Perception on Quality

**explorer** · June 16th, 2003 04:14 PM

from: http://www.detnews.com/2003/insiders/0306/13/b01-192062.htm

Friday, June 13, 2003

Competition makes Detroit carmakers better, assures survival
By Daniel Howes / The Detroit News

DETROIT--Here's the perception: Detroit's automakers are paying customers more than ever before to buy cars and trucks, presumably because they're substandard to German and, especially, Japanese competitors.

Here's a fact: The cars and trucks coming from General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group are perhaps the best Detroit has ever produced, measured in terms of quality, reliability and efficiency of production. And in some key segments they score higher than their foreign rivals.

But here's the problem: Until fact catches perception, which is demonstrably possible in the auto industry (witness the turnarounds of Mercedes-Benz in the 1990s and Nissan Motor Co. more recently), Detroit will continue to appear the perennial laggard while competitors Toyota and Honda look invincible.

"The market finds you out," says Gary Dilts, Chrysler's senior vice-president of sales. It's "too slow when you're doing something right and too fast when you're doing something wrong."

Toyota and Honda are using their advantages in manufacturing, brand equity, residual values and, yes, currency rates to aggressively price vehicles and pick up market share. GM is playing to its strengths, too, using a Toyota-inspired manufacturing system and the cost savings that comes with it to offer average incentives north of $3,800 per vehicle and still make money.

Not as much as Chairman Rick Wagoner, Wall Street or his shareholders would like, but money nonetheless. For Detroit and those who depend on GM, the alternative is worse, considering the numbing fixed costs -- pension obligations, skyrocketing health care -- burdening GM.

Yes, GM is stimulating the market for more revenue. Yes, it is pressuring Ford and Chrysler into following. Yes, it swallowed labor contracts that bar plant closures and layoffs. But I don't see a credible alternative in this transition from sclerotic behemoth to quicker, nimbler company.

The point is this: Those who count Detroit's automakers out because they a.) made some colossal mistakes in the past b.) have the United Auto Workers on their assembly lines and c.) can't catch leaders Toyota and Honda when it comes to product quality and reliability, aren't looking at the numbers.

GM (with union workers) is approaching Toyota and Honda in manufacturing efficiency, a key predictor of profitability. Ford vehicles are outperforming Japanese and German models in some J.D. Power and Associates quality surveys.

Trouble is, shareholders can't make a profit by cashing in rising efficiency surveys and customers can't drive J.D. Power surveys. The difficulty Detroit's automakers are having in consistently delivering profits -- a rap on each company at different times in recent years -- contributes to the notion that, simply put, their leaders don't know what they're doing.

They do. But they're managing two, often conflicting, camps. One pushes for short-term results, which drive expedient "move-the-metal" incentive programs that risk making hot new products look like tired, old commodities. The other recognizes the need to burnish brands so customers will be more willing to pay more for them.

Competition is forcing Detroit's automakers to change. It may also help ensure their survival.

Daniel Howes's column appears Sundays, Wednesdays and Fridays. He can be reached at (313) 222-2106 or dchowes*detnews.com.