it necessarily implicate the setting of performance standards, or are you suggesting a regulatory body could simply say a vehicle must last number of years, or a number of miles?

Mr. WEINBERGER. I am inclined to the latter. I don't think there is anything in the report on the basis of warranties which would justify a governmental body saying a car has to be able to accelerate to 60 miles an hour within 5 seconds, or half a second anything of that kind. These aren't matters that are within the reasonable expectations of buyers which the Government should attempt to interfere with. These are matters that can be developed and determined by the buyer on the basis of his own tests.

What we are talking about is whether the tires will blow out the first week or whether the carburetor is going to fail, or the battery is going to go dead in the first 2 months-things of that kind. We think it is entirely within the reasonable expectation of a buyer that his car should perform in a minimum way, established by the Government; that is, it should run and it should be fit for the purpose for which it is sold.

There have been, we feel, too many cases in which that has not been the case.

Mr. SUTCLIFFE. Does that indicate, then, that the test for minimum. standards relates to the reasonable expectations of the consumer? And if it does, does that suggest that perhaps the Federal Trade Commission would have the expertise to determine those things? Because they are the very same things that are now considered in the determination of implied warranties.

Mr. WEINBERGER. I think if the Congress wished to assign us that responsibility, we would try to fulfill it, obviously. It is our belief that there are more technical matters involved, such as the determination of how long a carburetor should be expected to last, how long is a reasonable period of time within which the repairs should be made, things of this kind.

We did not attempt to fix any of these standards, and we expressly stated that we felt an agency with the expertise necessary to do this would be a preferred method of approach.

But we do believe that these standards can be established, and that once established they can then be exceeded by any company that wishes to gain a competitive advantage.

Mr. SUTCLIFFE. Would this take a considerable amount of time, or some time to develop this kind of expertise within an existing governmental agency?

Mr. WEINBERGER. I don't know that it would take a considerable amount of time to develop that expertise. I think it would take a considerable amount of time to develop the standards. But I would hope it could be done within a 2-year period. I don't see any reason why, with proper participation and interest by the people who know the most about it-that is, the manufacturers and dealers we could not develop standards of this kind that would be perfectly fair and would be usable within a 2-year period.

I would certainly hope that could be done.
Mr. SUTCLIFFE. Thank you very much.

Senator Moss. Thank you very much, Chairman Weinberger. We appreciate your appearing here today, and we have benefitted from your explanation of the automobile warranty report of the Commission.

It is obvious that auto warranty problems plague the American consumer and that it is necessary to have automobile manufacturers stand behind their products. The price of poor quality control and improper repair can mean loss of life and untold millions of dollars, and we cannot pay this price.

The Commission deserves praise for its forthright recommendations of legislative action. It seems to me that the Guaranty Act which this committee is considering is a compatible first step down the legislative road mapped for Congress by the Commission. It would be my hope that no further steps will be necessary.

But if the automobile manufacturers refuse to comply on the basis of the rules set down in S. 3074, I think the committee would quickly consider the second step, which the Commission has suggested in this report. It has certainly been helpful to us. We appreciate very much your coming here this morning.

Senator Moss. Our next witness is Mr. John J. Nevin, vice president of marketing, Ford Motor Co.

We are pleased to have Mr. Nevin.

Do you have any others accompanying you, Mr. Nevin, who would like to sit at the table with you?

STATEMENT OF JOHN J. NEVIN, VICE PRESIDENT, MARKETING, FORD MOTOR CO., ACCOMPANIED BY ROBERT W. SCOTT, GENERAL COUNSEL, FORD MOTOR CO.

Mr. NEVIN. I would like Mr. Scott from our office of general counsel to join me, if I may.

Senator Moss. We are glad to welcome you, Mr. Scott.

