Car Quality Drives Out Of Detroit (GM)(F)(HMC)(TM)

The quality of American cars was supposed to be getting better. Perhaps that was an illusion.

Part of the reason that investors thought GM (GM) and Ford (F) could come back was that their vehicles were as well built as their Japanese and European counterparts.

The mirage of US car quality faded a bit with a new data from the University of Michigan’s American Customer Satisfaction Index. The survey found that Lexus and BMW topped the list in customer satisfaction. They were followed by Toyota (TM) and Honda (HMC).

Most Ford and GM products dropped down the list and Chrysler was at the bottom.

The American car companies are scrambling to make smaller, more fuel-efficient vehicles which will put them in direct competition with the Japanese. Detroit may not be able to win the battle on a quality basis. That means the US firms are left with the chance to pick up market share only through offering lower prices.

GM recently announced incentives across almost all of its brands. The margins on those cars will certainly drop. That should tend to increase the red ink at the company’s North American operation, the segment of the company that it has to turn around. GM is undermining its own strategy.

The haplessness in Detroit is quickly turning to hopelessness. The new customer satisfaction data is only hastening that process.

Douglas A. McIntyre