Has U.S. Auto Quality Failed?

More creativity could help reverse the industry’s downward spiral.

Although Ford Motor Co. and General Motors Corp. continue to lose market share, they’ve both had active quality programs underway for years. This year Toyota replaced Ford as the second largest automaker and is well on its way to taking over the No. 1 position from GM. At its current pace, Toyota will reach its ambitious goal of capturing 15 percent of the world market early in the next decade. GM, whose sales are ahead of Toyota’s by an output equivalent to only one assembly plant, must look out or it will find itself in the No. 2 position.

According J.D. Power and Associates’ 2003 quality survey, the best quality auto manufacturers were as illustrated below.

GM cars’ overall quality is 35 percent lower than Toyota’s. Both Ford and DaimlerChrysler were even farther down the list.

Another useful reliability indicator is Consumer Reports’ “Good Bets” for used cars. These offer better-than-average reliability for multiple years. The publication lists 50 recommended buys, only five of which are produced by U.S. automakers. Consumer Reports also singled out 31 used cars to avoid in 2003; U.S. auto-makers contributed 13 to that list.

Furthermore, Honda takes 19.9 hours to assemble a car. Ford takes 25.7 hours, GM takes 26.8 hours and DaimlerChrysler takes 31.3 hours. Therefore, the time it takes for U.S. manufacturers to assemble a car doesn’t seem to contribute to poor auto quality.

The U.S. auto industry has been trying to improve for years. Consider Ford’s improvement processes. Beginning as early as the 1940s, it attempted tactics such as:

Initiating a poster campaign promoting quality. These were posted in all Ford facilities and in many suppliers’ plants.

Initiating a companywide slogan contest. John Hislop of the Chester Plant received a new Ford automobile for his first-place entry: “Quality and Demand Go Hand-in-Hand.”

Creating a monthly quality control publication

Sponsoring its own quality control exhibition

Implementing an award system that recognized plants with outstanding quality and productivity improvements

Applying statistical methods to control product quality

Training employees and managers on the principles of statistical quality control

Requiring suppliers to use statistical quality control. Ford even taught SQC classes to its suppliers.

These are just some of the points documented in the January 1950 issue of Industrial Quality Control magazine, which outlined programs Ford implemented during the 1940s. In the 60 years since, how much progress have quality professionals made in improving the organization’s performance? Why hasn’t better quality increased Ford’s and GM’s market shares?

If we can’t build the highest quality into a car, design the most reliability into it or develop processes that take less time to assemble a vehicle, are we doing anything right? With all the benchmarking the U.S. auto industry has undertaken--as well as all the total quality management, Six Sigma and supplier improvement processes--why do we continue to fall behind?

We need a more drastic, holistic and revolutionary solution to bring about the needed changes in management, process and especially design. Only 5 percent of Ford’s manufacturing costs go into the design process, even though it dictates 65 percent of other costs and has the biggest effect on customers. Besides the 5 percent spent on design, Ford allocates 50 percent of its manufacturing budget on materials, 15 percent on labor and 30 percent on overhead. It’s high time the company fixed its design processes. This country can’t afford to lose its auto industry as it has so many others.

“Results indicate GM has turned a corner toward closing the quality gap with foreign manufacturers,” states Joe Ivers, J.D. Power’s executive director of quality and customer satisfaction.

I hope he’s right, but I just don’t see it in the results. And what about Ford and DaimlerChrysler? What should they do to close the gap?

Improved quality should increase customer satisfaction. With increased customer satisfaction, an organization should grow its share of the market. U.S. automakers are losing market share, and it’s clear that what the quality profession is doing isn’t enough. Our organizations need better quality, reliability and more creativity. Today, information technology is doing more to improve quality than the quality professional. We must take our responsibilities more to heart and become much more creative. It’s not just the auto industry that’s in trouble, either. We’re also losing the service industry market. When that’s gone we’ll have no place to go but downhill.

About the author

H. James Harrington is CEO of the Harrington Institute Inc. and chairman of the board of Harrington Group. Visit his Web site at www.harrington-institute.com.