TrueDelta

Based on the emails I’ve been receiving from TrueDelta’s members, I have underestimated the impact of the unintended acceleration fiasco on Toyota’s future sales. This fiasco is going to hurt Toyota, possibly for years to come. The problem isn’t that many people feel that Toyotas are unsafe. Most seem to recognize that a very small percentage of Toyotas have suffered from unintended acceleration. But they’re hearing about problem after problem, so Toyota’s quality seems to be lower. Most of all, Toyota’s public statements have seemed dodgy, and people seem to feel that they cannot trust the company to keep owners’ best interests or even their safety in mind.

In other words, they’re feeling about Toyota much like they’ve felt for decades about Detroit. That the company is focused on sales and profits rather than the owners of its cars. That Toyota does not really care about them.

The odd thing here is that many people previously felt that Toyota could be trusted more than the typical auto company. Why? Because of their reputation for reliability? Because of the Prius?

The fact of the matter is that, when car owners have had problems with Toyotas, Toyota has been at least as bad as the average car company in taking care of them. Conducting TrueDelta’s Car Reliability Survey, I hear customer care horror stories involving virtually every manufacturer. If a car has a problem you feel it should not have had out of warranty, and you haven’t been regularly servicing your car at a particular dealer, that dealer will tell the manufacturer you’re not a valued customer, and you’ll get little or no out-of-warranty assistance. This is as true of Toyota as any other make. Have a problem that requires special help, and you’ll quickly learn how little they care. Toyota’s advantage was that its cars have been (and in many cases continue to be) more reliable, so people had fewer opportunities to experience how little they really care.

Among mainstream automakers (I have less information on luxury makes), Honda seems to be better than the others in readily paying for repairs after the warranty ends, buying back troublesome cars (always with a confidentiality clause, so you won’t hear about them), and in other ways taking care of customers.

But even with Honda I don’t get the sense that they do these things because they care more. The confidentiality clause when they buy back a car indicates their true interest. They simply concluded some time ago that taking care of customers would earn goodwill and, perhaps most importantly, protect their reputation and so earn them more money in the long run. And it has. It’s simply smart business. Other car companies don’t actually care less. They just aren’t as smart in this regard.

Toyota, though, behaves no differently than GM, Ford, Chrysler, Nissan, or VW and has not in recent memory been more trustworthy than these companies. But apparently many people felt they were more trustworthy anyway. This illusion is now, in many cases, gone.

What does this matter? Well, when you trust someone to do the right thing, you don’t pay nearly as much attention to what they’re actually doing. You buy the car blindly. Going forward, car buyers will be scrutinizing both Toyota and its cars more closely. Those who want to buy a car with a minimum of research and thought are now much more likely to go elsewhere.

So, GM is going to allow car buyers to return a car in the second month of ownership for a refund.

Or, buyers can opt for an extra $500 rebate instead.

So, how many people are going to forego $500 for the right to return the car?

The fine print, as I understand it:

1. Dealer processing and titling fees are not refundable. Sales tax is.

2. The car must have less than 4,000 miles on it.

3. The car must have at most $200 in wear and tear or damage.

4. Only one return per household.

My wife is still upset that I returned a partially eaten loaf of bread to CostCo. (My argument then: no one liked how it tasted. What’s a satisfaction guarantee for?)

So I’m guessing she won’t let me buy a Corvette Z06 unless I intend to keep it. And if I intended to keep it, I’d opt for the $500 rebate.

Or maybe GM really does believe in its products. A friend of mine once bought a big screen TV right before hosting a Super Bowl party, planning to return it the following week. But, after having that TV in his living room, he couldn’t bring himself to return it.

Maybe GM figures that anyone who bought a GM car planning to return it would find that they couldn’t live without the car?

I keep reading over and over, most recently in today’s Automotive News, that GM needs to tell the American public that it “is not the company that screwed them in 1978.” The claim: the cars that turned millions of people away from GM were decades ago, and that GM is unfairly being punished for the sins of long-retired executives and employees.

As much as I’d like to see GM recover, this annoys me. I tend to get annoyed when people try to make something true by repeating it over and over. They read it somewhere, so it must be true, right?

The reality: GM’s cars are much better than they were, but they often aren’t as good as they should be. Based on responses to TrueDelta’s Car Reliability Survey, the oft-mentioned 2008 Chevrolet Malibu was the exception, not the rule, among GM’s recent new product launches. The 2007 Aura, the 2007 Lambdas, the 2008 VUE, and the 2008 CTS all launched with two to three times the average repair frequency.

