reduce the need for carmakers to spend wildly on incentives. Despite their rising in the Power rankings, GM and Ford on Tuesday extended their hefty cash rebates and interest-free loans on most vehicles to spur sales. Last month, GM averaged $3,934 per vehicle in incentives, whereas Ford's average was $3,492.

By comparison, Toyota, Honda and Nissan offer few incentives and low-interest loans, while continuing to nibble away at market share. And a new Honda, for instance, typically commands a $1,500 premium over comparable models from other manufacturers because consumers believe Hondas are so dependable.

A reputation for durability drives used-car sales and pricing. Again, Japanese automakers have the edge: Three-year-old Hondas fetch a premium of $1,800, said Joe Ivers, executive director of the quality and customer satisfaction practice at Power.

One quarter of new cars and trucks are leased, and most of them find their way to used-car lots in 30 months, said Paul Taylor, chief economist for the National Automobile Dealers Assn. And used-cars sales are where the big profits are, he noted: The net profit per new vehicle averaged $200 over the last three years whereas the average for used cars was $300.

Although the gap between Japanese and U.S. brands has narrowed in terms of customer satisfaction, Japanese companies continue to win in longer-term durability. In terms of complaints per 100 vehicles, Japanese brands rated 16% above the industry average in the Power report, whereas U.S. cars were 3% below, said Brian Walters, senior director of product research at Power.

In Tuesday's report, Ford, GM and Chrysler collectively scored far better than European imports. Volvo, Volkswagen and Land Rover were in the bottom 10. "It's a combination of the others getting better, and the Europeans either not improving or actually getting worse in some cases," Walters said.

DaimlerChrysler's Mercedes-Benz, for instance, was the top-rated brand in the first durability study in 1990, which examined 1985 models. This year, with Power looking at 2000 models, Mercedes tied for 26th place.

The big problem, analysts say, seems to be with the German carmaker's Alabama-built sport utility vehicles and its lowest-price European-built C-Class cars.

"Mercedes shows how it takes a long time for perception to catch up with reality," said Dan Gorrell, vice president of San Diego-based Strategic Vision, an automotive marketing research firm. "They are still regarded by most people in this country as a very high-quality brand."

Meanwhile, domestic automakers have spent billions improving production processes and engineering.

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