Bloomberg News

GM Lands Most Models at Top of J.D. Power Quality Survey

June 18, 2014

Chevrolet Malibu

In the J.D. Power & Associates’ annual Initial Quality Study, General Motors Co.’s Chevy Malibu placed first for initial quality in the mid-size car category. Photographer: Jonathan Alcorn/Bloomberg

General Motors Co. (GM:US), dogged by a widening recall crisis, still managed to place the most models atop one of the auto industry’s most closely watched quality measures, with its Chevrolet Malibu besting the Toyota Camry.

GM won six model segments, the most of any automaker, in J.D. Power & Associates’ annual Initial Quality Study released today. Three of GM’s four U.S. brands ranked above industry-average quality and its top-selling Chevy lineup placed sixth overall, trailing only Hyundai and Toyota among mainstream brands. South Korea’s Hyundai Motor Co. (005380) and its Kia Motors Corp. (000270) affiliate had five models win segments.

GM remained a leader in the study for the second consecutive year, even as Toyota Motor Corp. (7203) reasserted itself in the rankings it dominated for most of the 28 years J.D. Power has conducted the consumer research. Toyota’s namesake brand ranked fifth in quality in the survey, up from sixth last year, while its Lexus luxury line ranked third, behind Porsche and Jaguar.

“The perception right now is that GM must have a lot of quality problems because of all these recalls,” David Sargent, J.D. Power vice president of global vehicle research, said in a telephone interview. “The truth is, they’re still one of the best in the industry.”

The survey reinforces the stock market’s view that GM’s recalls are more about the company’s past than its future. While three analysts tracked by Bloomberg recommend selling the stock, 17 say buy. The shares have gained 2.1 percent from Feb. 12, the day before the small-car recalls began, through today. The stock fell less than 1 percent to $36.30 at the close in New York.

‘Great News’

“The results are great news for our brands, especially Chevrolet,” Jim Cain, a spokesman for Detroit-based GM, said in an e-mail. “But what matters most to customers is consistency. We did well last year. We did well this year. And not a day goes by that we don’t try to improve for the future.”

Chief Executive Officer Mary Barra returned to Capitol Hill today after a hearing in April to answer more questions about why it took GM more than a decade to recall 2.59 million small cars with defective ignition switches that have been linked to 13 deaths. With a new focus on safety and quality, GM has recalled a record 20 million vehicles in North America for various fixes this year.

‘Massive Recall’

“Recalls are not necessarily a good measure of quality,” Sargent said. “Even with a massive recall, the proportion of people who actually experience a problem is typically tiny.”

The annual survey by Westlake Village, California-based J.D. Power tracks the number of consumer complaints per 100 vehicles in the first 90 days of new vehicle ownership.

In the report, GM’s Chevy Malibu placed first for initial quality in the mid-size car category. The Hyundai Sonata was second and the Toyota Camry, the top-selling car in America, was third. The Honda Accord finished fifth and the Ford Fusion was seventh out of 13 models in the category, Sargent said.

GM took top honors in three sport-utility vehicle categories. It had the top-ranked compact SUV with the GMC Terrain, while the Chevy Equinox was second in that segment, followed by Toyota’s FJ Cruiser. GM’s Buick Encore was the top-ranked small SUV in a tie with the Kia Sportage and Nissan Motor Co.’s Juke. GM’s Chevy Suburban and GMC Yukon tied for top-ranked large SUV.

Touch Screens

GM’s Chevrolet Silverado HD won the large heavy-duty pickup segment, ahead of the automaker’s GMC Sierra HD.

The company’s strong showing for a second consecutive year is proof that “this is, in fact, a different GM,” Michelle Krebs, an analyst for researcher AutoTrader.com, said in an interview. “It’s at least evidence of it on the product side of things.”

Barra faced intensive questioning from a House subcommittee today over the slow recall of defective ignition switches, as lawmakers cut off her answers and asked whether she can truly change the company’s culture. An internal report this month showed engineers knew about the flaw for more than 10 years, though corrective action was stymied by a pattern of incompetence and neglect.

Ford Motor Co. (F:US) also moved up the rankings after plunging in recent years as consumers complained its dashboard touch screens were too complicated and unreliable. The Ford brand climbed up to the industry average to tie for 11th, from 21st last year. Ford’s Lincoln line rose to eighth, from 12th last year.

“Ford is in a better position than most because they’ve been through the fire and they’ve come out the other side,” Sargent said. “A lot of their improvement was due to the entertainment systems getting much better.”

‘Not Satisfied’

Ford won three vehicle categories. Its F-150 pickup won the large light-duty pickup segment, ahead of the Toyota Tundra and Ram 1500 LD. The Ford Edge was the highest ranked mid-sized SUV, with the Hyundai Santa Fe and Nissan Murano in a tie for second. Ford’s Lincoln MKX model was the top-ranked mid-sized premium SUV, ahead of the Porsche Cayenne and Nissan’s Infiniti QX70.

“We are certainly not satisfied with where we are, that just got us to average,” Raj Nair, Ford’s product development chief, said in an interview. “We’re not going to be satisfied until we are best in class.”

