New models are driving brands' success

GM brands saw an increase in customer avoidance in 2014 because of recalls, J.D. Power says, but they did very well in terms of appeal and customer satisfaction. Photo credit: DAVID PHILLIPS

SAN FRANCISCO -- New-model introductions will continue to boost the performance of auto franchises for the next two years.

A panel of industry consultants told the J.D. Power Automotive Summit Thursday that vehicle brands from mass-market to luxury are chalking up positive results in customer satisfaction and owner-loyalty largely as a result of a stream of new and substantially redesigned products.

“There is no question that new product is very much the king right now,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive, who presented Power’s annual deep-background industry franchise review. “And it’s smoothing over a lot of issues.

“The new models are driving the growth of most brands,” he says. “And they are what’s behind the rising consumer appeal at many franchises.”

U.S. vehicle brands are planning to introduce 142 new or significantly redesigned models in 2015, up from 113 in 2007, before the U.S. economic downturn.

Consumer appeal has been a key ingredient for brands that are trying to overcome recall trouble in particular, said Dave Sargent, J.D. Power vice president for global automotive.

“Honda faced a significant recall crisis last year with component problems,” Sargent said, “and yet they had excellent brand appeal among consumers and scored very well in customer relations.

“General Motors’ brands saw an increase in customer avoidance because of all the news of their recalls last year,” he said, referring to Power’s measure of how many customers intentionally stay away from a brand for some reason. “But they did very well in terms of appeal and customer satisfaction.”

Sargent said that the resulting clamor for new products is translating into higher per-store volumes around the industry. And that increased throughput is generating higher retail gross margins for many dealers, improved store profitability and improved customer relations.

“But that can all slip away,” Sargent commented after the franchise assessment presentation. “If your dealership is growing faster than your capacity to take care of your customers, we’re going to see a decline in satisfaction.”

You can reach Lindsay Chappell at lchappell@crain.com

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