Domestic cars today are approaching and in some cases surpassing major import brands in terms of initial quality. While on average the U.S. industry still lags the Japanese industry, it’s ahead of the European manufacturers like Volkswagon and BMW. The Chevrolet Monaco has been rated one of the most reliable cars on the road. The Nissan Sentra, one of the worst. You’ll find cars from all manufacturers are each end of the spectrum.
There have been dramatic gains in quality and design from domestic automakers in the past 10 years. Unfortunately, they are still tarred from their history of crappy products, and it’s going to take a long time to turn that around.
One of the big problems the domestic manufacturers have is the cost of the retirement and health care contracts they negotiated in the 70’s. Back then, the unions were much more powerful and aggressive, and went on strike regularly for more pay and benefits. The auto makers punted the problem by agreeing to extremely generous retirement benefits - basically kicking the financial can down the road rather than coming up with higher salaries then. Essentially, they gambled. If the industry continued to grow, the relative cost of those retirement packages would be manageable. It’s the same problem as the Social Security problem - predicated on an increasing population of workers to provide for the health benefits of retirees.
Alas, it didn’t work that way. The number of current workers shrank, meaning the size of the retired work force is a higher percentage of overall cost than the companies counted on. The result is that on average, every ‘big three’ car made has roughly $1500 in costs added to it to support retired workers. $1500 in costs is a huge amount. All else being equal, that means other manufacturers can spend an additional $1500 on better quality materials and sell their car for the same price. That’s why the ‘bean counters’ at GM and elsewhere have to fight hard to keep their other costs down, cheaping out on materials and such.
Another problem is management. A lot of innovative manufacturing practices originated in Japan, and we were very slow to pick them up, and when we did we found that they don’t quite work as well here as they did in Japan due to cultural differences. We’ve spent a lot of time trying to figure out how to implement similar practices domestically while modifying them to work well within our corporate culture. For example, Japanese workers and engineers were much more willing to ‘toe the line’ and follow the exact letter of the law when procedures and rules are handed down. This makes management’s job much easier. If you come up with a new process, and apply it knowing that everyone will follow it religiously, you can gauge the results and modify it appropriately until you have it optimized. But if you company is full of shoot-from-the-hip engineers and lower-level managers, you can apply a process and see it fail, and not know WHY it failed. Was it implemented according to plan? Or did some people choose to implement it in their way? Or some think it was stupid and not implement it at all? Or rebel by implementing it in an extremely rigid fashion to ‘prove’ to someone how ‘stupid’ it was?
Don’t get me wrong - there can be tremendous benefits to having employees that try to be innovative and think for themselves - but not if you try to impose a rigid process on them based on the fact that it worked in another country with a different culture.
So domestic corporations have played catch-up for a long time on some of these issues.
But some differences between domestic cars and foreign cars has been due to a difference in the environments they operate in. Take car size and weight - Europeans and Japanese tend to drive their cars slower, for shorter distances, in more congested surroundings. This is going to drive car design towards making smaller cars with more precise steering, firmer suspensions, etc. American cars are driven on big roads at high speeds for long distances. Those roads may not be maintained all that well. This drives designers towards bigger, heavier, more powerful cars with handling a secondary design consideration and an emphasis on suspensions that absorb the bumps.
You’ll notice that as Japanese cars have gained market share in the U.S., they are looking more like U.S.-designed vehicles in terms of size and weight. Japanese trucks used to be tiny little things - now the Nissan Titan is a big truck. Japanese cars have been growing in size dramatically - compare the size of the Accord today to the size of the old Accord - the 1981 Honda Accord sedan had a wheelbase of around 94 inches. The latest Accord has a wheelbase of 107 inches - over a foot longer. In fact, there’s little size difference now between Japanese cars built for North America and domestic cars. However, those cars started out life with better suspensions, tighter steering, and retained those qualities. American cars have been catching up, but now a lot of them are really good.
Another thing to bear in mind is platform sharing, which is really blurring the line between cars from various manufacturers. The Ford Fusion uses the same chassis as the Mazda 6. The Ford Escape and Mazda Tribute are almost identical. Ford, GM, and BMW share a jointly-designed six-speed auto transmission. So quality lines are blurring across all the manufacuters, bringing them closer together.
So domestic cars have almost caught up to the rest of them, and in some cases are as good as or better than the alternatives. But in the interim, the domestics lost huge market share. The result is a dealer network that’s too big, product lines that are still spread out among too many internal brands, a pension liability that’s a bigger factor per car than it should have been, and a fight against public perception of quality that formed when these cars really did suck. The 80’s were a horrible decade for domestic autos, the early 90’s not much better, and people still remember that. It’s going to take a while for the domestics to erase the memory of the truly craptacular cars they were building not long ago.
In the meantime, they have to downsize further, drop some dealer, consolodate some brands, eradicate a few levels of management, and in general get a whole lot better at managing their companies.
As an aside, when you’re looking for a bargain a good place to look is for something that is better than its reputation. American cars can offer good value right now simply because they are playing catchup on their reputation. The big three are losing huge money in part because of the extreme discounting they are having to do to move cars off the lot. That presents some opportunities for consumers, so don’t reject domestic cars out of hand when looking for a new car. Instead, research the reliability record of specific models and look for ones that are much better than the historical record. For example, the Ford Fusion has one of the best initial quality ratings, is one of the few new cars to not have a single major recall, and it’s bult on the Mazda6 platform. But the Mazda6 is thousands of dollars more, and the Fusion is often available with rebates and incentives that don’t exist for the Mazda6.
