clock menu more-arrow no yes

Filed under:


American consumers exhibit stronger brand loyalty to the cars made by Nissan, Honda and Toyota than to the products Detroit turns out, a Brookings Institution economic study said.

That represents a long-term obstacle for American carmakers, the authors said. Even if American cars now are just as good as their foreign competitors - as Detroit claims - people are likely to perceive them as inferior and continue to prefer Japanese cars.Transportation engineer Fred Mannering of the University of Washington and economist Clifford Winston of Brookings, a Washington, D.C., think tank, studied the "vehicle ownership histories" of 488 households that accounted for nearly 1,000 vehicle purchases over the last several decades.

They charted a steady decline throughout the 1980s in devotion to American-made cars and an upswing in acceptance of those made by Japanese companies.

"The major source of the U.S. makers' problems is attributable to vehicles that were of worse value and quality than (that of) the Japanese," Winston said in an interview. "That's something they can make progress on, but loyalty is something that is, to some extent, out of their control."

Winston said U.S. automakers - especially Chrysler's Lee Iacocca with his commercial saying, "Chrysler's cars are every bit as good as the Japanese, but nobody knows it" - have expressed frustration at the way their cars are still perceived as inferior.

"This reflects the legacy of the past, brought about by the loss of loyalty that could take years for them to overcome," he said.

The authors defined brand loyalty as more than just buying the same maker's car each time. Instead, they said it reflects a variety of factors - vehicle ownership experience, word from friends, news and advertising - all combining to make a customer think of his brand as the standard against which to judge all competitors' cars.

The study said that if old customers had remained loyal during the 1980s, General Motors would have sold 4.3 million more cars, Chrysler would have sold 2.8 million more and Ford would have sold 107,000 more.

With nearly a third of the market forfeited to imports, the Big Three are taking a beating now. They lost $2.3 billion in the first three months of this year - their worst quarter yet.

Without any change in today's loyalty patterns, the authors predicted that GM's market share will fall during the 1990s to below 31 percent, a decline of more than four percentage points.

They said Japan's combined market share will be almost as big as GM's and predicted that Toyota alone will threaten Chrysler as the third-largest seller in this country.

Mannering and Winston proposed some ways U.S. carmakers could catch up.

They suggested that the government evaluate the performance of American and foreign autos and publicize the findings.

Such a policy would violate the tradition that government keep out of marketplace decisions. But it would be a spur to competitiveness, "in the same spirit as government reports of airlines' on-time performance," they said.

In Japan, they noted, automakers are required to subject their products to government quality inspection systems every two years. Thus quality improvements are encouraged even when sales are good.

U.S. carmakers could also reward loyalty with "repeat buyers discounts" similar to frequent flyer programs or offer discounts to customers who already own their brands, the authors said.