This said, an extra problem or two in the first year or three isn’t what scares away potential buyers. Based on the emails I receive, many people want to know how a car will hold up for years after the warranty ends. So neither IQS nor VDS is going to carry much weight with them.

In the long-term, if GM’s cars hold up then its reputation will improve. But this could take a decade or more.

In the interim, GM needs to more firmly and comprehensively stand behind its products, to remove risk from buyers’ minds. As I’ve suggested before, they could do this by stating that they’ll cover the cost of any common problem for the first 100,000 or even 120,000 miles. The “old GM” wasn’t just a matter of the number of problems the cars had. How the company treated owners with car problems was at least as significant. Currently customer assistance is provided out of warranty on a seemingly arbitrary case-by-case basis. This does nothing to instill potential buyers with confidence in the company.

GM isn’t unusual in this regard–this sort of “customer care” is the industry norm. But GM needs buyers more than other car companies do. If GM truly is a different company now, providing clearly defined, comprehensive customer care would be a good way to prove this to the car buying public. Talk alone shouldn’t be sufficiently convincing, and probably won’t be.

GM is asking car buyers to wager that its quality has improved. But is GM willing to put its (U.S. government-provided) money where its mouth is, and bet on itself?

I’ve written before that Detroit needs to reduce the risk of buying its cars by providing proper customer care. Unfortunately, I recently learned that Ford might be cutting back on the out-of-warranty assistance it provides to customers.

While visiting a close friend of my wife, we learned that her husband’s truck had an electronic controller in its 4WD system fail two weeks after the warranty ended. I have no idea if this is a common failure. But many times manufacturers pick up the cost of failures when they occur so soon after the warranty ends.

I visited a Ford dealer with him. The service writer told us that in the past Ford would probably have covered the part, but that in recent months they rarely have. As far as he could tell, Ford has cut way back on their out-of-warranty assistance as part of their effort to avoid running out of cash.

While I can certainly understand Ford’s need to avoid running out of cash, I’m not sure that cutting back on customer care is the best way to do this.

I strive to remain objective about how different manufacturers compare, and even to give them all the benefit of the doubt. Problem is, ownership of a 2002 Chrysler PT Cruiser (my wife’s car, she wanted something cute and fun) can make this very difficult. A conversation today with a dealership service writer was only the latest incident.

Some background: back in the fall of 2006 we had to replace the wheels on the PT Cruiser because, at 3.5 years of age, the original ones had corroded so badly around the valve stem seats that the tires were losing over ten pounds of pressure per day. Chrysler picked up half of the tab. They felt they were being gracious in doing so. After all, the wheels were six months out of warranty.

I’d never before heard of wheels corroding so badly that the tires wouldn’t hold air. So TrueDelta conducted a special survey on alloy wheel and chrome wheel corrosion. It turned out that while this problem was most common with Chryslers, it wasn’t uncommon with many other makes.

I heard from a few other owners of the same special edition of the PT Cruiser. It seems likely that the failure rate is close to 100 percent for cars in places where the roads are salted in the winter. Just a few months ago, I came across the following on Honest John’s, a UK car site: “Chromed alloys corrode and lose tyre pressure. Are unrepairable and a new set is £2,000, so best to switch to aftermarket wheels.” Wish we had, but Chrysler’s “customer care” assistance was predicated on buying the replacement wheels from Chrysler.

A few months after the wheels were replaced, the torque converter failed at 52,000 miles. This time they picked up nothing. We’d used up our “goodwill” with the wheels–one payment per customer.

We’ve had a few other repairs since then: brake calipers, control arm bushings, wheel bearings, the horn, and the thermostat housing (cracked). Today we had the outer tie-rod ends replaced. We’ve learned that a repair every eight months or so feels like “in the shop all the time.”

But what really concerns me: the finish is starting to flake off the replacement wheels, which are about 2.5 years old. Seems the replacement wheels were no better than the originals. We’ve had this problem once. We shouldn’t have to deal with it again.

So I called the dealer, which is located just a few miles from Chrysler’s HQ. Turns out that they’re not happy that I haven’t had my car serviced there since the awful experience getting the first set of wheels replaced (tires still at 10 psi after paying to have the wheels “inspected,” lug nuts overtorqued so badly AAA almost couldn’t get them off).

The service writer’s final response before hanging up on me: “You’re the one who bought a PT Cruiser, not me. You get what you deserve when you do that.”

