A Big Recall For Chrysler, A Black Eye For Detroit (GM)(F)

Chrysler is recalling over 575,000 vehicles. According to Reuters "long-term wear on the gear shift assembly could cause them to shift out of park without the key in the ignition."

The move does no good for Chrysler’s reputation and will certainly cost it money. Last week the company said it would lose $1.6 billion in 2007.

But the announcement is also very bad news for GM (GM) and Ford (F). Both companies are having their turnarounds derailed by a slowing US car market. They do not need a spreading perception that "made in Detroit" means low quality. The US car companies have been hoping that a reputation for poor workmanship is behind them

A new study from JP Power and Associates shows that Toyota (TM) still leads all car brands in customer loyalty. CNN Money writes that the Japanese company "does a better job than any car company in America of keeping its customers coming back." Almost 68% of those who previously owned a Toyota bought one again.

In the survey, GM finished second with a retention rate of 65% and Ford was fifth with 54%.

Trying to calculate what it costs to replace a car customer is probably impossible, but the figure must stretch into the hundreds of millions of dollars. A person who owns a $25,000 vehicle and moves to another manufacturer for his next purchase has to be replaced or sales and marketshare keep falling. Of course, that has been happening to all three US car companies for years.

Chrysler has not done itself any favors, but it has also undermined the reputation of the US car.

Douglas A. McIntyre