GM, Hyundai Excel in Consumer Reports Survey
Ford, Mercedes Do Poorly; Toyota Remains a Favorite With 20 Recommendations
The Wall Street Journal
March 11, 2003
By Karen Lundegaard
General Motors Corp. and Hyundai Motor Co. did surprisingly well in annual rankings by Consumer Reports magazine, joining perennial favorites Toyota Motor Corp. and Honda Motor Co. The big losers: Ford Motor Co. and Mercedes-Benz, the luxury brand of DaimlerChrysler AG.
Toyota, including the Toyota and Lexus brands, had 20 vehicles recommended by Consumer Reports out of 25 models rated. Honda, including the Acura brand, earned recommended ratings for 10 out of 14 models evaluated. GM placed 13 models on the magazine's recommended list out of 48 evaluated, its best showing to date.
Consumer Reports, which has influenced car buyers for decades, recommended just five Ford vehicles -- including two from its Volvo unit -- out of 32 evaluated. The magazine's editors said they have seen a steady decline in the number of recommended Ford vehicles since 1999.
"It's all reliability that brings them down," said David Champion, head of the magazine's auto-test facility, who noted Ford's showing was the worst since he joined the magazine in 1997. Meanwhile, Mercedes received no recommendations and its reliability was third worst of all the brands.
Mr. Champion said that while DaimlerChrysler seems to be improving reliability at Chrysler, it has "left their own shop bare." Often reliability issues involve power equipment such as windows, locks and seats as well as electrical problems. European automakers generally aren't keeping pace with the reliability improvements of the domestic and Japanese brands, he added.
One of the big turnaround stories has been Hyundai. Mr. Champion said the South Korean automaker had been one of the worst in the survey a decade ago. During the past three years, its reliability has continued to improve and its 2002 model-year vehicles were tied with those of Honda for second place in reliability.
The magazine, now in its 50th year of rating automobiles, holds remarkable sway over consumer purchasing decisions. Many buyers insist on checking with the magazine before buying a vehicle. Nearly 10% of buyers a month away from purchasing a vehicle use it as their primary source of information, second only to advice of a friend or relative, at 14%, according to CNW Marketing Research. "There is probably nothing else as a single entity that holds as much influence as Consumer Reports does," Art Spinella of CNW says.
In addition to the recommendations, GM earned two "best picks," the magazine's top honor, for its Chevrolet Silverado pickup truck and the Pontiac Vibe (which shared the honor with the vehicle's twin, the Toyota Matrix). They were the Detroit company's first top picks. Two years ago, GM received 11 recommendations, but last year that number dwindled to four.
One sore spot for the world's largest automaker: Cadillac, which may be making a sales comeback, but had the worst reliability of all major auto brands.
GM spokesman Tom Wickham noted that the reliability rankings were done on three-year-old vehicles, and the automaker has done much to improve quality in the past two years. Consumer Reports agreed, noting that several GM trucks showed improved reliability. "We have great expectations that Cadillac products will be rising up the ranks," Mr. Wickham said.
Honda garnered five of the magazine's coveted "top pick" designations, its best showing since the magazine began the best-in-class designations in 1997. Toyota lost two of its best picks, earning just two this year, its worst showing since 1999.
Reliability scores come from the magazine's survey of approximately 3.5 million subscribers, about 480,000 of whom responded. Consumer Reports subscribers are older, richer and better educated than the population as a whole. Some two-thirds are men. The six-page survey, which asks readers to judge everything from their vacuum cleaner to automobile to restaurant chains, in the past has drawn criticism from automakers.
This year auto firms seemed more reluctant to criticize the magazine's methodology. Ford, which last year questioned the minimum sample size for each model (100), this year limited comments to a written statement that said "quality is Ford Motor Co.'s highest priority." (Ford, of Dearborn, Mich., also included results of its Japanese affiliate Mazda, of which it owns a third, in its results, thus boosting the number of recommended vehicles from five to nine.)
Don Dees, vice president for quality for Chrysler Group, says Consumer Reports results generally track the company's own quality data. "Consumer Reports is a very good metric for us to look at as a company," he says.
Mercedes spokesman Fred Heiler noted that the questions are vague and don't make a "distinction between a squeak or a rattle or an engine or transmission falling out on the road." Mr. Heiler believes Mercedes's poor reliability results often are linked to added technology that the German-U.S. auto maker has included in the vehicle that owners often don't know how to use, so they assume it is flawed.
