Is Toyota Losing Luster--Or Have More Makes Added Polish?

Is Toyota on the decline as long-time ruler of vehicle quality? Yes, if one speaks of real quality--but if one speaks of brand equity, probably not, at least in the near term. Yet, a flurry of studies this year suggest that Toyota may want to watch its back.

Mile markers include Ford's strong showing in J.D. Power & Associates' "2007 Initial Quality Study" in June. For the first time since 1998, Ford topped all automakers, garnering five top model segment awards (although one of the vehicles was Mazda's). Lincoln went from 12th place to third, Mercury from 17th to eighth, and Ford from 16th to 10th. In the first paragraph in its story on Ford's win, the Associated Press suggested that people who have been joking that Ford stands for "Found on Road Dead" may have to change it to "Fixing Our Reputation Daily."

The consultancy's report followed another study--San Diego-based Strategic Vision's Total Quality Awards, the results of which showed all boats rising to meet Toyota in the area of perceived quality: Hyundai and Nissan dominated that study, while long-time leader Toyota took no top honors at all, although its scores also rose. The consultancy's headline: "Hyundai 3; Toyota 0."



This month, Consumer Reports' "2007 Annual Car Reliability Survey" downgraded several Toyota vehicles, while giving the nod to Ford and GM. Toyota responded, saying that Toyota, Lexus, and Scion brands led the industry in CR's survey, with the greatest number of models--17--ranking "Most Reliable."

Now, Strategic Vision's "2007 Total Value Index" has given the nod to Ford as well, making the point in its official release that one of Ford's wins comes at Toyota's expense. Ford, which has won only four of the consultancy's top spots over the past four years--versus 20 for Toyota--garnered top spots for three vehicles: the Lincoln MKX crossover, Ford Edge crossover and Expedition EL SUV. General Motors fared best among domestics in the index, with four leaders, including the full-sized pickup segment with its GMC Sierra.

Analysts say it is unlikely that Toyota's advantage in consumer perception of brand quality will suddenly evaporate. But, they say, if the domestics keep garnering third-party awards that acknowledge their quality gains--awards they can then turn around and use in advertising--consumers will focus less single-mindedly on quality and more on aesthetics, pricing and features. No doubt, Ford would like that very much--particularly as it has just launched Synch, a voice-activated music and telematics program.

"Our data suggest that consumers aren't yet shifting, in terms of the perception of relative quality of domestics versus Japanese brands," says Dave Sargent, director of automotive research for J.D. Power. "What is happening is that the actual differences are narrowing, and when the basic requirement of a car not falling apart and being safe to drive is met, consumers will consider other things."

Still, both Edge and Lincoln MKX are selling strongly. Ford's overall vehicle sales numbers slumped 21% last month, but the company sold 11,632 of the Edge crossovers, and 3,805 Lincoln MKX vehicles. Lincoln has a ways to go to beat Toyota in its game: Last month, Toyota's Lexus division sold twice as many RX350 and RXs as Lincoln of its still-new MKX.

Strategic Vision's report says: "Although the Lexus brand name offers its customers a stronger belief in reliability and durability, the MKX product characteristics and features, specifically in areas such as interior design, quality and roominess, offered at a lower price, makes each dollar spent on the MKX a better choice than the RX350."

Alexander Edwards, president of Strategic Vision, says Toyota has led in 20 of the vehicle segments covered by the index because "they have preached one message for 20 years: reliability"--adding that their focus has been on keeping the number of things that have gone wrong per 100 vehicles as small as possible. "But statistically, the differences are negligible, so that actual leadership position in quality is not apparent any more--the other brands catching up"--meaning, he adds, that keeping ahead of the field means focusing more and more on narrower and narrower leads.

Of GMC Sierra vs. Toyota Tundra pickups, Strategic Vision says, "As seen in multiple instances in 2007, the Toyota brand name stood for reliability, but the product cues were where the Tundra was slightly behind the Sierra. For the Sierra, GM's new warranty also had a strong impact in reassuring customers that their investment was more secure."

Says Edwards: "Toyota is in the top area of a very tight race which would only get a ribbon on a horse track. Yes, whoever has the lowest score wins, but is it statistically relevant? For the most part, most brands and vehicles are at the same level of quality, and pushing it further will be difficult. If Toyota provides products that are satisfactory and don't go the next step with vehicles providing an emotional connection between consumer and product, their 'get out of jail free' will begin to fade, and consumers, reassured by warranties, will look at other vehicles more frequently."

Still, in the Total Value Index, based on subjective new-owner statements about things like expected reliability, expected fuel economy, price paid, and expected resale value, Toyota still dominates. The company had four leaders, including Yaris, and 4Runner, and, for the fourth year, Lexus LS430. Honda has also done well this year in the index, with six vehicles leading in five vehicle segments, and a strong perception of resale value inherent in the brand. Hyundai took two top spots for the Azera sedan and Santa Fe SUV.

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