Industry Report Part 1: New J.D. Power Initial Quality Survey Puts Hyundai Above Toyota

Lexus is Still Number One Overall with Honda the Top Entry Nameplate

Which automaker nameplates are the winners and losers in J.D. Powers and Associates 2004 Initial Quality Survey (IQS)? In what might be the biggest shakeup since the Japanese took away quality bragging rights from the Germans, this years biggest winner is Hyundai. This will come as good news to backers of the price-competitive brand as it is just readying a product offensive that will see it launch eleven new vehicles before the end of 2007.

The South Korean firm outpaced Toyota on its way up the IQS charts, moving from its below average rating of 23rd place out of 37 nameplates, to a much more respectable 7th, and as significant, improving its problems per 100 vehicles (PP100) rating from 143 to 102.

“The fact that Hyundai is now outperforming even perennial quality leaders like Toyota–and in a relatively short amount of time–is nothing short of remarkable considering the vast quality gap it faced just a few years ago,” said Ivers. “This kind of improvement simply cannot be achieved without a serious commitment to quality over the long haul. The question now is whether Hyundai can demonstrate this same level of improvement in terms of new-vehicle launch and long-term vehicle quality.”

Its important to note that Toyota hasnt dropped from its 9th place rating, maintaining the impressive position from the 2003 to 2004 IQS and improving its PP100 rating from 121 to 104 in the process, but rather Hyundai displaces Porsche that takes the biggest dive of any automaker, from first place among all European automakers at 7th, to 3rd to last just ahead of Volkswagen (from 117 to 159 PP100).

Why the massive shift to the bottom of the grid? It can only be attributed to initial quality problems with the new Cayenne, Porsches dynamic new sport utility vehicle that now makes up more than half of its sales. While important to the brands bottom line, the SUV includes a large amount of Volkswagen components in its manufacture, from chassis architecture and mechanical components, electrical and safety equipment. Porsche at least has managed to nudge ahead of troubled Volkswagen by one position, but unfortunately Europes most enviable brand for quality seems to have hitched its wagon to what has become a bit of a lame horse. Incidentally, Volkswagen was in 24th place last year, just behind Hyundais 2003 rating. The German brands PP100 falls from 143 to 154.

But at least Volkswagen isnt dead last, that notoriety belongs to GMs Hummer division which shows no improvement in placement when compared to last years survey despite showing a significant rise in initial quality from an abysmal 225 problems per 100 units to 173. Off-road competitor Land Rover, however, that found itself placed a single position ahead of Hummer last year, has jumped significantly forward in the points to 28th out of 37 nameplates (from 190 to 148 PP100). This news should make the recently appointed head of Ford Motor Co.s Premier Automotive Group (PAG) Mark Fields, that organization that oversees Land Rover, very happy. He recently proved to be good humored about LRs previous quality issues by gibing, “The only way they [quality ratings] look good is when you take the page and turn it upside down.” Theres no need to flip the chart anymore.

Other premium manufacturers that show improvement from 2003 to 2004 are Land Rovers kissing cousin Jaguar, also part of the Fords PAG, that pulled itself up from an already strong 10th place to an amazing 3rd (from 122 to 98 PP100), bested only by Lexus in 1st (from 76 to 87 PP100) and Cadillac in 2nd (from 103 to 93 PP100), both not budging in placement from their impressive 2003 survey results in this years IQS. It should be said, however, that while Jaguar and Cadillac moved up with regards to problems per 100 vehicles, Lexus experienced an average of 11 additional problems.

Jaguar displaces Nissans Infiniti brand, which now moves to 8th just behind Hyundai, albeit the brands quality rose from 110 PP100 to 104. With its move up the scale Jaguar also finds itself with a better J.D. Power initial quality score than rivals Mercedes-Benz, that vaults up from 15th place last year to take over Jaguars old 10th placement for 2004 (from 132 to 106 PP100), Audi, which also moves up from its old 14th rating to one place behind Mercedes-Benz at 11th (from 132 to 109 PP100), and BMW, that while dropping from 8th to a still respectable 12th would actually be rated 11th if it wasnt for the fact that it tied at 109 problems per 100 vehicles (from 118 PP100) with Audi that nudges ahead simply due to alphabetical order. BMW also shows an improvement in initial quality since last year.

