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Reliability Measures: The Good News and The Bad News

The domestic auto industry has several companies that monitor the quality of automobiles. Some are short-term in nature. The J.D. Power & Associates’ Initial Quality Survey measures the quality of buyer experience over the first ninety days of ownership. Since all automobiles are under warranty during that period, this survey measures the hassle factor associated with early problems.

Much more important is J.D. Power & Associates’ annual Vehicle Dependability Study. This report is the result of analyses of customer perceptions over the first three years of ownership of a vehicle. It better reflects customer experiences with a product. This study recently named Lexus as the number one brand among the thirty-seven brands sold in the U.S.

Durability is a form of Reliability, in our terminology. In a Hostile market, the Reliability segment of customers is usually the largest and most loyal (see “Reliability: The Hard Road to Sustainable Advantage” in StrategyStreet.com/Toos/Perspectives). This seems to be true, as well, in the automobile market. J.D. Power notes that durability is the top factor when buyers consider the purchase of their next vehicle. Durability is more important than fuel economy or design of the product.

So, who got the good news on this latest ranking? It comes as no surprise that Toyota distanced itself from its competitors. The company received the highest marks in eleven of the twenty individual award categories. The three U.S. automakers had a total of three individual awards, while Honda, Hyundai and Mazda also had one each.

If the history of other industries has anything to tell us, this Reliability recognition for Toyota guarantees that it will continue gaining market share in the foreseeable future. Given their current size, the U.S. automakers have a cloudier future. They are likely to continue losing share, especially to the Japanese manufacturers.

Posted 8/28/08

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