The Passat supplied the only good news for Volkswagen AG, with its six-cylinder version garnering a best pick for the sixth year in a row in the family-sedan category. Otherwise, the German automaker's reliability was panned, even in its Audi luxury lineup, which earned no recommendations.
Consumers Rate Cars
Some of the best and worst from this year's Consumer Reports annual auto issue:
Top Picks
Best car tested............ BMW 530i
Fun to drive............... Subaru Impreza WRX
Family sedan............... Honda Accord (4 cylinder), Volkswagen Passat (6 cylinder)
Small sedan................ Honda Civic EX
Driving green.............. Honda Civic Hybrid
Affordable versatility..... Pontiac Vibe/Toyota Matrix
Small SUV.................. Toyota RAV4
Midsized SUV............... Honda Pilot
Pickup truck............... Chevrolet Avalanche
Minivan.................... Honda Odyssey
Vehicle Reliability
2000 model year vehicles average 55 problems per 100 vehicles, but some automakers did better than others.
Best
Acura 21
Toyota 25
Lexus 25
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Isuzu to Cut U.S. Vehicle Production
Los Angeles Times
March 11, 2003
By John O'Dell
American Isuzu Motors Inc., the struggling maker of sport utility vehicles, said Monday that U.S. production of two of its three remaining models would cease next year and that in 2005 it would begin importing SUVs made in Thailand to help fill the gap.
The Cerritos-based U.S. import and distribution arm of Japan's Isuzu Motors Ltd. is restructuring in an attempt to find a new place for itself in the North American market and said details of the plan would be announced April 17.
"There will continue to be an Isuzu in the U.S.," spokesman Charles Letzgus said Monday.
Isuzu, an affiliate of General Motors Corp., helped start the SUV craze in the U.S. when it introduced the Trooper in the early 1980s.
But sales have dried up as the firm has lost marketing and product development support from its ailing Tokyo-based parent. American Isuzu's sales fell 36% last year after a 14% decline in 2001.
As part of its cost-cutting effort, Isuzu in January sold its 49% stake in a joint-venture vehicle manufacturing plant in Lafayette, Ind., to former partner Fuji Heavy Industries Ltd.'s Subaru passenger car unit.
Isuzu's Rodeo and Axiom models are built at the Indiana plant and the company contracted with Subaru for continued production until the end of the 2004 model run.
"The last vehicles will be built there sometime in the summer of 2004," Letzgus said.
Production will continue on Isuzu's third U.S. model, the Ascender SUV, which is made by GM. The Ascender model now being sold at Isuzu dealers is a re-badged seven-passenger GMC Envoy XL, and at the New York Auto Show next month Isuzu will announce that it will begin selling the shorter, five-passenger version as well.
In addition, Isuzu said in 2005 it would begin importing a new SUV to be built at its Thailand factory.
The company has not disclosed design and other information about the new SUV, which will be built on a mid-size pickup truck platform.
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Ups and Downs for Japan's Auto Industry
Asia Pulse
March 11, 2003
TOKYO -- Continued overall economic slowdown has been emaciating many Japanese industries, but the automakers of this country are likely to remember fiscal 2002 as a bumper year.
Both domestic sales and exports have been steadily growing. In February, domestic sales of vehicles totaled 367,505 units, up 5.1 percent year on year, marking the sixth straight month of increase. Japan's auto exports rose 16.8 percent year on year in January to 383,168, for the thirteenth straight month of increase, after surging 23.9 percent in December.
Exports hit a nine-year high in 2002, rising 12.8 percent to 4.699 million, thanks mainly to strong demand from North America and Europe as well as a rebounding economy in Southeast Asia.
Buoyed by the surging demand, domestic vehicle production at all five major automakers has been growing.
In January, domestic production at Toyota Motor Corp. rose 9.5 percent to 299,356 vehicles for the fifth month of year-on-year increase. Honda Motor Co. reported an 8.6 percent increase of domestic production to 108,018 vehicles for the same month.
Nissan Motor Co. said its production grew 21.7 percent to 116,069 vehicles. Mitsubishi Motors Corp. and Mazda Motor Corp. recorded smaller increase in domestic production.
In the same month, worldwide production at Toyota climbed 12.4 percent to 478,999 units and that of Honda rose 16 percent to 264,269 units. Nissan's global output grew 11 percent to 228.059 units, for the 11th straight month of increase.
The strong demand and growing output have been boosting profits at these automakers, with group pretax profit rising for Toyota, Nissan, Honda and Mazda.
Things may not be so rosy as these figures suggest. A case in point is Honda whose per car operating profit is lagging behind those of Toyota and Nissan. Honda's per car operating profit has decreased 10 percent from the preceding year, although its Fit subcompact has outsold Toyota's Corolla to become the best selling car in the category for 2002.
