The Auto Industry in 2010 and Beyond
by James Bleeker
The first half of 2010 saw several claims of quality improvement and some
hints of decline. Some of each have merit.
For each of Ford Motor Company, Chrysler LLC, General Motors
Corporation, Toyota Motor Corporation, Honda Motor Company, and
Hyundai Motor Company, the manufacturer's 2010 quality stature
and future quality and market prospects are discussed below.
Ford Motor Company in 2010 and Beyond
Of the Detroit Three, Ford Motor
the best evidence of past quality improvement.
At the bottom end, Ford has reduced its share of of
Consumer Reports' Worst Cars from 23% in 1992 to 10% in
2010. If this rate were to continue into the future, it
would achieve 0% to 1% in about 15 years, as the
following graph indicates:
At the upper end, Ford currently has three vehicles with a 2010
Auto Reliability Grade Point Average of 3.50 or more
over a 3-year data history or longer. They are:
The front-wheel-drive Lincoln MKZ, Zephyr, with a 2010
Auto Reliability GPA of 4.00 over a 4-year data history,
4-cylinder Mercury Milan, with a 2010 Auto Reliability
GPA of 4.00 over a 4-year data history,
The V6 front-wheel-drive Ford Fusion, with a 2010 Auto
Reliability GPA of 3.63 over a 4-year data history.
Likely Ford Motor Company will
continue to show improvement in the quality of
its coupes, sedans, hatchbacks, SUVs, and pickup trucks;
however, the likelihood that its overall quality will
match that of Toyota Motor Corporation or Honda Motor Company within the next two decades seems
1. Ford's three vehicles with a 2010
Auto Reliability GPA above 3.50 over a 4-year data
history are very atypical, as the following
scatter diagram indicates.
2. Ford's overall
2010 Auto Reliability GPA is a modest 2.15, a mid-C. As Ford's
Reliability Percentrank Average
for Model Year 1998
is 0.51, a typical Ford vehicle has remained stubbornly
3. Ford is a large company,
constrained both by enduring union rules and by
hundreds, if not thousands, of decision makers with a
long history of standards, values, and thought and
To these 3 points may be added the observation that
the three models holding more notable 2010 Auto
Reliability GPAs over a 4-year data history may have
good, mediocre, or abysmal Reliability GPAs as they age.
At this point, their Reliability GPAs in the middle and
outer years are anyone's guess.
Site manager is currently a
very small shareholder of Ford Motor Company (2010-07-14). I am not,
and have not been, a
shareholder of any other motor vehicle manufacturer.
Chrysler LLC in 2010 and Beyond
Chrysler LLC offers much weaker
evidence of quality improvement.
At the bottom end, its share of
CR's Worst Cars has
fallen from 25% in 1992 to 18% in 2010. The following
graph depicts Chrysler's share of the Used Cars to Avoid
and provides an extrapolation to 2030, a liner
regression of degree one.
While the graph shows a modest reduction in Chrysler's
share of the Worst, this reduction may only reflect the
greatly expanded North American product offerings by
non-North-American-based auto manufacturers. As Chrysler
2010 Auto Reliability GPA is 1.02, a D in
letter grade, it seems safe to attribute its declining
share of CR's Worst to increased product offerings by
Little or no quality improvement
in Chrysler LLC's motor vehicle offerings is seen by site manager in the near future. Another
bankruptcy reorganization may be in the offing.
General Motors Corporation in 2010 and Beyond
It is difficult to find
improvement in General Motors Corporation's product
Its share of
CR's Worst declined by a minuscule 2
percentage points, from 43% in 1992 to 41% in 2001. When
an extrapolation is made of GM's share of the Worst, we
obtain a horizontal line, indicating no long-term
And when account is taken of the greatly increased
number of model offerings from abroad, the reliability
of GM's models may have significantly, or dramatically,
Nonetheless, General Motors' overall
2010 Auto Reliability GPA beats Chrysler's by
a bit, 1.41 versus 1.02, although GM's modestly higher
GPA may be attributable to frequent model name changes,
limiting model reliability ratings for the outer years,
and to the inflationary effect of its one very remote,
high-flying outlier (see the scatter diagram in the
Beyond section of Ford Motor Company), a
Toyota-engineered model marketed by General Motors.
Little or no quality improvement
in General Motors' motor vehicle offerings is seen by
site manager in the near future. However, another
bankruptcy reorganization within the next decade seems
unlikely (barring another recession), as with clever marketing ploys GM should be
able to limit its annual U.S. new car market share loss
to one percentage point per year, closely matching its
decade-plus decline, which should be well manageable
without resort to a bankruptcy court. In this regard,
General Motors should be helped by the very low
performance of U.S. high school students on
international math exams over the past century and by
the general absence of even a rudimentary statistics
course at the high school level.
The unlikelihood of another GM bankruptcy
reorganization in the near future should be good news
for prospective investors in GM's 2010 public offering.
For long-term investors, better news is that if GM
devises a long-term downsizing strategy (that works),
its share price may appreciate over the next decade. For
short-term investors, site manager thinks good marketing
ploys, together with a sympathetic press, may well mean
a bump-up in sales, revenue, and profit for a year or two.
Toyota Motor Corporation in 2010 and Beyond
Toyota Motor Corporation remains
the most successful at avoiding
CR's Worst list. Its long-term share of this
list of avoidables remains at, or close to, 0%, as the
following chart depicts.
Nonetheless, Toyota is struggling some. Its 2010
share of CR's Worst is 1%. Furthermore, its overall Auto
Reliability GPA fell to
3.48 in 2010 (putting it
in second place after Honda) from
3.67 in 2009 (last
year's first place). And outliers are apparent on the
scatter diagram displaying the 2010 Reliability GPAs
of its models (see the scatter diagram in the Beyond section of Ford
With Toyota's drop in
quality, there will likely be a pause in the growth of
Toyota's U.S. new car market share, which has
dramatically exceeded Honda's as the following graph
The pause in growth should give Toyota time to focus
more intensely on quality and then to expand anew its
new car market share.
Honda Motor Company in 2010 and Beyond
Honda Motor Company increased
its Auto Reliability GPA from
3.47 (a high B) in 2009 to
3.55 (a low A) in 2010. It currently is the
Honda's percent share of CR's Worst is depicted
below. The slope of the extrapolation has a slightly
Honda and Toyota should remain
the auto industry's reliability leaders for a decade or
more to come, as the following scatter diagram suggests.
Hyundai Motor Company in 2010 and Beyond
Hyundai Motor Company is the
dark horse in the race to quality, if there be such a
Hyundai's Auto Reliability GPA leaped past those of
the of the Detroit Three in 2010 to
2.54 (versus 2.15, 1.41, and 1.02 for Ford,
GM, and Chrysler, respectively) from
1.97 in 2009. Also,
Hyundai has no outliers in the above scatter
diagram depicting the 2010 GPAs of its model offerings.
This contrasts sharply with Hyundai's
Reliability Percentrank Averages of 0.00
and 0.01 for model years 1988 and 1989,
placing its models at the very bottom for that two-year
time period. So, at least for a newer, smaller
company, a quarter of a century can mean quite a
difference in quality.
Hyundai is the best, maybe only,
prospect for matching Toyota and Honda vehicular
reliability and durability within the next two decades.
It provides hope for a third competitor in the
high-reliability car market segment.
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