2019

PROGRESS REPORT

AUTOMOTIVE

A Big Comeback

Automakers respond to consumers’ shift back to SUV and truck preferences

In the early 2000s, an unstable economy and skyrocketing gas prices caused people to start tightening their belts. For many, that meant trading in their gas-guzzling SUVs and trucks for smaller cars. Today, with cheaper gas prices, a low unemployment rate, more disposable income and eco-friendly vehicles, consumer preferences are changing once again.

Karl Brauer, executive publisher at Cox Automotive, said the three main drivers for this shift—design improvements, lower gas prices and a better economy—were “really a one-two-three punch. Essentially, every force lined up to help SUVs, and that has been hurting car sales.”1

A new preference

According to research firm Autodata Corp., despite total vehicle sales dipping 2.1% throughout the first half of 2017, light truck sales increased 4.6%.2 Between 2006 and 2016, SUVs saw a 52% increase in sales.3

It’s common for consumer preferences to shift among vehicle types depending on many factors, such as the economy, but analysts believe this shift is permanent.4 LMC Automotive has forecasted that by 2022, only about 27% of consumer vehicle sales in the United States will be cars.5 The auto industry forecasting firm also predicts that during the next four years, SUV and truck sales will account for the top three automakers’ overall sales as follows:

  • General Motors (GM): 84%.
  • Ford Motor Co.: 90%.
  • Fiat Chrysler: 97%.6

Besides lower gas prices and a better economy, what’s driving this change? The simple answer is flexibility. Gone are the days of having to choose between the fuel economy and comfort of a car and the cargo room of an SUV or truck. Advancements in engineering have made SUVs more fuel-efficient, and design and quality improvements have made them more comfortable. Mike Manley, the global head of Jeep, said that in the past, car buyers had to compromise—but not anymore.

“Now I can get everything I want to get, and I don’t have to give up all those things that I might have had to give up five or six years ago,” Manley said.7

The big catalyst for the shift to SUVs was gas prices. During the 2008 recession, gas prices in the United States reached an all-time high of $4.10 per gallon, so consumers opted for the fuel efficiency of cars, which made up 51% of vehicle sales at the time.8 In response to the rising gas prices, U.S. oil extraction increased from about 5 million barrels per day to 10 million per day in just 10 years.

“There has been kind of been a monumental paradigm shift in the oil sector,” said petroleum analyst Patrick DeHaan. “The U.S. is producing the most oil it has since the 1970s. All this has led to three-plus years of relatively affordable gasoline.”9

According to DeHaan, oil prices are stable and gas prices are projected to hold steady between $2.50 and $3 per gallon. More affordable gas means fuel efficiency is less important to car buyers.10 However, even if gas prices were to suddenly skyrocket, DeHaan doesn’t think consumers will abandon their larger vehicles.

“Some buyers would move to cars, assuming there are still small cars available at that time, but I think the majority of the movement would still take place within the SUV segment,” he said.11

Automakers respond

Automakers are listening to their customers and responding to their changing needs and wants. “It’s not that automakers can’t make money on sedans,” said LMC Automotive analyst Jeff Schuster. “But if consumers want something that produces better margins, that’s where the focus is going to be.”12

In response to a 20% drop in U.S. car sales in 2017, GM is making fewer of its models, including the Chevy Cruze, Impala, Buick LaCrosse and Cadillac ATS and CTS. Fiat Chrysler has stopped making its Dodge Dart and Chrysler 200 altogether.13

Perhaps the most aggressive response, however, has been Ford’s. In an April 25 press release, the automaker announced that—except for the Mustang and a yet-to-be-released model—it will no longer manufacture or sell any of its passenger cars in North America.14

According to the release, Ford is putting its efforts into “building a winning portfolio and focusing on products and markets where Ford can win,”15 namely by funneling $7 billion in R&D capital to its trucks, utility and commercial vehicles.16

“Given declining consumer demand and product profitability, the company will not invest in next generations of traditional Ford sedans for North America,” the press release said. “Over the next few years, the Ford car portfolio in North America will transition to two vehicles—the best-selling Mustang and the all-new Focus Active crossover coming out next year.”17

Ford president and CEO Jim Hackett said, “We are committed to taking the appropriate actions to drive profitable growth and maximize the returns of our business over the long term. Where we can raise the returns of underperforming parts of our business by making them more fit, we will. If appropriate returns are not on the horizon, we will shift that capital to where we can play and win.”18