Nair said Ford has improved its MyFord Touch dashboard controls by eliminating software errors, making it work more intuitively and by restoring mechanical knobs and buttons for functions like audio volume and tuning. Ford also fixed glitches with its PowerShift transmission and is working to add more convenient storage spaces to its interiors.

“We were probably over-indexing on really stylish interiors,” Nair said. “In the balance of function versus form, we have restored more function.”

Technology Flaws

Technology continues to bedevil automakers and was the primary reason that industrywide quality declined 3 percent this year, J.D. Power said. The industry average was 116 problems per 100 cars, compared with 113 in 2013 and 102 in 2012. Newly introduced models also registered more flaws than vehicles that have been on the market for a longer period of time.

“It’s a double-edged sword -- consumers are demanding and expecting this new technology and then some complain when they get it,” Sargent said. “If I was cynical, I would say if you wanted to win IQS, don’t introduce any technology on your vehicles. You won’t sell any, but the three you sell will be outstanding.”

The harsh winter in the Northeast and Midwest also took a toll on vehicle quality, Sargent said. Problems per vehicle rose in those regions, while staying constant in the warmer climes of the West and South. Consumers in cold-weather areas reported more problems with heating and ventilation, as well as engines, transmissions and exteriors, J.D. Power said.

Cold Weather

“It is impossible to negate the effects of severe weather,” Sargent said. “Heating and ventilation systems have more work to do, engines and transmissions aren’t as smooth when cold, and exterior moldings and paint all take some punishment.”

Hyundai ranked as the top mainstream brand in the survey, trailing only luxury lines Porsche, owned by Volkswagen AG (VOW), Jaguar, owned by Tata Motors Ltd. (TTMT) of India, and Toyota’s Lexus. Hyundai’s corporate affiliate Kia tied with Chevrolet to rank sixth.

“They’ve got their mojo back,” Sargent said of Hyundai. “They’ve rededicated themselves to quality, having chased sales for quite a while. Once Hyundai focuses on something, they tend to be good at achieving it.”

Luxury Foray

Hyundai’s Elantra won the compact car segment, ahead of the Toyota Corolla and Honda Civic. The Hyundai Accent was the top-ranked small car, with the Mazda2 and Kia Rio second and third. Hyundai’s foray into luxury also paid off, as its upscale Genesis model was the top-ranked mid-size premium car, ahead of the Lincoln MKS in second and the three-way tie for third shared by the BMW 6 Series, Lexus GS and Mercedes-Benz CLS-Class.

Kia -- in addition to the Sportage’s win in the small SUV category -- took top honors in the large car category with the Cadenza finishing ahead of the Nissan Maxima and Toyota Avalon.

Toyota and Honda Motor Co., which once held substantial leads in J.D. Power’s quality rankings, each landed just one model at the top of the vehicle segments. Toyota’s Lexus ES was the top-ranked compact premium car, ahead of Honda’s Acura TL, Acura ILX and the BMW 4 Series. Honda’s Ridgeline took first in the mid-size pickup category, with the Nissan Frontier and Toyota Tacoma tied for second.

‘Clear Gap’

Honda’s namesake brand ranked seventh, matching its ranking last year, though it had 108 problems per 100 vehicles compared to 103 last year, J.D. Power said. Honda’s Acura luxury line fell below the industry average, ranking 16th, down from sixth last year.

“Maybe 20 years ago, there was Toyota and Honda and then everybody else,” Sargent said. “Now there’s no clear gap between Toyota and Honda and the rest. They’re amongst the best, but they’re not ahead of the pack anymore.”

Chrysler Group LLC and its parent Fiat SpA (F) landed just the Chrysler brand above the industry average, where it ranked ninth, up from 11th last year. Chrysler’s Ram truck brand climbed to 11th, matching the industry average, up from 22nd last year.

“Chrysler is generally moving in a good direction, but they’re not moving as fast as they would like,” Sargent said.

‘Teething Pains’

Chrysler landed two models at the top of vehicle segments. The Chrysler Town & Country won the minivan category, ahead of the Toyota Sienna and Dodge Grand Caravan. And Chrysler’s Dodge Challenger won the mid-size sporty car category ahead of GM’s Chevy Camaro.

Jeep, Chrysler’s hot selling SUV line, plunged to second from last to rank 22nd, down from 16th last year, which Sargent attributed to “teething pains” on the introduction of its new Cherokee model.

Chrysler’s Dodge brand, while below the industry average, moved up to 13th from 20th last year. Fiat fell to the bottom of the survey and was the only brand to average more than two problems per vehicle. Last year, Fiat was second from last.

J.D. Power’s study this year was based on responses from more than 86,000 purchasers and lessees of 2014 model-year cars, trucks and SUVs. The unit of McGraw-Hill Financial Inc. (MHFI:US) conducted its survey between February and May.

To contact the reporters on this story: Keith Naughton in Detroit at knaughton3@bloomberg.net; John Irwin in Southfield, Michigan at jirwin25@bloomberg.net

To contact the editors responsible for this story: Jamie Butters at jbutters@bloomberg.net Ben Livesey, Cecile Daurat


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