QUALITY ISSUES CLOUD CHRYSLER'S GAINS

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Chrysler Corp. is making a great run, but its Achilles' heel-the perception of product quality problems-could trip it up.

The automaker is riding a string of hit products and strong quarterly earnings, like last week's announcement of third-quarter profits of $651 million, up 54% from a year earlier. It's a stunning turnaround for a company that appeared headed for bankruptcy when the decade began.

But the good news could sour fast if Chrysler can't overcome concerns about product quality. The company's efforts to deal with the issue with marketing ran smack into the problem itself in the Oct. 10 issue of USA Today.

A new corporate ad, from Bozell Worldwide, New York, showed a tall stack of letters, with excerpts from 15 praising Chrysler products. "Our owners let go of their steering wheels just long enough to applaud," said the headline of the ad introducing the new corporate theme line, "Judge us by our performance."

However, the same issue of USA Today included an editorial special report on readers' evaluations of their vehicles. "In our reader write-in, complaints about Chryslers outnumbered those of other carmakers' products," said the introduction to one story that quoted several letters detailing owner problems.

The reader write-in reinforced other reports. All of Chrysler's brands finished below average this year on two surveys by J.D. Power & Associates, Agoura Hills, Calif., one on initial product quality and the second on overall customer satisfaction. And there has been a series of well-publicized recalls for products such as the popular Dodge/Plymouth Neon.

Chrysler needs to improve the reliability of some of its powertrains and improve overall customer service at dealerships, said Jesse Snyder, an analyst with Autofacts, a West Chester, Pa., market planning consultancy.

"Those issues have the potential to put a real damper on their growth," Mr. Snyder said. "It will take time and a lot of money to fix the problems. The good news is that it's easier to do from a position of high profitability."

Chrysler says it's getting something of a bad rap.

"There's more to quality than what J.D. Power measures," said A.C. "Bud" Liebler, VP-marketing and communications. While Power measures things gone wrong, it doesn't get at "customer delight" over performance and details that exceed their expectations, Mr. Liebler said.

"I've been with the company 15 years, and while there's still some hate mail, there's a lot more love letters than ever before," he said.

Internal discussion about the positive letters led to the corporate campaign, an estimated $10 million, three-week effort that began with a TV spot that broke in both 30- and 60-second versions on Oct. 9. The campaign is running on network and cable TV and in 85 newspapers.

Among the points made by the ads: Chrysler has a higher owner loyalty rate than Honda, Toyota or Nissan; owners of Chrysler minivans are so satisfied, 74% buy another Chrysler vehicle; and in the last year, 300,000 import owners switched to Chrysler.

The automaker has been able to win over import owners with an array of stylish cars and trucks such as the Jeep Grand Cherokee, its LH line of midsize sedans and the peppy little Neon. Chrysler officials say those former import owners are younger and more discriminating than traditional domestic car buyers, and give tougher grades on surveys like those of J.D. Power.

As for the USA Today ad, Mr. Liebler said he was "frustrated and angry" that the publication didn't give Chrysler the chance to move its ad to another date. "A major magazine or a TV network would notify an advertiser if they were going to run something anti-your product in the same environment as your ad," he said.

USA Today officials declined to comment.

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