Cash Incentives ‘Devalue’ US Autos in Eyes of Consumers

26 August 2004

The latest American Customer Satisfaction Index survey compiled by the University of Michigan reveals that incentives offered by US auto makers are backfiring as consumers no longer perceive purchases of domestic brands as 'value for money'.

Instead, customers are more satisfied with Japanese and European vehicles, even though there may be little difference in quality and reliability between US and foreign brands.

Detroit's 'Big Three' auto makers (General Motors, Ford Motor Company and DaimlerChrysler) could all benefit from abandoning the cash rebates and finance deals associated with sales of their cars, according to Claes Fornell, a business professor at the University of Michigan.

On average, the Big Three offered $4,088 (€3,380; £2,274) per vehicle sale in July, a rise of $4,000 in the last year. This compares with just $1,498 and $2,783 from Japanese and European auto manufacturers respectively. Fornell acknowledges, however, that "once you resort to that type of promotion, it's difficult to get out of it."

Ford, though, aims to do just that with the launch of new models such as the Five Hundred flagship sedan. Says spokesman Dave Reuter: "Nothing is more important to a customer's perception of a product than how well it holds its value."

Although the automotive industry survey ranked two of Ford's current brands (Lincoln and Mercury) as top for consumer satisfaction – with index scores of 86 out of 100 – Japanese nameplates scored highly: Honda Motor Company was second with a score of 85 and Toyota Motor Company joint third with 84.

DaimlerChrysler's Mercedes-Benz fell 4% to 80, its lowest ever score. Brands scoring below the industry average of 79 include GM's Chevrolet (77) and DaimlerChrysler's Dodge (75).

For the complete Q2 customer satisfaction index, click here.

Data sourced from: The Wall Street Journal Online; additional content by WARC staff