Brisk sales of the Fit jacked up Honda's overall domestic sales in volume, but profit failed to keep up with sales results because with a price tag of less than 1.5 million yen, Fit's profit margin is a fraction of high-priced models such as the Odyssey minivan, whose sales are slowing.
Even Japan's largest automaker Toyota is suffering from low profits from the domestic market. Amid the deepening deflation, more consumers are shifting toward lower-priced subcompacts and asking for deeper discounts, which is depressing Toyota's profitability.
The meager profit margin on the domestic market leave the automakers dependent on the overseas markets, particularly North American sales. But the geopolitical crises involving the U.S., especially the likelihood of war in Iraq have been chilling consumer sentiment and lifting oil prices, thus clouding auto sales outlook in the North American market.
According to some stock analysts, Toyota and Honda are no longer growth stocks. These firms should be considered cyclical stocks that are heavily influenced by cyclical changes in general economic activity, they say.
To lower their reliance on the North American markets, Japanese automakers are enlarging their presence in the promising Chinese market. On Oct. 8, Toyota began producing passenger cars in China in a joint venture with Tianjin Automotive Xiali Co., an affiliate of China FAW Group Corp., China's largest automaker.
Toyota also plans to invest about 100 billion yen in China, mainly with a second plant it will start operating jointly with China FAW Group in 2005. Honda plans to expand annual output at its joint venture Guangzhou Honda Automobile Co. to 240,000 units by spring of 2004 from current 50,000 units.
Nissan has signed a deal to jointly produce passenger cars and trucks with Dong Feng Motor Corp. from spring.
The automakers with annual output of less than 4 million units will not withstand the global competition, and smaller Japanese firms are seeking their ways of survival through strengthening their ties with larger foreign companies.
Mitsubishi, which is 37.3 percent owned by DaimlerChrysler AG, jointly developed the Colt subcompact and released it in Japan in November. The European version of the car will also be built at Mitsubishi's joint venture plant in the Netherlands.
Mazda, which is about a third owned by Ford Motor Co., looks set to become an international niche player. The company has been sharing more of vehicle platforms with Ford, and limiting its product line which once covered from small trucks, minicars to luxury sedans.
In August, to help financially strapped Isuzu Motors Ltd., General Motors Corp. accepted Isuzu' offer to retire its holdings and buy new shares worth 10 billion yen issued by Isuzu.
This has lowered GM's stake in Isuzu from 48 percent to 12 percent. Isuzu also has to bear 57 billion yen in loss for fiscal 2002 that stemmed from its withdrawal from Subaru-Isuzu Automotive Inc. sports utility vehicle production joint venture located in Indiana. Isuzu had owned a 49 percent stake in SIA and Fuji Heavy Industries Ltd. held a 51 percent interest. Isuzu sold its sake worth 47 billion yen to Fuji Heavy for 1 dollar on Jan. 1.
OUTLOOK:
To make the U.S. less vulnerable to instability of external energy supply, the Bush administration has been pushing ahead with its initiative in improving vehicles' fuel economy.
While GM, Ford and DaimlerChrysler are arguing the U.S. government's target is too high to clear, Japanese firms seem more positive about building eco-friendly, fuel economy vehicles.
On December 2, Toyota and Honda each delivered their first commercially produced fuel cell vehicles to the Japanese government. The two also began marketing the vehicles in the U.S. on the same day, local time. Toyota's FCHV model can run for 300km, on a full fuel tank and Honda's FCX travels 355km on a full fuel tank.
The cost of producing a fuel cell vehicle is still prohibitively high at about 100 million yen and Toyota has been leasing the FCHV model to the government for 1.2 million yen per month and Honda charges 800,000 yen for leasing the FCX. Both automakers are working on lowering production costs and making efforts to overcome technological problems and bugs.
Nissan had decided to jointly develop fuel cells with the United Technologies Corp. group of the U.S. to speed up commercialization of fuel cell vehicles.
Nissan and UTC Fuel Cells will jointly develop fuel cell stacks for powering automobiles and install UTCFC fuel cells in Nissan vehicles to be released on a limited basis this year. Toyota develops its own fuel cell technology and Honda used the fuel cell stacks of Ballard Power Systems Inc. of Canada in its vehicles. But Honda is now developing its own fuel cells.
It is so costly to develop fuel cell vehicles independently that only a small number of automakers will succeed in doing so on their own, suggesting international industry cooperation in this area will increase.
