Score One for the Retailers

San Francisco — Chrysler LLC is reducing dealership numbers, but its dealers rank better than the auto maker itself, according to a J.D. Power & Associates study.

Chrysler overall scores low in the study of automotive brand power, says Gary Tucker, J.D. Power's vice president and general manager.

Chrysler product quality got rapped. Dealerships did much better.

“Remarkably, Chrysler's strength is in the dealership experience, with above average scores in sales and service,” Tucker says at a recent Consumer Bankers Assn.'s auto finance conference here.

Despite its downsizing efforts, Chrysler realizes what an asset its dealers are.

“Think about what Chrysler dealers have been through and how resilient they have been,” says Jim Press, Chrysler vice chairman and president. “If I'm in a bar brawl, there's no one I'd rather be with than Chrysler dealers.”

He vows that streamlining the dealer network will be orderly and fair. Chrysler now has 3,488 dealerships, 196 fewer than 2007.

Fifty-eight percent of Chrysler dealerships sell all three of the auto maker's brands — Chrysler, Jeep and Dodge — as part of its “Genesis” single-channel distribution program.

The J.D. Power brand study examines factors that influence brand loyalty, an important business asset because “committed customers behave differently and are willing to write a check for a bigger amount,” Tucker says.

“We know from research that the ‘customer experience’ is an overriding factor that drives brand image,” he says.

Auto companies score relatively low in a ranking of the world's most powerful brands, led by General Electric Co. and Microsoft Corp., Tucker says. “You have to get to No.10 before you get to an auto company, and it's Toyota.”

J. D. Power's automotive-brand loyalty study looks at contributing factors such as product quality, customer relations, dealer profitability, reputation, marketing efficiency and residual values.

The Honda brand scored highest. With profitable dealers and loyal customers, Honda is “the healthiest automotive brand,” Tucker says.

No.2 is the Toyota brand, scoring high on reputation and dealer profitability, but getting only fair grades for customer relations.

“In the non-luxury world, Honda and Toyota brands are juggernauts,” Tucker says.

In the luxury world, Toyota Motor Corp.'s Lexus brand was “unbeatable,” he says. “Lexus scored excellent in everything and it is a long way down before you get to No.2 in a lot of categories.”

Among the Lexus standouts is dealer profitability. “It is six times the average,” Tucker says. “It's a very healthy dealer network.”

Some brands had mixed reviews. For example, Jaguar was ranked poor in retained vehicle value and marketing efficiency, but its dealership customer relations were deemed “extremely strong in both sales and service.”

Jaguar also suffers from the ghosts of past years' poor product quality, Tucker says. “Even though Jaguar's product quality has been good of late, the problem is that consumers have long memories.”

At the back of the Brand 101 class are Mitsubishi and Saab.

“Mitsubishi's customer relations were the worst and its marketing efficiency was the worst among non-luxury brands,” Tucker says.

That's taking a toll on customer loyalty, he says. “Mitsubishi is losing two customers for every one it gains.”

The Saab brand was rated poor in everything but customer relations.

Also poor is J.D. Power's outlook for auto sales this year, as the market looks increasingly gloomy.

Initially, 2008 sales were predicted at 15.4 million to 15.7 million units, compared with 16.1 million in 2007.

J.D. Power has dropped its forecast to 14.9 million units. “And we're usually rosy,” Tucker says. “This year is stark.”

He adds: “The challenges of today's market will stretch even the most powerful brands.”