The Myth Of American Car Quality (F)(TM)(HMC)

JD Power’s Sales Satisfaction Index Study for 2009 has been published. The research firm questioned 48,000 people. American cars did well as they have for several years in the Powers Initial Quality Survey, its second annual study, and a number of other polls of what consumers think about US brands compared with brands from Asia and Europe.

Among the 38 brands in the Sales Satisfaction questionnaire, Jaguar placed first among luxury cars followed by Cadillac, Lexus, and Mercedes. Among “mass market” autos, Ford’s (NYSE:F) Mercury brand was on top just ahead of Buick, Pontiac, and Chevrolet.

American car company executives trumpet the results of these studies as proof that domestic auto have closed the quality gap with their rivals and continue to make progress in many cases passing the Japanese  for a reputation in quality among consumers.

What the surveys about new cars don’t says is that it is hard for consumers to hate a new car which they have recently purchased unless is a complete lemon from the start. People looks at cars and often test drive several models before making a choice. A nasty salesman may undermine the experience of buying a new car, but consumers who have their brand new vehicles almost always drive them off the lot in a state of near-euphoria.

The perception of a car when it is sold after several years of ownership is quite another matter and the process is much more bloodless and calculating than dealing with a new car. Used cars are often bought for transportation or by poor souls who cannot buy a new one. It says a great deal about what a car is really worth when the price of a used vehicle is compared to the same model when it was new.

The Kelley Blue Book Best Resale Value Awards “recognize automakers’ outstanding achievements in producing vehicles that best retain their value.” The vehicles were grouped into 16 categories including various types of SUVs, sedans, coupes, performance cars, and trucks. Only three American cars topped their categories for resale value. Toyota (NYSE:TM) and its Lexus brand took six spots. Honda (NYSE:HMC) was the leader in three. BMW, Audi, and Mini also did well.

Once the new car smell has been washed away, consumers don’t think that American cars will hold their value very well. The romance of the first two or three trips in a new car gives way to the realization that when that prized possession ages the owner will find out the real value of his purchase.  Then everyone suddenly wants to own a Toyota.

Douglas A. McIntyre