Let the fireworks begin. It's time to party like its 1965, folks. As of yesterday, Detroit is back.
According to the most-quoted source for who's hot and who's not in the automotive world, the J.D. Power Vehicle Dependability Survey, Detroit's Big Three have moved into the top half of all automakers when it comes to making cars that don't fall apart within three years of purchase. The 2005 edition of the survey places the industry average number of problems reported per make of vehicle at 237 this year, a 32-point improvement over 2004.
The news most likely to make headlines and translate into better sales: Each of the American automakers -- Ford
Fellow islander Nissan
From time to time, pundits opine that the J.D. Power survey is little more than a popularity contest -- one that can be easily rigged. After all, most of J.D. Power's readers are auto-industry players themselves. In absolute terms, there may be some merit to that way of thinking.
As investors, though, we should focus instead on one little factoid from the press release that announced the survey results: "3-year-old vehicles of brands that perform above the industry average in [the survey] typically retain $1,000 more of their value than those of brands performing below the industry average."
That's key to Detroit automakers' success -- more reliable cars make better investments. In recent years, one of the major flaws behind the "buy American cars" thesis has been that it makes no economic sense. All cars are depreciating assets, granted. But if given a choice, educated consumers prefer to buy a car that depreciates more slowly than others. Given the choice between buying a $20,000 Toyota that will sell used for $15,000 in three years, and a $17,000 Ford that will sell for $10,000, it actually makes sense to buy the pricier foreign model. Boost Ford's three-year-used market value up to $11,000, however, and the company has a fighting chance of selling some hot rods. More importantly from where we sit, it also has the chance of providing satisfactory returns on its shareholders' investments.
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Fool contributor Rich Smith owns no shares in any company mentioned in this article. He buys his trucks from GM and his commuter cars from Nissan.