Believe It or Not, GM Is Ranked No. 1 for Quality

Did that title surprise you as much as it did me? I was actually caught off guard when I read J.D. Power and Associates' Initial Quality Study released today. Here's how the survey, in its 27th year, works. It measures the number of problems on the current year's vehicles reported after 90 days of ownership. It rates by brand, so while Porsche knocked off Lexus to take the top spot, General Motors (GM -0.07%) was the top ranked corporation. Here are the details and what it could mean for investors and consumers.

Results
Now, before I get into the results of each brand it's important to note that these measured problems in the report aren't manufacturing defects or recalls. Instead, nearly two-thirds of the issues consumers experience are design problems and quality shortfalls, according to J.D. Power and Associates.

General Motors headquarters. Photo credit: General Motors.

According to the report, Porsche ranks the highest in the study, with GMC and Lexus filling out the top three brands. Behind that was Infiniti and Chevrolet rounding out the top five rankings. It should be noted that GMC and Chevrolet were the only two non-luxury brands that broke into the top five.

"GM has the best quality of any corporation in the study, the first time it's been on top," said David Sargent, said the study's author told Automotive News. "And GMC and Chevrolet have never finished in the top five before."

If you break down the press release further, out of the 26 model segment awards, Chevrolet received five top spots with its Avalanche, Camaro, Impala, Silverado HD, and Tahoe. Honda, Kia, Mazda and Porsche each had two models taking home segment awards.

I follow the automotive industry for The Motley Fool, and from what I've seen over the last couple of years, Ford (F -1.15%) has topped GM in terms of product quality and consumer demand. The sales and market share increases back me up on that.

I very much respect J.D. Powers and Associates studies, and often find them great tools for inside information to the automotive industry. However, I think what we have to distinguish here is that Ford's SYNC and MyTouch infotainment systems have some work to do and those small frustrations drive its poor quality ranking in this survey.

In reality, though, while these give consumers small frustrations, Ford is still producing an overall vehicle that consumers love and are driving off the lots in droves. Fusion and Escape, for instance, have set numerous records in sales this year. Not to mention that Ford can't produce enough Fusions to keep them on dealer lots -- plant capacity has been running at 114% to try to keep up with demand. I think that's what the author hinted at below.

"Automakers are investing billions of dollars into designing and building vehicles and adding technologies that consumers desire and demand, but the risk is that the vehicle design, or the technology within the vehicle, in some cases may not meet customer needs," said David Sargent, vice president of global automotive at J.D. Power, in a press release.

Bottom line
When you look at the big picture, it's clear that Detroit's Big Three automakers have come a long way since the depths of the recession and their stereotype of producing poor-quality vehicles. Consider that for the first time in two decades all three Detroit automakers gained market share in the U.S. for the entire first quarter. In addition to that, Ford has produced America's best-selling vehicle for the last 31 straight years, and owns four of the top 12 best-selling models -- more than any other automaker.

We also have to remember that Ford consistently ranks on top in consumer loyalty and that doesn't happen by chance. I think it's time we give GM a nod in respect for improving vehicle quality -- GMC jumped 10 spots to rank second in this year's study -- but in my opinion, Ford is still on top of Detroit's Big Three automakers. One thing is for sure: If Ford and GM continue to impress consumers with quality, popular designs, and valuable vehicles, investors will surely be rewarded as automotive sales continue to surge.