The final words I squeezed in before the click: “I can’t believe you just said that.”

I’ll call Chrysler Customer Care on Monday, to see if there’s anything they care to do about the wheels. Probably not.

Conducting TrueDelta’s research, I hear of quite a few such horror stories, with many different brands. Honda might be a bit better than most. Toyota certainly isn’t. In general, the only way to avoid such “customer care” is to not have problems in the first place.

I’m still waiting to learn of a company that truly stands behind its products by consistently taking care of common problems caused by engineering errors even after the warranty ends. If GM and Ford want to live, this is the #1 thing I would suggest that they do. For what such a strategy would look like, read this blog entry from November 2007. Chrysler? They’re most likely too far gone.

Every time Consumer Reports or J.D. Power releases the results of a reliability survey, much of the press rushes to reduce the message to a single question: are Detroit’s cars as reliable as Japanese cars?

The same answers have followed in all recent years: the gap is closing, and some domestic cars now score as well as the imports, but on average, or if you sum up the category winners, a gap remains. So we see the same oversimplified headlines and articles over and over.

Why the rush to reduce the issue of reliability to Detroit vs. Japan? Does the press or reading public try to similarly oversimplify acceleration times? No, in that case people expect test scores for not only a specific model but a specific powertrain.

The same should be done for reliability. The fact of the matter is, the reliability scores for a make’s models often vary widely. Some require few repairs, some require more repairs. Looking up individual model scores does require a bit more work from everyone, but not much more. Well, when such scores are provided. (TrueDelta provides them.)

The focus on Detroit vs. Japan not only misleads some people into buying Japanese models that are actually unreliable, but makes it difficult for those Detroit car models that do score well to get the consideration they deserve. This is the perception gap Detroit complains about–because it is one thing threatening the survival of an entire industry.

In defense of oversimplification, some things do pertain to the manufacturer as a whole, if not a nationality as a whole. Most importantly: customer care. How well the customer is treated when a problem occurs will be fairly constant for all of a make’s models. And, as I’ve written before, Detroit’s customer care needs to be much better. Too often these companies, when forced to choose between covering an early failure out of warranty and losing a customer, choose to lose the customer.

That’s a separate if related issue, though. When it comes to the number of problems a car is likely to have, car buyers, car manufacturers, and the people the latter employ would all benefit if consumers stopped trying to oversimplify reliability and at least looked at the scores for individual car models. And it wouldn’t hurt if the press took the lead on this one rather than “giving the people what they want.” After all, isn’t this the same line Detroit uses to defend its overdependence on SUV sales?

We’re all very busy these days. I know I am. So it helps to feel that there are companies that we can trust to provide good service at a good price. After all, who has the time to shop around for the best car insurance, phone plan, Internet service, doctor, mechanic, stock broker, accountant, lawyer, and so forth on a yearly basis?

Well, I’ve got bad news for all of us: if you trust that you’re getting the best rates possible, you’ll probably end up paying too much, even far too much.

Case in point: for the last 18 years I’ve used USAA as my insurance provider. They’ve always provided great service. And for a long time their rates were much lower than those for any other insurance provider.

In recent years I’ve noticed my rates climbing higher and higher. Each year I’d call them, and see what they could do about these ever higher rates, which was never much. A few years into this ascent I checked with a few other insurance providers, and USAA was still lower, but not by nearly as much as they had been.

Well, I’ve got to make some major changes in my auto policy. So today I called Progressive. And they came in nearly $1,200 per year lower than USAA. Even factoring in USAA’s roughly $100 per year “dividend,” we’re talking a difference of over $1,000 per year.

I then checked my homeowners, and Progressive’s partner came in over $200 lower (and the gap will widen to $350 come the first of April).

I was shocked. (I’m still in shock.) I called USAA to see what they had to say.

They answered the phone with, “Thank you for trusting USAA.”

My response, “Well, I did until today. And now I wish I hadn’t.”

They “did what they could” for me, and found a savings of $150 off their current rates. Not nearly enough.

Now, I don’t know if anyone at USAA is getting rich off of the steady increase in their rates. Technically they’re a non-profit owned by their policy holders. But clearly at some point along the way they lost control of their costs, a basic failure of management. Knowing how much their members/customers trusted them, they probably didn’t feel much pressure to remain lean. In other words, though I don’t think they’re crooks, I do think they’re mismanaged.

The end result is that in recent years I’ve been spending about $1,200 more a year than I should have been. Because I trusted them to keep their costs low, so they could keep my rates low. And I should not have.

