Consumer satisfaction with domestic brands is sinking, and the Detroit 3s reliance on incentives to pad sales may only continue to weigh down their brands, an industry study says.
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. automakers are at the bottom of the index, which was released today. The Detroit 3 have six of the bottom eight nameplates, with Chrysler LLCs Jeep and Dodge trailing the field.
A slip by domestic brands this year breaks a two-year trend of the Detroit 3s gaining on Asian and European automakers.
The index uses customer interviews and factors consumer expectations and perceived quality and value. It scores automakers 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 years.
Satisfied buyers buy again
Customer satisfaction is closely tied to a repeat purchase, says Claes Fornell, who heads the University of Michigan study. Automakers are vulnerable to losing dissatisfied customers to other manufacturers.
That puts General Motors, Ford Motor Co. And, especially, Chrysler in a precarious spot, Fornell told Automotive News. Chrysler has a big uphill struggle, he said.
Jeeps index of 76 and Dodges 78 are industry lows. And at a score of 80, Chryslers 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, Fornell said, Chrysler ought to refer to its Detroit counterpart to reverse its course.
Historically, GMs 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.
Fornell attributed Cadillacs and Buicks strong performances to each brands attention to a products 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.
Its tempting, but avoid incentives
Also on Fornells roadmap that leads Chrysler upward in the rankings: avoid incentives.
They cant completely avoid using incentives because everybodys doing it, he said. But they have to try to avoid incentive game-playing.
Nearly all automakers 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 Fornell said leaves them in a classic Catch-22.
The automakers essentially lead buyers to expect incentives, putting further pressure on already-tight price margins.
Its hard to get out of that, Fornell said. Unless consumers get the discount, theyre 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 Monday, 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, Fornell said: When you introduce them, you lure away buyers from other manufacturers. But incentives arent likely to do Detroit automakers any good in customer satisfaction.
Those consumers know what they want, but theyre buying what you have because of a perceived value, he said. Theyre not going to be as satisfied with the product, because they were willing to give up what they wanted for value.
A tie to fuel economy, and grim look ahead
Toyotas Lexus Division and BMW tied atop the rankings with an index score of 87. Close behind are Toyota and Honda, which both scored 86.
GMs Buick, Cadillac and Saturn brands rank higher than any other Detroit 3 brands. GM also had the industrys biggest gainer in Saturn. The brand scored 85, gaining four points and surging past the industry average for the first time since 2005.
Fuel economy has been credited with easing slumping sales, and Fornell said Saturns success can be attributed at least in part to the brands relatively fuel-efficient fleet.
Its not that Saturn gets great mpg in their categories, but overall, the Saturn fleet has better fuel economy because theyre smaller, he said.
While the industry average stayed steady this year, Fornell said trouble could loom in 2009.
To keep scores high, automakers must keep prices low and quality high. He said industry watchers can expect a dip next year, given the challenges automakers will face with the rising costs of raw materials and other obstacles.
Said Fornell: I think it would be realistic to expect that it would either stay flat or dip, because there are so many challenges now.