Good news for Ford Motor Company (NYSE:F): At least by one important measure of quality, its current lineup beats most rivals' -- including all of the Japanese brands.
The annual J.D. Power Initial Quality Survey is one of several widely watched measures of the quality of automakers' vehicles. The 2018 edition, released on Wednesday, places Ford near the top -- trailing only Hyundai and Kia among mainstream auto brands.
Here's a look at the survey's results and what they do (and don't) tell us about Ford and its rivals.
What this is: A measure of an automaker's build quality
The J.D. Power Initial Quality Survey, or IQS, asks participants to report problems with new vehicles that occurred in the first 90 days of ownership. It's distinct from the other important J.D. Power auto-quality survey, the Vehicle Dependability Survey (VDS), which measures problems in the third year of ownership.
The IQS covers 33 brands, including nearly every auto brand sold in the United States. (The few exceptions include low-volume luxury brands like Ferrari and Aston Martin, as well as Tesla, which for whatever reason has chosen not to make its customer-registration data available to J.D. Power. Also missing from this year's results are the Fiat and Smart brands. Both were included in the survey, but they didn't show up in the results because the sample sizes were too small.)
The IQS' results are reported by brand, as you'll see in the chart below. In addition, J.D. Power gives awards to the best-performing models in several different vehicle segments. (Ford did well in those, too.)
Simply put, the IQS provides some information about how well an automaker's vehicles are assembled, while VDS tells us something about how the vehicles hold up over time. The thing to remember is that there are a number of different ways to measure "quality," and the IQS is just one of them.
Let's take a look at the 2018 results.
How Ford's initial quality compares to rivals'
Here's the chart from J.D. Power that shows how each auto brand performed. The score is the average number of problems reported per 100 vehicles; obviously, a lower score is better.
Ford also won five of the segment awards, the most among automakers. Hyundai won four, and GM, BMW, and Nissan won three each.
This is the second year in a row in which Ford has outpaced all of its Japanese and American rivals. (Ford also outpaced most of the German brands in 2017 and 2018. Only Volkswagen subsidiary Porsche, which has been near the top of the rankings for years, beat the Blue Oval in the last two editions of the survey.)
Here's how Ford's result -- fifth place with 81 problems per 100 vehicles -- compares with its results over the last several years:
- Fourth with 86 problems per 100 vehicles in 2017,
- 11th with 102 problems per 100 vehicles in 2016,
- 12th with 107 problems per 100 vehicles in 2015,
- 16th with 116 problems per 100 vehicles in 2014,
- 27th with 131 problems per 100 vehicles in 2013, and
- 27th with 118 problems per 100 vehicles in 2012.
Why did Ford fall one place in 2018? The answer is that Hyundai joined its sibling brands Kia and Genesis at the top of the rankings; Hyundai came in 8th last year. But more importantly, despite the drop in the standings, note that Ford's overall score improved over its 2017 result. In fact, Ford's score has improved in every year since 2013, when it placed a lowly 27th in the IQS.
Electronics were a key to Ford's improvement
The reality is that by 2012, Ford's vehicles were quite well-built -- for the most part. The fit and finish, interior quality, reliability, comfort, and fuel economy of most Fords in 2012 was far ahead of where the company's products had been a decade earlier -- and solidly competitive with vehicles from the "import" brands it had been chasing for years.
But Ford got beaten up badly in the IQS and other quality surveys for several years because of ongoing problems with a touchscreen "infotainment" system called MyFord Touch, an evolution of the SYNC voice-recognition system that Ford first introduced back in 2007.
While the initial version of SYNC was generally well-regarded, MyFord Touch...wasn't. When first released, it was poorly laid out and full of bugs. In fact, MyFord Touch was so bad that Consumer Reports devoted an entire article to calling out its problems in 2012 (the Consumer Reports article is paywalled, but this Fool.com article includes a summary).
Several rounds of updates to MyFord Touch made it somewhat better, but the problem wasn't really solved until Ford rolled out the next-generation system, called SYNC 3. Built on a completely new software foundation, SYNC 3 has proven to be much easier to use and much more reliable than the old MyFord Touch system. (Consumer Reports agrees, by the way.)
The upshot: This is a critical competitive point for Ford
Ford, like its old Detroit rivals, was seen as lagging import-brand rivals in quality for many years. That perception is still out there, but it's not really supported by the data anymore.
It may seem kind of silly that Ford lost ground in a quality ranking because of software bugs in its infotainment system. But software competence -- and the stability of in-car systems -- has become a much more important part of the auto-ownership experience than it was even a decade ago.
For investors, the fact that Ford has now performed very well on this survey for two years in a row is a very good sign. While Ford still has challenges, it's solidly outperforming most of its peers when it comes to build quality -- and that's something that will help both sales and residual values over time.