Toyota Rebounds to Pre-Recall Level in U.S. J.D. Power Auto-Quality Survey

Akio Toyoda is making good on his pledge to restore Toyota Motor Corp. (7203)’s reputation for quality.

The Japanese carmaker’s luxury Lexus line retook the top spot among all auto brands in J.D. Power & Associates’ Initial Quality Study, advancing from fourth last year, the market- research company said yesterday. Toyota’s namesake brand ranked seventh, up from 21st a year ago.

The performance matched Toyota’s results in J.D. Power’s 2009 survey, before the first recall of its vehicles for floor mats at risk of jamming accelerator pedals late that year. Toyoda, the carmaker’s president and grandson of its founder, formed a global quality committee last year to tackle defects following recalls of more than 10 million vehicles.

“It shows the true quality of Toyota without bias and that the users re-appreciated the value of Toyota after it was proven it didn’t have quality problems,” Mamoru Kato, a Nagoya, Japan- based auto analyst at Tokai Tokyo Research Center, said of the survey result. “The company has overcome the bad image created by the series of recalls.”

Toyota was the only large automaker to post a sales decline last year in the U.S., historically its most profitable market. The company’s deliveries fell 0.4 percent to 1.76 million Toyota, Lexus and Scion vehicles, contrasting with an industrywide increase of 11 percent, the first since 2005.

Photographer: Prashanth Vishwanathan/Bloomberg

Ford models had 116 problems per 100 vehicles in the J.D. Power survey, ranking it behind 12 other below-average brands. Last year, Ford ranked fifth with 93 problems per 100 vehicles. Close

Ford models had 116 problems per 100 vehicles in the J.D. Power survey, ranking it... Read More

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Photographer: Prashanth Vishwanathan/Bloomberg

Ford models had 116 problems per 100 vehicles in the J.D. Power survey, ranking it behind 12 other below-average brands. Last year, Ford ranked fifth with 93 problems per 100 vehicles.

Lexus ES, GS and LS models topped all “premium car” segments in the J.D. Power survey, which measures consumer complaints in the first 90 days of vehicle ownership.

2010 Decline ‘Unique’

Toyota rose as much as 1.7 percent in Tokyo trading, the biggest intraday gain in two weeks, and was up 1.2 percent at 3,290 yen as of 2:07 p.m., compared with a 0.9 percent advance in the benchmark Nikkei 225 Stock Average.

Toyota’s decline in the survey last year “was largely driven by consumers being concerned that they might have a problem on their vehicle and it was unique to the 2010 model year,” David Sargent, J.D. Power’s vice president for global vehicle research, said in an interview.

Following the record recalls, Toyota added 40 engineers last year in Toyota City, where the company is based, and created teams to scrutinize the designs of components. With its heightened focus on quality, Toyota also reduced the number of new development projects, according to the company.

‘Extreme Efforts’

In the U.S., Toyota hired additional engineers at its technical center in Ann Arbor, Michigan, as the facility plays a bigger role in developing models for the American market.

“Toyota has been making extreme efforts on quality,” said Edwin Merner, president of Atlantis Investment Research Corp. in Tokyo. The J.D. Power results are “very positive for Toyota,” he said.

In the 2011 survey, Toyota brand owners reported 101 problems per 100 vehicles, an improvement from 117 last year.

“The results point out that our quality really hasn’t gone away,” Mike Michels, Toyota’s vice president of U.S. external communications, said in an interview. “It was there before, and it’s there now.”

Lexus had 73 problems per 100 vehicles and had four models rank highest in their respective vehicle categories. The Lexus LS sedan had the fewest defects of any model, with 54 problems per 100 cars. Lexus factories in Canada and Japan received J.D. Power’s highest award for plant quality.

“Toyota has rebounded with its steady efforts, and having it on top of the ranking is a source of comfort for investors,” said Takashi Aoki, a Tokyo-based fund manager at Mizuho Asset Management Co., which owns Toyota stock.

Ford, Honda

Ford Motor Co. (F) fell to 23rd place in the survey from fifth last year, the result of gripes about the Dearborn, Michigan- based company’s dashboard touch-screens, while Seoul-based Hyundai Motor Co. (005380) dropped to 11th from seventh. Honda Motor Co. replaced Ford as the top mass-market brand in this year’s study, jumping to second place from sixth last year.

Honda’s highest ranking ever was helped by having seven models rated best in their vehicle categories, J.D. Power said. The previous highest ranking for Tokyo-based Honda was third in 1997, Sargent said.

“Honda benefited from having mostly vehicles that carried over from the previous model year and there were no big new- model launches,” Sargent said. “It’s unusual for any brand to win seven awards, but they’ve just done a lot of hard work.”

Vehicle Defects

Acura, Honda’s premium line, ranked third, followed by Daimler AG (DAI)’s Mercedes-Benz and Mazda Motor Corp. (7261)’s namesake brand, Power said. Porsche AG’s brand fell from first overall to sixth.

Ford models had 116 problems per 100 vehicles in the survey, ranking it behind 12 other below-average brands. Last year, Ford ranked fifth with 93 problems per 100 vehicles. The company’s Lincoln luxury models, which also have new touch-screens, fell to 17th from eighth and went from above average to below.

“Ford’s decline in the study is primarily driven by consumers reporting both usability problems and actual functionality problems with the MyFordTouch system,” Sargent said. “Some consumers are saying the system is, let’s be kind here, more complex than they would like.”

Hyundai, South Korea’s largest automaker, fell to 11th place, just below the industry average, from an above-average seventh place last year. Its affiliate, Kia Motors Corp. (000270), rose to 19th from 26th last year.

General Motors Co. (GM), which reorganized in bankruptcy in 2009, was the only U.S. automaker to have brands rank above average in this year’s survey. Detroit-based GM’s Cadillac luxury line ranked 9th, up from 13th last year, and the GMC truck brand moved up to 10th from 25th last year.

J.D. Power, a unit of McGraw Hill Cos, said its study was based on surveys of about 73,000 buyers of 2011 model-year vehicles. Participants were asked 228 questions about their first 90 days of ownership. The study was conducted between February and May this year.

To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net; Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net; Keith Naughton in Detroit at knaughton3@bloomberg.net

To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net

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