176-Reliability in Tough Markets

The stats for the light vehicle sales in the U.S. during the month of February are out. Of course, Toyota’s sales shrank by nearly 9%. The surprising big winner was Ford, whose sales increased 43%, far more than anyone else. Its nearest competitor, Nissan, had a sales increase of 29%. GM’s sales increased by 12%. What may be driving this superb performance from Ford?

We often use the Customer Buying Hierarchy to evaluate a company’s performance against its competitors. The Customer Buying Hierarchy argues that customers buy Function, Reliability, Convenience and Price, in that order. Customers continue to cycle through their alternatives until they have chosen one supplier who offers something important to the customer that no one else offers. As we have noted before, in tough marketplaces, high Reliability is a hallmark of the best industry performers. (See the Symptom & Implication, “Competitors are emphasizing reliability in product quality” on StrategyStreet.com.)

Ford’s reliability is impressive today. (See the Perspective, “Reliability: The Hard Road to Sustainable Advantage” on StrategyStreet.com.) The National Highway Traffic Safety Administration measures the complaints it receives about automakers and their products. Their measure is number of complaints per 100,000 vehicles sold. Honda is the leader here, with about 64 complaints. Ford follows at 81, then Toyota at 91 and GM at 104. So, Ford’s quality seems to be somewhat better than Toyota’s today. That is at least one reason why Ford is in the ascendant, and while Toyota is falling off the pace.

Posted 3/18/10

US manufacturers have made impressive improvements in their reliability over the last several years. While they have certainly narrowed the gap with competition, the Korean and Japanese brands tend to lead industry dependability surveys. In the 2022 JD Power rankings, the top vehicle brands in the mass-market in order were: Kia, Buick, Hyundai, Toyota and Dodge. In the premium segment, the top brands were, in order: Genesis, Lexus, Porsche, Cadillac and Lincoln.   Still, the proof is in the used-car pricing.  In this measure, the Japanese manufacturers are the clear winners After five years, the brands with the highest resale values, in order, are: Subaru, Toyota, Volkswagen, Honda and Mazda. The fine reputation for quality the Japanese manufacturers enjoy commands a price premium in the used car market. Competitors may be closing in, especially the Koreans, but it takes years to build a solid reputation for reliability.

The auto industry, with its global reach, cycles through periods of market hostility. Dealing with a hostile market is complex since you have to deal with both the causes of the hostility and the problems of overcoming the initiatives of competition in a hostile market. Reliability is key in most of these markets. See HERE for more explanation and examples.

9/22

***