Sales are up, but quality, productivity still trail Japanese

BIG 3 REGAIN RESPECT

August 08, 1993|By Ian Johnson | Ian Johnson,Staff Writer

When Vicki Kriner was ready to replace her Suburu GL, she did something she hadn't done in years: She bought American. In fact, Ms. Kriner, who owns an Owings Mills day care center, bought a vehicle made by Chrysler, a company whose brushes with bankruptcy symbolized the problems of U.S. automakers in the late 1970s and 1980s.

"When I took the test-ride, I was convinced," Ms. Kriner said last week of her Jeep Cherokee, manufactured by Chrysler. "The ride was great, and the price was reasonable."

That combination of quality and price is helping Chrysler Corp., Ford Motor Co. and General Motors Corp. regain long-lost customers.

And recent financial reports show that the Big Three can make money as well as good cars -- combined second-quarter profits hit $2.5 billion.

But for all the progress in cost-cutting, quality improvement and product development, the U.S. auto industry faces serious challenges.

Among them: the burden of years of crippling losses, a still-substantial gap with Japanese automakers in quality and productivity, uncertain labor negotiations and a reliance on tariffs to keep out competitors.

If the Big Three can't meet those challenges, the entire U.S. economy is likely to suffer.

GM, for example, accounts for 2 percent of all goods and services produced in the United States, and, after numerous cutbacks, still employs 450,000 people, including 3,500 in Baltimore.

When the number of U.S. jobless claims recently dropped by 60,000, to 336,000, economists attributed the change to rising auto production.

Such issues, however, seem miles away from the nation's showrooms. With the average age of the U.S. auto fleet at eight years -- a level that hasn't been reached in more than four decades -- consumers are rushing in to buy cars.

At the Bob Bell Chevrolet dealership in southeast Baltimore County, best-sellers include the Geo Metro and the Chevrolet Cavalier, a 10-year-old model still popular because its price is under $10,000.

Sales are so strong, says a salesman, Stuart Brooks, that the dealership is turning over 100 percent of its inventory each month and would be selling more but for factory bottlenecks.

His experience is mirrored by statistics showing that auto sales hit a three-year high in the first half of 1993.

Although sales dropped in July, 1993 is likely to be the strongest year for vehicle sales since 1990.

People "need autos, interest rates are low and they just feel more confident," Mr. Brooks said. "Everything has just come together."

In the past, many of those new-car buyers would have chosen Japanese autos, with their reputation for reliability and value.

In the first six months of 1993, though, U.S. automakers have cut into Japanese companies' market share, slicing it to 27.6 percent, from 29.2 percent.

The reason: U.S. manufacturers are benefiting from fundamental changes they have undertaken, as well as from temporary factors that could vanish in the future.

Among the more permanent changes: an emphasis on quality and lower costs.

Better production

Lean production techniques, for example, have raised U.S. autoworkers' productivity to near-Japanese levels. From 1979 to the number of U.S. autoworkers needed to produce a vehicle dropped from about five to three for Ford and Chrysler, although GM lagged, with 4.5 workers needed, according to a recent study by Harbour and Associates, a Michigan consulting firm. Japanese auto companies, by comparison, needed fewer than three workers.

Productivity "is not quite as high as the Japanese, but for all intents and purposes, that gap has been closed," said Ron Harbour, who runs Harbour and Associates.

That means lower costs for consumers. Today, U.S. cars enjoy a $2,000-to-$3,000 price advantage over their Japanese competitors, a margin increased by the record strength of the yen, which drove up the cost of Japanese cars last year by between 4 percent and 7 percent. By contrast, the Big Three increased prices by just 1.6 percent.

Detroit has boosted quality, too. J.D. Power and Associates, which measures new-car defects, reported that quality rose 17 percent among 1993 U.S. models. Quality rose among Japanese cars, too, but by just 10 percent, the consultants reported.

Still behind Japanese

But in both quality and productivity, U.S. automakers have ground to make up. J.D. Power's study, for example, showed that Japanese cars have 92 defects per 100 vehicles; American-made cars had 113 defects, and European cars had 128 defects.

The top four divisions for quality were Japanese: Lexus, Toyota, Infiniti and Acura.

Ford's Lincoln division ranked fifth -- one of three U.S. manufacturers in the top 10. The others were GM's Buick and Saturn divisions.

In the showroom, this can mean that some consumers still shun U.S. models.

"For some people, it's a mind-set," Mr. Brooks said.

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