Despite making changes to up quality Volvo also gets bumped down the chart, but only from 12th to 14th place (from 128 to 113 PP100). Hondas Acura brand loses much more ground falling from 4th in 2003 to 15th (from 111 to 117 PP100), although still above average.

Of the nameplates not previously mentioned, Lincoln at 19th (from 139 to 121 PP100), and Saab at 25th (from 160 to 133 PP100), are the only premium brands rated below average in J.D. Powers 2004 IQS. To their credit, Lincoln moved up one place from 20th position last year, while Saab showed even greater improvement by charging forward 7 increments from its 32nd place 2003 score.

What about the brands most of us drive? The top non-premium brand is Honda, shooting up the IQS chart from 11th in 2003 to 4th place in 2004 (from 128 to 99 PP100). Just behind is Buick, maintaining its 5th place rating, albeit the upscale GM division, that actually straddles the line between entry-luxury and premium, improves from 112 PP100 to 100. Buicks 100 problems per 100 vehicles is tied with Ford Motors Mercury brand that sits in 6th place, again due to alphabetical order, also not moving from last year. After Hyundai in 7th is Toyota in 9th (from 121 to 104 PP100), followed by Oldsmobile in 13th position (from 134 to 110 PP100), a solid result for a marque that unfortunately will soon be phased out now that its last vehicle rolled off the assembly line on Thursday, April 22. Chevrolet, in 16th position (from 130 to 119 PP100), is the final brand to rate above average.

Chrysler continues as leader of the below average crowd at 17th, missing out by one problem per 100 vehicles at 120, but it has improved quality from 136 problems per 100 vehicles last year. Dodge slots in right behind in 18th place (from 137 to 121 PP100), with GMs Pontiac rated in 20th position, maintaining 142 problems per 100 vehicles.

Subaru, GMC, Ford and Mitsubishi follow in 21st, 22nd, 23rd, and 24th places respectively, all improving their problems per 100 vehicle rating by 146 to 123 for Subaru, 144 to 127 for GMC, 136 to 130 for Ford, and 138 to 130 for Mitsubishi (Ford and Mitsubishi tied for 23rd actually).

Jeep moves up from its 2003 rating of 27th to become the next non-premium brand in 26th place (from 146 to 136 PP100) for 2004, followed closely by BMWs MINI brand now in 27th place (from 166 to 142 PP100), a big improvement over its 33rd standing in the 2003 IQS.

Saturn, Suzuki and Kia are 29th, 30th and 31st respectively, with Saturn moving up the list 2 places from 31st last year (from 158 to 149 PP100), Suzuki dropping from 26th in 2003 (from 144 to 149 PP100), one of the only brands to move backwards in problems per 100 vehicles most likely due to the integration of GMDAT Korean built models previously under the Daewoo badge, and Kia making moves to the positive from its previous 33rd position (from 168 to 153 PP100). Watch for Kia to steadily move up the charts in years to come due to its shared architectures and components with rising star Hyundai.

Disappointing are Nissan, Mazda and Scion, near the bottom of the 37 nameplate heap at 32nd, 33rd and 34th respectively. Nissan is a big loser in the 2004 IQS dropping from 21st place with 139 problems per 100 vehicle in the 2003 survey to 154 in 2004, most likely due to teething pains from an influx of new products (watch for improvements next year), probably the same reason why Mazda went from 148 problems per 100 units to 157. Scion is an all-new brand, but given its Toyota roots and Lexus familial ties its 158 problems per 100 vehicles is surprising to say the least.

While some brands fell backward the majority of nameplates raised their game to an average of 119 problems per 100 vehicles, improving the overall rating by 11 percent from last years IQS. Not only were the 2004 initial quality numbers the lowest since the revised study was initiated in 1998, three additional nameplates broke the 100 PP100 barrier to join number one rated Lexus.

“When we started tracking initial quality more than a dozen years ago, the industry said this level of quality wasnt possible and that it would cost too much,” stated Ivers. “Yet, automakers could not ignore the warranty savings due to quality, as well as the impact quality has on consumer buying decisions. Even at this historically low level of initial quality problems, the ongoing quality improvements of new vehicles will continue to have a significant impact on the industry–affecting as many as one-third of new-vehicle purchases.”

The 2004 Initial Quality Study (IQS) is based on responses from more than 51,000 purchasers and lessees of new 2004 model-year cars and trucks, surveyed after 90 days of ownership.

Come back tomorrow to find out what auto group is on top, and how the domestics are faring compared to the imports.

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