Manufacturers of Korean-branded vehicles, strongly driven by Hyundai's performance, have aggressively cut initial quality problems by 57% in the past six years-dropping from 272 problems per 100 vehicles (PP100) in 1998 to 117 PP100 in 2004. This improvement is in contrast to the state of initial quality among the Korean-branded vehicles in 1998, when they trailed the industry-leading European-branded nameplates by 116 PP100. The Koreans now lead the Europeans by 5 PP100 and the domestics by 6 PP100, but trail the Japanese by 6 PP100.

"A decade ago, as Korean manufacturers struggled with a universally poor reputation for vehicle quality, no one would have predicted they could not only keep pace, but actually pass domestics and other imports in terms of initial quality," says Joe Ivers, partner and executive director of quality/customer satisfaction at J.D. Power and Associates. "This demonstrates how vastly more competitive the market has become-which is good news for consumers, who will ultimately benefit."

The study shows that widespread initial quality improvements have taken hold in the automotive industry, with initial quality problems dropping 11% from 2003. The industry average stands at 119 PP100-the fewest problems since the study was redesigned in 1998. Among the 169 models included in both the 2003 and 2004 IQS, 129 (76%) have registered an improvement, while 35 (21%) have declined and five (3%) remain unchanged.

"When we started tracking initial quality more than a dozen years ago, the industry said this level of quality wasn't possible and that it would cost too much," says Ivers. "Yet, automakers could not ignore the warranty savings due to quality, as well as the impact quality has on consumer buying decisions. Even at this historically low level of initial quality problems, the ongoing quality improvements of new vehicles will continue to have a significant impact on the industry-affecting as many as one-third of new-vehicle purchases."

Toyota Motor Sales, U.S.A. Inc. continues to be the highest-ranking corporation in IQS, with seven models receiving awards-the most of any corporation. Toyota is followed in the corporate ranking by American Honda Motor Co. and Hyundai Motor America in a tie, and by BMW of North America, respectively. Although General Motors Corp., DaimlerChrysler and Ford Motor Co. continue to demonstrate product improvement, all three continue to rank below the industry average.

Lexus set a new IQS record with its Lexus SC 430, which is the best-performing model in the IQS history, with 44 PP100. Lexus remains the top-ranked nameplate, despite a 14% decline in initial quality, with four models receiving awards. Lexus is followed in the nameplate rankings by Cadillac, Jaguar, Honda, and Buick and Mercury in a tie, respectively.

Thirty out of 37 nameplates have improved IQS scores from 2003. Hyundai, jumped 16 rank positions from 2003, making the most significant advancement, improving 29% year-over-year to rank seventh. Between 1998 and 2004, Hyundai has improved by 62%-more than any other nameplate and nearly twice the industry average of 32%.

"The fact that Hyundai is now outperforming even perennial quality leaders like Toyota-and in a relatively short amount of time-is nothing short of remarkable considering the vast quality gap it faced just a few years ago," says Ivers. "This kind of improvement simply cannot be achieved without a serious commitment to quality over the long haul. The question now is whether Hyundai can demonstrate this same level of improvement in terms of new-vehicle launch and long-term vehicle quality."

The J.D. Power and Associates 2004 Vehicle Dependability Study, which measures quality after three years of ownership, will be released in late June.

Other nameplates reporting significant initial quality improvement in 2004 include: Honda (23%), Humer (23%), Land Rover (22%), Jaguar (20%) and Mercedes-Benz (20%).

The study also recognizes assembly plants for their contribution to quality. Toyota's Tahara, Japan, car plant, which produces the Lexus GS 300/GS 430 and the Lexus LS 430, receives the Platinum award for worldwide plant quality for the third consecutive year, with a score of 53 PP100. Honda and Toyota plants also receive awards in the Asia Pacific region, while Porsche, Honda and Ford plants receive honors in Europe. For the first time in the North/South America region, all three awards go to Michigan plants. General Motors' Lansing Grand River and Hamtramck plants receive the Gold and Silver awards, respectively, and Ford's Wixom plant receives the Bronze award.

IQS measures a broad range of quality problems, heavily weighted toward defects and malfunctions, quality of workmanship, drivability, human factors in engineering (i.e. ease of use) and safety-related problems. Among these categories, the area that accounts for the greatest product improvement since 1998 are defects and malfunctions, down from 61 PP100 to 40 PP100. Further, those that are related to safety show a 44% improvement-from 25 PP100 down to only 14.

The 2004 Initial Quality Study is based on responses from more than 51,000 purchasers and lessees of new 2004 model-year cars and trucks, who were surveyed after 90 days of ownership. This industry benchmark study for new-vehicle initial quality is now in its 18th year.