DETROIT (Aug. 19, 2008) — Consumer satisfaction with domestic vehicle brands is sinking, and the Detroit 3's reliance on incentives to pad sales may only continue to weigh down their brands, an industry study said.
For the first time in the 15 years of the American Consumer Satisfaction Index, none of the domestic brands ranks in the top four.
Instead, U.S. auto makers are at the bottom of the index, which was released Aug. 19. The Detroit 3 have six of the bottom eight nameplates, with Chrysler L.L.C.'s Jeep and Dodge trailing the field.
A slip by domestic brands this year breaks a two-year trend of the Detroit 3's gaining on Asian and European auto makers.
The index uses customer interviews and factors consumer expectations and perceived quality and value. It scores auto makers on a 100-point scale, with higher scores representing higher satisfaction.
Consumer satisfaction with the industry remained at an all-time high, according to the index. The industry average index of 82 matches last year's.
Satisfied buyers buy again
Customer satisfaction is closely tied to a repeat purchase, said Claes Fornell, who heads the University of Michigan study. Auto makers are vulnerable to losing dissatisfied customers to other manufacturers.
That puts General Motors Corp. (GM), Ford Motor Co. and, especially, Chrysler in a precarious spot, Mr. Fornell told Automotive News, a sister publication of Tire Business. “Chrysler has a big uphill struggle,” he said.
Jeep's index of 76 and Dodge's 78 are industry lows. And at a score of 80, Chrysler's namesake brand also comes in below the industry average. The 2008 index is the fourth straight in which all three Chrysler brands have been at or below the industry average.
While GM had its troubles with the index this year, Mr. Fornell said, Chrysler ought to refer to its Detroit counterpart to reverse its course.
Historically, GM's Cadillac and Buick brands have ranked near the top of the index. This year, they round out the top five brands with matching scores of 85.
Mr. Fornell attributed Cadillac's and Buick's strong performances to each brand's attention to a product's fit within the market. He said GM does well at targeting particular segments when it rolls out products for each brand.
“Chrysler would have to do the same with Dodge and Jeep, and both also have quality issues,” he said.
It's tempting, but avoid incentives
Also on Mr. Fornell's roadmap that leads Chrysler upward in the rankings: avoid incentives.
“They can't completely avoid using incentives because everybody's doing it,” he said. “But they have to try to avoid incentive game-playing.”
Nearly all auto makers are turning to some form of incentives to deal with slumping sales. But manufacturers with the lowest satisfaction scores tend to use incentives most, which Mr. Fornell said leaves them in a classic Catch-22 situation.
The auto makers essentially lead buyers to expect incentives, putting further pressure on already tight price margins.
“It's hard to get out of that,” Mr. Fornell said. “Unless consumers get the discount, they're not going to buy.”
While Chrysler can learn from GM with respect to Buick and Cadillac, it can stop watching GM with respect to incentives.
On Aug. 18, GM confirmed it will offer two weeks of employee discounts for all buyers on its eight brands.
Incentives may slow the falling sales and market share, Mr. Fornell said: “When you introduce them, you lure away buyers from other manufacturers.”
But incentives aren't likely to do Detroit auto makers any good in customer satisfaction.
“Those consumers know what they want, but they're buying what you have because of a perceived value,” he said. “They're not going to be as satisfied with the product because they were willing to give up what they wanted for value.”