Unintended consequences

While a consumer’s preference for an SUV over a sedan seems innocuous enough, the reality is it has had some pretty big consequences. With the rise of SUVs has come a rise in pedestrian deaths. Since 1975, pedestrian deaths have decreased 20%19—until 2016, that is, which saw the highest number of pedestrian deaths in about 25 years—5,987. Between 2009 and 2016 alone, overall pedestrian deaths increased 46%.20

According to a new study released by the Insurance Institute for Highway Safety (IIHS), pedestrian deaths involving SUVs increased a whopping 81%. Distraction behind the wheel, texting while walking and even marijuana legalization have all been tagged as potential reasons for the dramatic increase.21

But shouldn’t the plethora of safety features that new SUVs come equipped with be making them safer?

“SUVs have higher front ends, and often the design for the vehicle is much more vertical than passenger cars,” said IIHS president David Harkey. “We do think that the number of SUVs on the roadways now and the size of the vehicles is playing some role.”22

Because of an SUV’s higher front end, crashes involving SUVs are more fatal because pedestrians typically are struck in the head and chest.23

There’s no doubt SUVs are here to stay, so what can be done to keep pedestrians safe?

“Understanding where, when and how these additional pedestrian crashes are happening can point the way to solutions,” Harkey said. “This analysis tells us that improvements in road design, vehicle design, and lighting and speed limit enforcement all have a role to play in addressing the issue.”24

Some initiatives already underway include developing better headlight technology. IIHS, for example, has established a headlight rating program, which it hopes will encourage improvements. Subaru, too, is equipping its vehicles with a pedestrian detection system, which reduces claim rates for pedestrian injuries by 35%.25

—compiled by Lindsay Dal Porto, assistant editor

References

  1. Robert Ferris, “The Steadily Disappearing American Car,” CNBC, April 6, 2018, www.cnbc.com/2018/04/06/the-steadily-disappearing-american-car.html.
  2. Ryan ZumMallen, “Auto Sales Stats Show Permanent Consumer Shift to Light Trucks,” Trucks.com, July 3, 2017, www.trucks.com/2017/07/03/signs-point-permanent-light-trucks-takeover.
  3. Ibid.
  4. Ibid.
  5. Robert Ferris, “Ford Is Basically Giving Up on U.S. Car Business, and GM Is Not Far Behind,” CNBC, April 26, 2018, www.cnbc.com/2018/04/26/ford-is-basically-giving-up-on-us-car-business-and-gm-is-not-far-behind.html.
  6. Ibid.
  7. Larry P. Vellequette, “What’s Driving the Shift to Crossovers,” Automotive News, July 13, 2015, www.autonews.com/article/20150713/RETAIL/150719968/whats-driving-the-shift-to-crossovers.
  8. Ferris, “The Steadily Disappearing American Car,” see reference 1.
  9. Ibid.
  10. Ibid.
  11. Ibid.
  12. Chris Isidore and Peter Valdes-Dapena, “American Sedans Are Vanishing,” CNNMoney, Jan. 22, 2018, http://money.cnn.com/2018/01/22/news/companies/american-sedans-future/index.html.
  13. Ibid.
  14. Kuppuraj Gopi, “Ford Bids Farewell to Sedans, Shifting $7B Investments to SUVs & Trucks,” PreScouter, May 2018, https://prescouter.com/2018/05/ford-bids-farewell-sedans-shifting-7b-investments-suvs-trucks.
  15. Ford Motor Co., “Ford Delivers First Quarter $1.7B Net Income, $2.2B Adj. EBIT; Fitness Actions Improve 2020 Outlook,” Ford Motor Co., April 25, 2018, https://media.ford.com/content/dam/fordmedia/North%20America/US/2018/04/25/1q18-financials.pdf.
  16. Gopi, “Ford Bids Farewell to Sedans, Shifting $7B Investments to SUVs & Trucks,” see reference 14.
  17. Ford, “Ford Delivers First Quarter $1.7B Net Income, $2.2B Adj. EBIT; Fitness Actions Improve 2020 Outlook,” see reference 15.
  18. Ibid.
  19. Insurance Institute for Highway Safety (IIHS), “On Foot, at Risk: Study Highlights Rising Pedestrian Deaths, Points Toward Solutions,” IIHS, May 8, 2018, www.iihs.org/iihs/news/desktopnews/on-foot-at-risk-study-highlights-rising-pedestrian-deaths-points-toward-solutions.
  20. Ibid.
  21. Eric D. Lawrence, Chris Woodyard, Zlati Meyer and Kristi Tanner, “Death on Foot: Pedestrian Fatalities Skyrocket in U.S.,” Detroit Free Press, May 8, 2018, www.freep.com/story/news/2018/05/08/pedestrian-deaths-skyrocket-suvs-share-blame/585379002/.
  22. Ibid.
  23. IIHS, “On Foot, at Risk: Study Highlights Rising Pedestrian Deaths, Points Toward Solutions,” see reference 19.
  24. Ibid.
  25. Ibid.