I wish I’d checked other companies’ rates sooner, and urge everyone to do the same.

GM and, to a lesser extent, Ford have been rolling out some vastly improved products. Reviews have been favorable. Yet their sales have yet to firm up. What gives? What do they have to do to regain the customers they have lost over the past few decades?

In the long term, better products will do the trick. But, as the saying goes, in the long term we’re all dead. GM and Ford might be dead before this sea change can occur on its own.

For a quicker result, they need to look at why people buy Toyotas and Hondas: they think they’ll get what they expect to get. Toyota’s quality reputation has taken a few hits lately, but nothing serious enough to shake consumers’ trust in the company.

In contrast, car buyers aren’t sure what they’ll get with a GM or Ford product anymore. And, if something does go wrong, they strongly suspect that the manufacturer will dodge responsibility to the fullest extent possible.

My advice to GM and Ford: if you want customers back sooner rather than later, you’ve got to take a much stronger stand behind the product.

It’s not just about a longer warranty. A warranty doesn’t only specify what the company is legally bound to cover. It also implies what the manufacturer is not legally bound to cover. Putting too much emphasis on the warranty effectively says, “Once the warranty is up, you’re on your own. By buying this car, you’re betting that we’ve done our job well enough. Don’t like that bet? Then don’t make it.” Put another way, a warranty suggests an adversarial relationship, where the manufacturer isn’t going to do something unless forced to by force of law. Few people enjoy a relationship that is entirely based on a legal contract.

So, while a longer warranty can certainly play a role in restoring confidence, these manufacturers need to go beyond the warranty and pledge that, if something goes wrong with the product, the manufacturer will do anything within reasonable limits to make it right.

What does this mean, really? It means putting yourself in the customer’s shoes, and saying, “If I were the customer, what would I expect the manufacturer to do?” Now there are always going to be rare, random failures in this part or that part with any car. Maybe the manufacturer should pick these up, just because they are rare and because it’ll keep the customer happy. But this sort of problem should be so rare that the potential impact either way is limited.

Of much greater significance are common failures that occur out of warranty, but short of 100,000 or maybe even 120,000 miles. Such failures are caused by a lapse in engineering, not just bad luck, and so the customer will rightly expect the manufacturer to take responsibility beyond the term of the warranty.

My suggestion to GM and Ford: pick up the tab on these common failures. And don’t take this step quietly, but as a clearly stated policy. Even today these and other companies have “customer care” departments that sometimes pick up the tab with out of warranty repairs. But how such decisions are made is unclear, and not anything that can be counted on in advance. What this says to the customer: “Maybe we’ll pick up the tab, maybe we won’t. You’ll find out when it happens.”

GM and Ford have tried the case by case approach, and it isn’t working. When they buy Hondas and Toyotas, Americans are saying they don’t like that bet. The solution: don’t make customers wonder whether you’re going to pick up the tab. Provide them with confidence that, if something goes wrong owing to inadequate engineering, the company will take care of it. The great majority of car buyers are not interested in placing a bet on a car company, even if they’re the sort of person who enjoys going to Vegas. Make them wonder, and they just won’t buy your car, even if it is much better than last year’s car.

Automotive News is reporting that, starting today, nearly all 2006 and newer Chrysler vehicles will come with a lifetime powertrain warranty. The only limitations mentioned are that the warranty is not transferable–I’ve never heard of a lifetime warranty that was, so no surprise there–and that the vehicle must have a free inspection performed every five years by the dealer.

As mentioned in an earlier editorial, Chrysler’s customer care hasn’t been the best. Hopefully this is a sign that, with the new ownership, they will become a much better company.

That editorial suggested that for their own good manufacturers should warranty major repairs for as long as customers today expect a car to not require them. Lifetime is longer than I proposed, but some transferability would also be nice. After all, others have five-year powertrain warranties that transfer; it appears that second owners will only get a three-year powertrain warranty on these Chryslers.

Still, an excellent step. Hopefully others do the same.

Last year I posted an editorial about how manufacturers who don’t stand behind their products will lose customers. Well, it appears that Cadillac might have learned this lesson. Over at GMInsideNews I learned of Don Hammonds’ Pittsburgh Post-Gazette article on Cadillac’s high customer service scores.

An especially encouraging excerpt from the article:

What’s Cadillac doing right?

Giving dealers lots of authority to get things done, and not being hidebound and rigid when it comes to pleasing customers, for one thing.

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