Good news for Ford (NYSE:F) on the quality front: The latest Initial Quality Survey from J. D. Power put the Blue Oval solidly above average, ahead of many German and Japanese rivals and up a few notches from its so-so result last year.
That's a solid win for Ford CEO Mark Fields, who made quality improvement a key priority for Ford during his first year in the top job. But it's clear that there's still more work to be done before Ford can be regarded as a quality leader. That's both good and bad news for Ford investors.
Ford beat Honda and Subaru in initial quality...
The Initial Quality Survey, or IQS, is one of several widely watched indicators of automotive quality and reliability. Published every June, the IQS measures problems with new vehicles in the first 90 days of ownership.
Here's how the results shook out in this year's edition.
For Ford, this is a solid but modest improvement from last year's IQS results, when it was tied with the industry average with 116 problems per 100 vehicles. (And that was a big improvement over 2013, when the Blue Oval bombed.) But this year, Ford's result was good enough to place it ahead of several "import" brands known for generally high quality.
J. D. Power said that "entertainment and connectivity systems" were the biggest source of problems reported in the survey (for all brands, not just Ford). In recent years, Ford has wrestled with glitches and customer complaints about its proprietary touchscreen "infotainment" system, MyFord Touch.
Hoping to boost Ford's quality rankings, Fields ordered a complete overhaul of the system. An all-new system built on new hardware, dubbed Sync 3, is set to debut in many Ford models later this year. Early reports suggest that it's a significant improvement.
In the meantime, Ford engineers have released several updates to the MyFord Touch software, and those updates appear to have reduced the number of complaints.
But by other measures of quality, Ford still has work to do.
...but Ford didn't fare so well in this J.D. Power study
The IQS is just one of several widely watched measures of automaker "quality." Another is J.D. Power's Vehicle Dependability Study, or VDS, which measures problems in the third year of a vehicle's ownership. Whereas the IQS is a good indicator of how well a car is assembled, the VDS is a good gauge of how well cars hold up over time.
Again, though, the problems reported here are largely electronic rather than mechanical. "Bluetooth connectivity and voice recognition issues are the most frequently reported problems after three years of ownership," J.D. Power said in a statement accompanying the most recent VDS report.
That may go a long way toward explaining Ford's low marks: Most of the vehicles in the latest VDS were sold in 2012, when complaints about the earlier iterations of MyFord Touch were high.
But it's worth noting that old rival General Motors has figured it out. GM's four U.S. brands did quite well in both of this year's J.D. Power surveys. The company's touchscreen systems don't get especially high marks from critics, but they seem to cause fewer problems for owners than the troublesome MyFord Touch units.
A higher quality ranking could boost Ford's profits
These quality ratings may seem like no big deal, but they do matter. Brands with better perceived quality can get better prices for their vehicles, which increases profits. And they get better resale prices a few years down the road, which makes it easier for automakers to offer attractive lease deals on new models.
The good news for Ford (and Ford shareholders) is that the new Sync 3 system should help boost Ford in the quality rankings significantly over the next couple of years. Given that some of Ford's longtime rivals are struggling to keep up with the industry leaders, that should lead to gains on pricing and resale value -- and a boost in profitability -- for the Blue Oval.
John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.