CUSTOMER SATISFACTION

Airline Customer Satisfaction In North America Stays High

Airline investments in newer planes, improved customer satisfaction with overhead storage compartments and cheaper fares have driven a seventh straight year of improved customer satisfaction, according to a recent J.D. Power study.

The 2018 North America airline satisfaction study showed that overall passenger satisfaction with airlines improved to 762 (on a 1,000-point scale) in 2018, which is a record high. J.D. Power ranked Alaska Airlines as the highest traditional carrier in terms of customer satisfaction for the 11th straight year—with a score of 775. Delta Airlines finished second with a score of 767.

Among low-cost carriers, Southwest Airlines ranked highest for the second consecutive year, with a score of 818. JetBlue Airways ranked second, with a score of 812.

“Operationally, it’s never been a better time to fly,” said Michael Taylor of J.D. Power. “Passengers perceive greater value in ticket prices, checking in has never been easier, passengers are more satisfied with the actual aircraft and airlines have improved their baggage-handling performance.”

The study measures passenger satisfaction with airline carriers in North America based on performance in seven factors: cost and fees; in-flight services; aircraft; boarding/deplaning/baggage; flight crew; check-in; and reservations.

For more from the study, visit www.jdpower.com/resource/jd-power-north-america-airline-satisfaction-study.


SALARY SURVEY

APICS Report: Earnings Up for Supply Chain Professionals

Salaries for supply chain professionals continue to rise, according to a recent survey conducted by American Production and Inventory Control Society (APICS).

The association’s inaugural salary report showed that the average salary for supply chain professionals in 2017 was $85,210. In addition, 90% of respondents received an average salary increase of at least 3% last year. Other highlights from the report include:

  • Supply chain professionals experience high job satisfaction: When asked to rate their overall job satisfaction with working in the supply chain field overall, 96% of those surveyed reported high levels of satisfaction, with an average rating of 8.4 on a scale of 0-10. Overall, supply chain professionals are also satisfied with their current job positions, reporting an average rating of 7.4.
  • Tenure matters, but recent graduates are seeing higher initial salaries: As might be expected, supply chain professionals with the most tenure receive the highest salaries. A $39,818 gap separates the average salaries of those with at least 20 years of work experience in the supply chain field and those with less than one year in the field. However, possibly due to the current demand for recent supply chain graduates, the average salary for recent graduates is slightly higher than the salary level for those with one to three years of tenure.
  • Leadership roles increase salary prospects: Roles that require supervision of others receive more significant compensation. Supply chain professionals who directly or indirectly supervise at least 50 individuals report an average base salary of about 82% more than those who do not supervise others; supervising even one to four individuals provides a 13% increase.
  • There is value in certification: Those who hold just one certification reported a median salary that was 19% higher than those who are not certified. Moreover, those with two or three certifications reported median salaries of 39% higher and 50% higher, respectively.

Visit www.apics.org/salaryreport to access the report, which costs $195 for non-APICS members.


ASQ WORLD CONFERENCE

India Insurer Team Captures Gold Status

Max Life Insurance Co. Ltd. of India was recently awarded gold-level status at ASQ’s International Team Excellence Awards for improving efficiency and cost savings.

Two other teams were recognized during this year’s presentations at ASQ’s World Conference on Quality and Improvement in May in Seattle. The teams are:

  • Max Group’s Max Healthcare Institute Ltd., Team Life Savers (bronze status).
  • Pan Asia Technical Automotive Center Co. Ltd., Virtual Rubik’s Cube Team, China (silver status).

A total of 23 entrants from eight countries competed for gold, silver and bronze status. About 3,000 people attended this year’s conference. Next year’s event is scheduled for May 20-22 in Fort Worth, TX.

For more information on the conference, visit asq.org/wcqi. For information on how to participate in the 2018–2019 International Team Excellence Award Process, visit asq.org/team-excellence.


