Competition yields golden age for new-car buyers

June 19, 2006|By STEVE CHAPMAN

CHICAGO -- The quality of modern cars would astonish a time traveler arriving from 1966 or even 1986. Today, we take it for granted that cars are not supposed to break down. Once upon a time, we took it for granted they were destined to spend much of their lives in the shop.

The change is a tribute to the transformative power of capitalism and global commerce. A few decades ago, American automakers were the titans of American industry, bestriding the economy like a colossus. But in recent years, they have been relentlessly out-competed by foreign automakers that have forced them to strive for ever-rising standards. This translates into misery for Detroit, but bliss for consumers.

The latest Initial Quality Survey from J. D. Power and Associates illustrates this unnoticed phenomenon. It says that in the first 90 days of ownership, 2006 model vehicles experienced the fewest problems of any year on record - a 59 percent reduction since 1992.

Consumer Reports, which does more-extensive, long-run surveys, found comparable results. Since 1980, the trouble rate for new cars has been cut by about 80 percent. Just about every automaker has gotten better - to the point that the worst makes are now more reliable than the best ones were back then.

What brought about this drastic makeover? More than anything else, it was competition from Japanese automakers. They started making serious inroads into the American market in the late 1970s, thanks in large part to soaring oil prices that made their small, gas-stingy cars far more attractive.

But when gas prices dropped, Japanese sales didn't. That was because Americans had discovered Toyotas and Hondas had something more to offer than fuel economy - unsurpassed quality.

Peter DeLorenzo, publisher of autoextremist.com, once said the Camry "was responsible for convincing a generation of Americans that there was a whole other world of transportation out there. It is transportation that is reliable - meaning where things just didn't go wrong, a totally alien notion to American consumers. It changed the American market forever."

The Japanese had the chance to win over American buyers because the United States had minimal trade barriers. That changed during the 1980s, when the Reagan administration browbeat them to accept "voluntary" quotas on their vehicle shipments here.

But the restriction proved only a minor impediment. Japanese automakers responded to the quotas by building factories here - reducing the need to export to the United States and proving that American workers were perfectly capable of building excellent cars. The competition, instead of abating, intensified.

As a result, consumers enjoy the best of both worlds: rising quality and bargain prices. The government says that since 1981, the average cost of a new car (adjusted to account for improvements in standard equipment and other features) has risen by 49 percent; the Consumer Price Index has risen 126 percent.

American manufacturers have found the challenge doesn't get easier with time. Last year, General Motors lost $5.6 billion in North America, and Ford spilled $1.6 billion worth of red ink. Both have also been losing market share.

Part of the reason is that quality sells, and Ford and GM, despite vast improvements, can't match the reliability of the major Japanese companies, or even Korea's Hyundai. Lately, the Asian makes haven't had to rely on quality alone to attract customers. As in the 1970s, they also offer better fuel economy at a time when that really matters.

Capitalism and globalization create fierce, relentless pressure for companies to give consumers what they want, which in this market has been more-reliable vehicles for less money. Modern automakers have to operate by two simple rules: Be good, and get better.

What is it like to live in a Golden Age? Anyone in the market for a car doesn't have to ask.

Steve Chapman is a columnist for the Chicago Tribune. His column appears Mondays and Wednesdays in The Sun. His e-mail is schapman@tribune.com.

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