Tuesday, August 16, 2005

Survey: Incentives are short-term fix

Quality counts most in U-M consumer satisfaction index that ranks automakers.

By Dee-Ann Durbin / Associated Press

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A survey of U.S. vehicle owners released today indicates that while this summer's employee discounts may give automakers short-term sales gains, improving quality is more important in the long run.

Toyota Motor Corp. got the top score of 87 out of 100 in the University of Michigan's American Customer Satisfaction Index, which rates automakers based on owners' satisfaction. Owners were asked about their overall satisfaction and their satisfaction level compared to their expectations. They also were asked to rate how their vehicle compares to their ideal vehicle.

Honda Motor Co., BMW AG and General Motors Corp.'s Cadillac and Buick brands rounded out the top five performers. Ford Motor Co.'s Ford brand got the lowest score of 75.

Half of the brands improved their scores from last year, including Hyundai Motor Co. and GM's Pontiac brand. One-quarter stayed the same, while one-quarter saw their scores drop, including Nissan Motor Co. and Ford's Lincoln and Mercury brands.

University of Michigan professor Claes Fornell, who compiles the index, said Hyundai's rapid climb shows that focusing on quality can significantly improve satisfaction ratings. Hyundai was at the bottom of the index with a record low score of 68 in 1999, Fornell said. Quality and styling improvements and the introduction of the industry's first 10-year, 10,00-mile warranty catapulted Hyundai to No. 6 in this year's ratings with a score of 84.

"That's something to hold up for Detroit, that this can be done. It's possible," Fornell said. "You don't have to give away cars."

Fornell said the Big Three automakers should spend less on incentives and more on quality improvements. U.S. automakers spent an average of $4,239 per vehicle on incentives in July, compared with $2,372 for European brands and $1,619 for Asian brands, Autodata Corp. said

Since July, GM, Ford and DaimlerChrysler AG's Chrysler Group have been offering employee prices for all customers on most 2005 vehicles. The incentives have a positive effect on customer satisfaction, but it's not large or sustainable, Fornell said. Fornell said Toyota was raising its prices this summer but still got the highest satisfaction score in the survey.