New @ ASQ

What’s on our minds

ASQ has released a new case study about how a global financial institution overhauled its manual processes and systems to meet market demands that rely heavily on digital transactions. The changes led to $50 million worth of efficiency opportunities. To access the case study, visit https://tinyurl.com/asq-case-study-dig-trans.


QUALITY HEADLINES

Quality-related news from around the world

—powered by Lexis Nexis

New Tesla Software to Offer ‘Full’ Autonomy, Musk Says

An update to Tesla’s Autopilot software coming next month will enable “full self-driving features” for the automaker’s electric cars, Elon Musk said. His comments came amid a race by automakers and tech firms to roll out fully autonomous vehicles, but also rising concerns about their safety. Musk said the updated “Version 9” software would help address several issues. Read the full story at https://tinyurl.com/new-tesla-software.

Three Factors That Accelerate theRise of Artificial Intelligence

Undoubtedly, artificial intelligence (AI) is the next big thing in the high-tech industry. From critical life-saving medical equipment to self-driving vehicles, AI will be infused into almost every application and device. The three essential aspects accelerating the pace of innovation in the fields of machine learning and AI are: next-generation computing architecture, access to historical data sets and advances in deep neural networks. For more information, visit https://tinyurl.com/ybjmdeqa.

Global Healthcare Access and Quality Improve From 2000-2016

According to the latest data from the Global Burden of Disease study, healthcare access and quality improved globally from 2000 to 2016. The study used an index to measure the quality and accessibility of healthcare based on 32 causes of death that should be preventable with effective medical care. For the first time, the study also analyzed healthcare access and quality between regions in seven countries. Read more about the study at https://tinyurl.com/y9lo3ruh.

For a roundup of the week’s most noteworthy stories delivered to your inbox every Friday, subscribe to the QNT Weekly e-newsletter at asq.org/newsletters.


Healthcare

Data Show Decline In Hospital-Acquired Conditions in U.S.

About 350,000 hospital-acquired conditions—such as adverse drug events, surgical site infections and injuries from falls—were avoided and the rate was reduced by 8% from 2014 to 2016, new data released by the Agency for Healthcare Research and Quality (AHRQ) showed.

The Centers for Medicare & Medicaid Services (CMS) has set a goal of reducing hospital-acquired conditions by 20% from 2014 through 2019. Federal experts say the recent drop signals that initiatives led by the CMS are helping to make care safer.

National efforts to reduce hospital-acquired conditions helped prevent an estimated 8,000 deaths and save $2.9 billion between 2014 and 2016, according to the report.

“Today’s results show that this is a tremendous accomplishment by America’s hospitals in delivering high-quality, affordable healthcare,” said CMS Administrator Seema Verma. “CMS is committed to moving the healthcare system to one that improves quality and fosters innovation while reducing administrative burden and lowering costs. This work could not be accomplished without the concerted effort of our many hospital, patient, provider, private, and federal partners—all working together to ensure the best possible care by protecting patients from harm and making care safer.”

For more on the AHRQ data, visit www.ahrq.gov/professionals/quality-patient-safety/pfp/index.html.


ASQ

Two ASQ Journals Publish Latest Editions

The latest issues of two ASQ journals have been released.

  • In Quality Management Journal’s (QMJ) July edition, one article details a study on a theoretical framework exploring the factors influencing restaurant customers’ positive word-of-mouth behavior after a service failure. You can access that journal by visiting asq.org/pub/qmj/index.html.
  • The Journal of Quality Technology’s (JQT) July edition includes an article on 3-D printing and its potential to fundamentally change the nature of future manufacturing. The article is the lead paper of JQT’s special issue titled “Quality Engineering in Advanced Manufacturing.” Access JQT at asq.org/pub/jqt/index.html.

Both QMJ and JQT were made available to ASQ full, senior and fellow members earlier this year.

News Briefs

ISPI Event Set: The International Society for Performance Improvement is hosting its fall innovation symposium Oct. 18-20 at Wayne State University in Detroit. For more on the event, visit https://tinyurl.com/ispi-fall-conf.

27 Apply for Baldrige Award: Twenty-seven organizations have submitted applications for the 2018 Malcolm Baldrige National Quality Award: 14 healthcare organizations, five education organizations, six nonprofit organizations and two small businesses. Baldrige examiners will evaluate the award applications before conducting site visits. Recipients will be selected in November and receive their awards in the spring of 2019.


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