The Ford Motor Co. is to be congratulated for appearing before the committee today. Despite the importance of these deliberations here today, the Ford Motor Co. is the only automobile manufacturer who has requested an opportunity to present its views in this forum. No discussions here this morning should implicate the Ford Motor Co. to the exclusion of other automobile manufacturers, and let me assure you that any nonpublic expressions about these problems from other automobile manufacturers will be greeted with the question "Why didn't you tell me this at the public hearing?"

We are pleased, indeed, that the Ford Motor Co. has responded and requested to come forward and be heard.

Mr. NEVIN. Thank you very much for those introductory comments, Mr. Chairman.

I am John J. Nevin, vice president-marketing, Ford Motor Co. Ford welcomes the opportunity to appear today to express its views on the very complex problems associated with providing the American public with adequate warranty protection and general repair services in the consumer durable goods industries.

In addressing these problems, we would prefer not to dwell at length on the specific provisions of the Consumer Products Guaranty Act

(S. 3074). We have prepared specific comments on that bill and these are attached to this statement for the record.

We propose to concentrate instead on what we consider to be the broader issues of public policy that have been raised by testimony before congressional subcommittees and by the recent Federal Trade Commission report on automobile warranties. Most of our testimony today will be concentrated on warranty and repair problems as seen by Ford in its role as a manufacturer of automobiles. The company's Philco-Ford subsidiary is, of course, involved in the manufacture and sale of household appliances. Although the facts that we will cite this morning will be oriented to the automobile industry, we believe that most of our conclusions and recommendations are as applicable to refrigerators and television sets as they are to cars and trucks.

Our testimony today has been organized to deal sequentially with three interrelated issues:

First, are there significant customer satisfaction problems in the automobile repair industry today?

Second, if such problems exist, is there evidence from which the causes of these problems can be reasonably established?

Third, if some measure of agreement can be reached on the severity of the problems and their causes, can that information be used to establish the actions that might most logically be undertaken by industry and by Government to accomplish meaningful improvements? We would propose to start by expressing our views on the significance of the customer satisfaction problems that now exist in the automobile repair industry.

CUSTOMER SATISFACTION WITH SERVICE

Ford does not consider the current level of satisfaction with automotive repair services to be adequate. The conclusion that repair services are not meeting the demands of the American public can be reached by reading the customer complaint letters received by automobile manufacturers, by listening to testimony heard by the Congress, and the Federal Trade Commission, or by considering market research results.

A Newsweek survey is cited by the Federal Trade Commission as providing a meaningful measure of the current level of dissatisfaction.

Throughout page 51 of the report that Chairman Weinberger referred to, this Newsweek survey is described in detail and I think it is correct to describe it as one of the meaningful pieces used in the report.

We are perfectly prepared to concede that there are other surveys that give higher and lower results with respect to dissatisfaction.

Newsweek surveyed persons who had purchased new automobiles within the preceding 6 months. Its conclusions with respect to customer satisfaction, therefore, were heavily oriented to customers seeking repairs under the terms of automobile warranties. Newsweek concludes that 14 percent of the new car owners were either very dissatisfied or somewhat dissatisfied with repair services. The testimony heard by Senator Hart's Subcommittee on Antitrust and Monopoly

would suggest that customer dissatisfaction with the repair services available for older cars is at least as high as that reported by Newsweek for new car owners.

There are today about 95 million automobiles on the American road; the Newsweek survey would suggest that 13 or 14 million Americans are now dissatisfied with the automobile repair services that are available to them. Since the privately owned automobile has become a substantial element in America's transportation system, Ford accepts as fact the conclusion that the ability of many owners to receive satisfactory service, whether they seek warranty repairs on a new vehicle or more general repairs for an older vehicle, is a consequential problem that must be resolved.

