Porsche and Hyundai will emerge as the biggest winners Wednesday when J.D. Power and Associates releases its 2006 Initial Quality Study, industry sources say. Porsche will vault to the top spot overall in the study, and Hyundai will place third, sources say. Published: 6/7/06

Who: J.D. Power and Associates is holding a press teleconference to
reveal the changes made to the 2006 Initial Quality Study (IQS),
which will be released June 7. Joe Ivers, executive director of
quality and customer satisfaction research at J.D. Power and
Associates, will explain why IQS has changed, what is different
from previous studies and how the changes will affect media
reporting of study results.

When: 1 p.m. EDT Wednesday, May 10

Where: Teleconference. Please dial (866) 253-5757 (U.S. participants) or
(703) 639-1206 (international participants). To avoid delays,
participants are encouraged to call in five minutes before the
start of the teleconference.

What: The J.D. Power and Associates 2006 Initial Quality Study(SM)
provides automobile manufacturers and suppliers with in-depth
information on new-vehicle quality after 90 days of ownership.
The study is based on responses from purchasers and lessees of
current model-year vehicles and uses a problems-per-100-vehicles
(PP100) metric. The study includes quality comparisons by
assembly plant, make and model. The 2006 study is based on
results from a redesigned questionnaire that features an expanded
and refreshed question battery that differs in important ways from
previous studies.

This year's scores are not comparable to those of previous years because this year, for the first time, J.D. Power considered design flaws that bother consumers as well as actual defects. Had the ranking been based on defects alone, Lexus would have ranked first and Porsche second.

"For example, BMW vehicles have among the fewest defects and malfunctions, along with Toyota," said Ivers. "But BMW approaches controls and displays in a way that creates some problems for customers, leading to more design-related problems overall than Toyota incurs."

Though Toyota and its luxury arm, Lexus, continued to dominate the latest Initial Quality Survey, the Japanese giant had some unexpectedly tough competition from two brands not generally known as quality benchmarks.



Porsche pushed past Lexus to capture the number one spot in the 2006 IQS, a closely-scrutinized measure of how consumers rate the quality of their vehicles during the first few months of ownership. The typical Porsche had 91 problems for every 100 vehicles, or pp100. Lexus, with 93 problems, came in a close second - while actually capturing the top spot in each product segment in which the luxury marque competes.



Perhaps the biggest surprise was delivered by the South Korean automaker, Hyundai. Not many years ago, it helped anchor the bottom of the quality charts. But this year, reported J.D Power & Associates, which publishes the annual study, Hyundai took the number three spot, edging out Toyota , which was fourth among the 37 brands included in the '06 IQS.



Overall, those manufacturers saw their quality improve by eight percent compared to the results in 2005 - at least by using last year's methodology. But California-based Power made some significant changes to the Initial Quality Survey for 2006, which Joe Ivers, JDPA's executive director of quality and customer satisfaction, said were meant to make the study, now in its 20th year, "more detailed, finite and particular."



Among other things, the IQS now separates actual defects from design flaws, which could include a flimsy cupholder or a too-small glovebox. The result of that change proved significant. Toyota would have been third, among all brands, based solely on defects, but it was eighth in terms of design flaws.



Just looking at actual defects, BMW would have tied with Toyota . But it suffered from a variety of consumer-perceived design flaws, as well, including its oft-maligned iDrive, as well as ergonomic issues with the new 3-Series. Combining the two categories, BMW fell to the bottom third of the manufacturers included in this year's IQS, with a combined problem count of 142. The industry average was 124.



Hyundai's stellar performance showed it able to control defects, while also limiting the number of problems its owners had with vehicle design. That's all the more significant, said Ivers, when you consider that the Korean carmaker was nearly driven out of the U.S. market, a decade ago, due to quality problems.



"They had to reinvent themselves," said Ivers. "It is clear they are now in the big leagues."



"This ranking proves what tremendous strides we've made in quality, especially with an almost entirely new model lineup," the average vehicle less than two years old, said Owen Koh, Hyundai's President and CEO.



Even competitors had to offer praise to the Korean maker. "Do we keep our eye on Hyundai? Of course we do, because they're going becoming a bigger and bigger player," said Toyota 's Jim Lentz. But he insisted he wasn't upset being nudged into fourth place.



Toyota took the top spot in 11 of the 19 product segments, Lentz emphasized - the Corolla, for example, was best compact car, while the Solara was named best midsize sporty car. And Lexus grabbed the top spot in every segment it competed in, including the large premium car winner, the LS430.



If Toyota showed any weakness, it was with Scion. The "brand-within-a-brand" was credited with 140 problems per 100 - just ahead of BMW, but behind such nameplates as Kia, Dodge and Buick. Ivers suggested several reasons for the Toyota division's problems, including the fact that Scion promotes the customization of its vehicles. Some aftermarket parts just aren't up to snuff, and that generates discontent, he said.



There's also the fact, added Toyota Vice President Lentz, that Scion attracts some of the youngest and most picky buyers in the industry. Other youth-oriented brands, such as Mazda, Mitsubishi, and Volkswagen, also scored well below the industry average.



"That's one of the reasons for Scion," Lentz asserted. "We have to have a better sense of how to please these buyers better in the future."



Porsche's strong performance showed that paying attention to the results of the IQS can help a manufacturer get quality under control, said Ivers. Ironically, Porsche was traditionally one of the weak links among the European brands that once dominated the quality charts. This year, only one other European brand scored above average. Jaguar slipped into sixth place, with an average 109 defects per 100 vehicles.



Mercedes-Benz fared only slightly better than BMW, with 139 problems for every 100 vehicles. BMW's MINI brand had 150 problems per 100, Volkswagen 171, and Land Rover plunged to last place, with 204.



American automakers had some setbacks in the latest IQS, which tabulated the responses from 63,607 motorists to see how their vehicles performed during the first 90 days of ownership.



With 117 problems, Cadillac was the number-eight brand - but the top-ranked American nameplate. GMC, Chrysler, Lincoln, and Chevrolet were the only other domestic brands to top industry average.



But JDPA's Joe Ivers said Buick and HUMMER, both General Motors brands, may have been hurt by their own success. In past years, Buick built some of the highest-quality products sold by any American manufacturer, including the recently-retired Regal. Newer models, such as the Lucerne , have been attracting a younger and more affluent set of buyers, but those customers are more picky - and apparently less satisfied.



Doug Betts, the vice president of customer satisfaction at Nissan, said he was generally pleased with the 2006 IQS results. His brand moved up four slots this year, while its sibling division, Infiniti, jumped by two. More importantly, said Betts, the revised IQS formula offers his company guidance for future quality control efforts.



"It's a lot more clear what the problem is," said Betts, "and how to attack it."