J.d. Power 2004 Initial Quality Study

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J.D. Power and Associates Reports:

Korean-Branded Vehicles Overtake Europeans and Domestics in Initial Quality

Industry-Wide, Initial Quality Improves 11 Percent from 2003, And More Than Three-Quarters of Models Perform Better

FOR IMMEDIATE RELEASE: April 28, 2004

WESTLAKE VILLAGE, Calif.—For the first time, Korean-branded vehicles outpace both European- and Domestic-branded vehicles in initial quality, according to the J.D. Power and Associates 2004 Initial Quality StudySM (IQS) released today.

Manufacturers of Korean-branded vehicles, strongly driven by Hyundai’s performance, have aggressively cut initial quality problems by 57 percent in the past six years—dropping from 272 problems per 100 vehicles (PP100) in 1998 to just 117 PP100 in 2004. This dramatic improvement is a stark contrast to the state of initial quality among the Korean-branded vehicles in 1998, when they trailed the industry-leading European-branded nameplates by an imposing 116 PP100. The Koreans now lead the Europeans by 5 PP100 and the Domestics by 6 PP100, and trail the Japanese by just 6 PP100.

"A decade ago, as Korean manufacturers struggled with a universally poor reputation for vehicle quality, no one would have predicted they could not only keep pace, but actually pass Domestics and other imports in terms of initial quality," said Joe Ivers, partner and executive director of quality/customer satisfaction at J.D. Power and Associates. "This demonstrates how vastly more competitive the market has become—which is good news for consumers, who will ultimately benefit."

The study shows that widespread initial quality improvements have taken hold in the automotive industry, with initial quality problems dropping 11 percent from 2003. The industry average stands at 119 PP100—the fewest problems since the study was redesigned in 1998. Among the 169 models included in both the 2003 and 2004 IQS, 129 (76%) have registered an improvement, while 35 (21%) have declined and five (3%) remain unchanged.

"When we started tracking initial quality more than a dozen years ago, the industry said this level of quality wasn’t possible and that it would cost too much," said Ivers. "Yet, automakers could not ignore the warranty savings due to quality, as well as the impact quality has on consumer buying decisions. Even at this historically low level of initial quality problems, the ongoing quality improvements of new vehicles will continue to have a significant impact on the industry—affecting as many as one-third of new-vehicle purchases."

2004 IQS Rankings

Toyota Motor Sales, U.S.A., Inc. continues to be the highest-ranking corporation in IQS, with seven models receiving awards—the most of any corporation. Toyota is followed in the corporate ranking by American Honda Motor Co. and Hyundai Motor America in a tie, and by BMW of North America, respectively. While General Motors Corporation, DaimlerChrysler and Ford Motor Company continue to demonstrate product improvement, all three continue to rank below the industry average.

Lexus set a new IQS record with its Lexus SC 430, which is the best-performing model in the IQS history, scoring just 44 PP100. Lexus remains the top-ranked nameplate, despite a 14 percent decline in initial quality, with four models receiving awards. Lexus is followed in the nameplate rankings by Cadillac, Jaguar, Honda, and Buick and Mercury in tie, respectively.

Thirty out of 37 nameplates have improved IQS scores from 2003. Hyundai, which jumps an impressive 16 rank positions from 2003, makes the most significant advancement, improving 29 percent year-over-year to rank seventh. Between 1998 and 2004, Hyundai has improved by 62 percent—more than any other nameplate and nearly twice the industry average of 32 percent.

"The fact that Hyundai is now outperforming even perennial quality leaders like Toyota—and in a relatively short amount of time—is nothing short of remarkable considering the vast quality gap it faced just a few years ago," said Ivers. "This kind of improvement simply cannot be achieved without a serious commitment to quality over the long haul. The question now is whether Hyundai can demonstrate this same level of improvement in terms of new-vehicle launch and long-term vehicle quality."

The J.D. Power and Associates 2004 Vehicle Dependability Study, which measures quality after three years of ownership, will be released in late June.

Other nameplates reporting significant initial quality improvement in 2004 include: Honda (23%), HUMMER (23%), Land Rover (22%), Jaguar (20%) and Mercedes-Benz (20%).

2004 IQS Assembly Plant Awards

Toyota’s Tahara, Japan, car plant, which produces the Lexus GS 300/GS 430 and the Lexus LS 430, receives the Platinum award for worldwide plant quality for the third consecutive year, with a score of 53 PP100. Honda and Toyota plants also receive awards in the Asia Pacific region, while Porsche, Honda and Ford plants receive honors in Europe. For the first time in the North/South America region, all three awards go to Michigan plants. General Motors’ Lansing Grand River and Hamtramck plants receive the Gold and Silver awards, respectively, and Ford’s Wixom plant receives the Bronze award.

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