Toyota-Led Quality Gains Seen Giving Auto Industry Lift: Cars

Automakers are building vehicles with greater durability as sales rebound, giving them added power to sustain pricing and avoid the corrosive discounts that pushed the predecessors of General Motors Co. (GM) and Chrysler Group LLC into bankruptcy.

“If your quality scores are improving and demand is improving, that’s a good story for pricing,” Matthew Stover, a Boston-based analyst for Guggenheim Securities LLC, said in a phone interview. “Everybody has adopted the religion.”

Car owners reported the fewest problems with three-year-old cars and trucks in the 22 years that Westlake Village, California-based J.D. Power & Associates’ has conducted an annual dependability survey. While the biggest strides came from Toyota Motor Corp. (7203), which had three brands among the top five, the gains were widespread, encompassing 25 of 32 makes covered.

The better results may have an added benefit, drawing back into showrooms the consumers who delayed purchases for years while the U.S. recovered from the recession that shriveled sales and sent GM and Chrysler briefly into bankruptcy in 2009.

Automakers are betting that technologies such as touch screens and voice-recognition systems, plus improved fuel economy, will also draw demand for new cars even as improved durability means consumers can hang onto vehicles longer.

Value for Buyers

“When everything in the data is saying you have high- quality vehicles, that forms an environment where people want the better wheels,” Erich Merkle, Ford Motor Co. (F)’s sales analyst, said yesterday in a phone interview. “That allows you to generate a sense of value in the mind of the consumer.”

GM’s biggest stride was with its luxury make Cadillac, whose owners reported 20 percent fewer problems per 100 vehicles from last year’s study. Cadillac improved its score by making changes to the CTS, one of the brand’s best-selling models, said Terry Woychowski, the Detroit-based automaker’s vice president of global quality.

The Cadillac brand vaulted to third in the industry in J.D. Power’s study, behind Toyota’s Lexus and Porsche AG (PAH3)’s namesake. GM’s mainstream Chevrolet also improved with 13 percent fewer problems per 100 vehicles from a year earlier.

Toyota had the most models lead their respective segments for the seventh consecutive year in the dependability study, with eight finishing first in their category. Lexus topped the industry for the first time since 2008 with 86 problems per 100 vehicles. The Toyota City, Japan-based automaker’s Scion brand also reduced problems per 100 vehicles by a third, the biggest percentage improvement in this year’s survey.

Confidence Boost

“Boosting confidence among consumers, particularly with a fleet that is 10.8 years old, is another way to get them off the fence and into showrooms,” Bob Carter, Toyota’s group vice president of U.S. sales, said in an e-mail. The average age of vehicles in the U.S. in 2011 was 10.8 years, and is up almost two years from a decade earlier, according to R.L. Polk & Co.

Next year may be a different story when J.D. Power surveys buyers of 2010 models, which were among the 10 million Toyota vehicles recalled to fix defects related to unintended acceleration and that performed poorly in the market researcher’s study of new-car quality.

The industry averaged 132 problems per 100 vehicles from the 2009 model year, down from 151 in last year’s study and 155 the year before. U.S. automakers narrowed the gap of problems per 100 vehicles compared with import brands to 13 problems from 18 a year earlier, according to J.D. Power.

Ford’s vehicle owners reported 11 percent fewer problems per 100 vehicles to 124, the eighth-lowest among in the industry, and its Lincoln luxury brand placed seventh at 116. The Dearborn, Michigan-based automaker had three models rank at the top of their segment, behind only Toyota’s eight.

Chrysler ‘Starved’

The predecessors of Auburn Hills, Michigan-based Chrysler and GM filed for bankruptcy in 2009, the model year that J.D. Power studied for this year’s survey. Chrysler Group’s four brands -- Chrysler, Dodge, Jeep and Ram -- were the four worst in the study, even as Jeep problems per 100 vehicles fell by 16 percent, Dodge decreased by 11 percent and Chrysler pared 5 percent.

“They were on the verge of going into bankruptcy, the vehicles had been pretty well starved of investment for a few years, so in terms of their model lineup it was a pretty low point and that’s reflected in their scores,” David Sargent, J.D. Power’s vice president of global automotive research, said yesterday in a phone interview.

Improving Chrysler

New or refreshed models that Chrysler, now majority-owned by Fiat SpA (F), has introduced such as the Jeep Grand Cherokee and Dodge Durango sport-utility vehicles, will help improve Chrysler’s performance in the future, Sargent said.

Since Fiat took control of Chrysler, the automaker has adopted some of its Italian owner’s quality practices, said Tony Brenders, Chrysler’s director of engineering quality.

The additional testing, which at its peak is being done by 600 contract workers on two shifts, seven days a week, is catching problems before new vehicles are introduced to the market that would have otherwise required warranty work for customers, Brenders said in a Feb. 13 interview.

“We would have shipped cars to dealers that would have cost us a lot more on warranties than what running this operation has cost us,” Doug Betts, Chrysler’s senior vice president of quality, said in an interview.

To contact the reporter on this story: Craig Trudell in Southfield, Michigan, at ctrudell1@bloomberg.net.

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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