Considering quality: when it comes to quality, parity with segment leaders doesn't cut it.

In looking around for some information about quality for this month's issue, I chanced upon an analysis produced by the Power Information Network (PIN), which is a division of J.D. Power and Associates (www.jdpower.com). It is data showing the number of days it takes vehicle models to turn. As anyone familiar with the notion of lean operations and just-in-time inventory knows, the more turns the better. According to the PIN info, the models that took the fewest days to turn in 2006 were the Toyota Prius and the Honda Fit. Eight days. They were followed closely by the Nissan Versa, at nine days, and the Toyota Yaris at 10. Rounding out the "top five" are the Saturn Sky, Honda Civic, Toyota FJ Cruiser, and Volvo C70, all at 12 days. Seems to be a pattern here. But a pattern somewhat deeper than I had initially discerned, one that was made clear when I talked with PIN's Tom Libby, senior director, Industry Analysis, about it.

First up, speaking to the issue of "perceived higher quality," he said, "Toyota and Honda are benefiting greatly from an image of superior reliability and quality." Arguably, when it comes to a vehicle, reliability is quality--a car that doesn't start, no matter how good the fit and finish, no matter how satisfying the "thunk" when the door is closed, is not going to be perceived as a "quality" vehicle. Libby pointed out that when one looks at the results from the J.D. Power Initial Quality Study (IQS), which measures how people feel about their cars and trucks after 90 days of ownership, Toyota and Honda certainly do well--with Toyota fourth on the 2006 list and Honda scoring the 6th position--but there are certainly others in the mix (e.g., Porsche is at the top of the rankings; Hyundai is in third place, and Jaguar comes in fifth--and in case you're wondering, the number two spot is held by Lexus). He suggested that because the IQS numbers are so close, many people are considering the results of the J.D. Power Vehicle Dependability Study (VDS), which measures the problems of the original owners of three-year-old vehicles. So, for the 2006 VDS, 2003 model year vehicles are measured. At the top of the nameplate list--the 12th year running--is Lexus. In terms of the other nameplates, Mercury is second, Buick third, Cadillac fourth, Toyota fifth, Acura sixth, and Honda seventh. If you drill down to the car and truck segments, Lexus leads in four segments, Toyota four, and Honda three. Acura, Buick, Cadillac, Chevrolet, Ford, Mazda, Mercury, and GMC each lead in one vehicle segment. So assuming validity for the IQS and the VDS, it would seem that the quality of Toyota and Honda products is both perceived and real. What's important about this in context of the days-to-turn metric is that people are acknowledging quality with their cash.

The pattern that Libby pointed out to me that I didn't initially realize is that the vehicles turning faster are vehicles that in some ways are timely and/or unique. For example, the Fit and Yaris, he noted, came out in the Spring of 2006, when gas prices began their upward climb. Here were two vehicles that stood out: fresh and efficient. The Versa, which came later, also benefits from this. "Prius is benefiting from being the leader in hybrids," he said, and pointed out that the FJ Cruiser is doing well because it is a "unique product" that essentially defines the category: "retro SUV." Which is all very good and well for Toyota and Honda. What about the Detroit Three? "The perceived quality of the domestics will come up after some time has passed," Libby said, but added, "I don't think anyone knows how much time." But he cautioned that the domestics must continue to work hard to keep their quality up: "If they slip, that will set back the time table for the perceived quality going up." Another point he makes is that it is necessary for the domestics to talk about their quality story when they have a good one to tell. He cites Buick, for example, which has had perennially high marks when it comes to J.D. Power studies: in the '06 VDS, for example, the top three models in the midsize car segment were the Buick Century, the Buick Regal, and the Mercury Sable. Now the downside is that none of those '03 models continue in production, but does the current Buick tagline "Beyond Precision" really telegraph a message of quality? Buick sales were down 14.7% in '06 compared with '05. Some people have argued that a precipitating factor in Ford's fall in the U.S. market goes back to the abandoning of "Quality Is Job One." I would agree. Quality matters a hell of a lot more to customers than it is given credit for. Quality cars and trucks are in garages. The others sit on lots.

[ILLUSTRATION OMITTED]

Gary S. Vasilash

[e-mail]

Gary S. Vasilash, Editor-In-Chief