Monday, June 11, 2007

Does Initial Quality Matter?

You've probably seen a number of articles and posts recently about the J.D. Power and Associates recently-released Initial Quality Study. The most interesting report I saw was by The Wall Street Journal. With all the hoopla surrounding the J.D. Power and Associates report, they simply asked: Is Initial Quality Still Relevant?

Take a look at some of the "scores" from the study. Here is the list of the 5 brands that scored best in the study, including their respective number of "problems" reported per 100 vehicles sold in the first 90 days after purchase.
  • Porsche - 91
  • Lexus - 94
  • Lincoln - 100
  • Honda - 108
  • Mercedes-Benz - 111

The industry average number of problems has stayed between 118 and 124 in recent studies. That means that, on average, every new car sold is going to have "about" 1 problem with it. Does the difference between a "good" score of 108 and an "average" score of 120 mean a lot to the average car-buyer? Probably not in the first 90 days after purchase. Either way, you're probably still going to have to take the car to the dealer to fix something. (Although, maybe cars with higher scores also tend to have more problems later in their lives.)

The article does point out, though, that the difference highlighted above--i.e., 12 additional problems per 100 vehicles sold--does matter a lot for manufacturers. Basically, more problems means more things to fix (often mechanical requiring replacement parts), which means more parts and labor costs for the manufacturer. When you multiply those 12 problems per 100 cars over the total volume of cars sold for each brand, you start getting into some pretty big numbers.

One last interesting tidbit from the Initial Quality Study itself: J.D. Power and Associates found that 3 out of 4 newly-redesigned models perform worse in initial quality than their predecessors. Is that enough to give you second thoughts about waiting for the "new" version of model to come out before buying?

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