Survey Says Americans Favor Foreign Car Brands

American consumers favor Asian and German auto makers, which could force the Detroit Three to adopt more aggressive pricing, a survey suggests.

Satisfaction levels among customers of General Motors Corp., Ford Motor Co. and Chrysler LLC are “slumping” while, industry-wide, customer satisfaction is at “an all-time high,” according to the American Customer Satisfaction Index.

The American Customer Satisfaction Index is a national economic indicator of customer evaluations of the quality of products and services available to household consumers in the U.S.

“The problem for domestic companies is that they now lag further behind their foreign counterparts,” says University of Michigan Professor Claes Fornell, author of the index, which consists of a quarterly review of products and services gleaned from customer evaluations. “This is not going to be helpful, as (Detroit auto makers) will lose more pricing power.”

This trend poses a particularly onerous problem for Detroit as rising gasoline prices spark a market shift away from trucks and SUVs, to smaller, thriftier cars and cross/utility vehicles. Trucks and SUVs comprise the core of the lineups at GM, Ford and Chrysler.

The harsh verdict against GM, Ford and Chrysler flies in the face of recent studies by “Consumer Reports,” J.D Power and other sources. That body of research suggests Detroit auto makers are building higher-quality products that are resonating well in the market.

Detroit's auto makers have sought in recent weeks to adjust their truck-heavy production mix as pump prices hovered near $4 per gallon, about $1 ahead of last year.

But production shifts take time. Ford, for example, will retool three truck plants for small-car production and introduce six new European-flavor vehicles to North America by 2010.

Chrysler plans leverage alliances with other global auto makers, such as Nissan Motor Co. Ltd., with an eye to model-year ‘10 vehicles and hints at some all-new products as early as next year.

GM, meanwhile, dramatically has stepped back its pickup and SUV production, a move that will see truck output cease at four assembly plants and ramped up car and CUV builds. It plans a new compact car for the U.S. in mid-2010.

The situation has contributed to second-quarter losses of $15.5 billion at GM and $8.7 billion at Ford. As a private company, Chrysler does not file a quarterly financial report, but the auto maker earlier this month claimed first-half earnings of $1.1 billion before interest, tax, depreciation and amortization.

Meanwhile, Asian auto makers have been able to seize the opportunity. American Honda Motor Inc, for instance, has managed to post a sales gain this year on the strength of its fuel-sipping Civic compact.

ACSI Over Time

(Q2 2008 companies and industries)