We are not prepared, however, to accept the suggestion that today's problems are related to the attitudes of persons engaged in the business of repairing cars and trucks. Our conviction is supported by the fact that dissatisfied customers are not limited to those owning a particular brand of car nor are there meaningful differences in the levels of dissatisfaction among customers seeking repair services in franchised dealerships, independent garages, or gas stations. There are today some 400,000 retail establishments engaged in the automotive repair business. Most are locally owned enterprises in which the operator has a substantial financial interest. His livelihood, therefore, depends on his ability to attract and hold customers. We find it impossible in these circumstances to conclude that customer dissatisfaction is in any meaningful way attributable to a deficiency in the attitudes of the operators or employes of these establishments.

We believe that assertions suggesting that the problems in the automobile service industry are somehow attributable to a lack of motivation on the part of manufacturers to accomplish improvement are equally subject to challenge. Market research results indicate that Ford can expect to sell a new Ford product to about 71 percent of the owners who are satisfied with the service that has been made available to them. The same research suggests that only 52 percent of the owners who are dissatisfied with service will repurchase a Ford product.

If the market research evidence suggesting that some 14 million Americans are dissatisfied with service is accepted, Ford can also assume that it will eventually lose some 600,000 new-car sales as a result of the now existent dissatisfaction on the part of Ford owners with available repair services. The importance of sales losses of this magnitude to Ford can perhaps be put into perspective by noting that Ford's very successful Mustang produced 400,000 sales in its first year and that Ford's new Maverick will probably require close to 2 years to produce 600,000 sales.

The sales and profit stimulus to a dealer to provide satisfactory repair service is even more direct than is the case for the manufacturers. Market research studies show that a dealer can expect to sell a new car to 48 percent of his satisfied service customers; this expectation drops to 21 percent among customers expressing dissatisfaction with the repair service they have received.

Ford's economic interest in accomplishing improved customer satisfaction in the warranty arena can also be judged by reviewing some

of the costs Ford experienced in the United States during the calendar year 1969. Payments made by Ford to its dealers to reimburse them for warranty repairs made on Ford vehicles totaled approximately $300 million.

These expenditures are for some cars which have been in the field. 3 or 4 years, and for some which have been in the field only a matter of months.

In the same year, Ford's total advertising expenditures were about $150 million, and the cost Ford incurred to amortize the special tools that are required to produce its new models totaled about $325 million. It goes without saying that, when Ford spends $325 million on tooling it hopes to produce cars with functional attributes and styling appeals that will please its customers, and that when Ford spends $150 million on advertising, it hopes to attract new customers to Ford and Lincoln-Mercury dealerships. It should be equally clear that, when Ford spends $300 million to accomplish warranty repairs, it has an immediate and important business interest in seeing to it that those expenditures produce acceptable levels of customer satisfaction.

In our view, the question of whether the problems in the automobile repair industry are related to a lack of will on the part of the manufacturers or repair shop operators to accomplish improvement should be a matter of considerable concern to the Congress. If one concludes that the problem is one of attitude, then the Congress could logically decide that legislation, designed to require the industry to meet some specific standard, would be of benefit to the American consumer. If, on the other hand, the Congress concludes that the difficulties in the repair industry are associated with more basic problems, then congressional action might more logically be directed at finding solutions to those problems.

Ford believes that the automobile repair industry's current problems derive from changes that have occurred in the automobile industry itself in recent years and from conditions that have existed throughout the American economy. We believe that the industry has taken and is taking action that will solve many of these problems, but that in other areas, industry action has thus far proven to be less than fully effective. In the material to follow, we propose to discuss the factors that Ford believes have led to the current problems and to outline the actions that Ford believes the Congress might consider taking in order to assist the industry in accomplishing the improvements that are needed.

CAUSES OF CUSTOMER DISSATISFACTION

Perhaps the most important change that has occurred in the automobile industry in the past decade is the dramatic increase in the number of units in operation. The Nation's car and truck population grew from 66 million in 1959 to 95 million in 1969. Coincident with the sharp increase in the sheer number of vehicles to be serviced, there have been important changes in the complexity of the products that the industry must maintain and repair. The rate at which options, such as air conditioning, power steering, and power brakes have been installed on American cars has increased substantially. Today's cars