Last week, my phone rang yet again with a journalist inquiring about the latest rumor emanating from China. Namely that Zhejiang-based Geely Automotive—China’s second largest automaker—was in negotiations to acquire the Volvo Cars division from the Ford Motor Company.

I say my phone was ringing again, because this same rumor was being bandied about last fall—except then it was Wuhu-based Chery Automobile, China’s largest automaker— that was rumored to be in negotiations to buy Volvo Cars.

I have no first-hand knowledge whether any Chinese automaker has been negotiating to purchase Volvo Cars.

But I do have, after 20 years of tracking the global automotive industry, strong opinions about what I would recommend to any automaker considering the purchase of a foreign automaker.

First, forget about acquisitions. In most cases, time has shown that acquisitions just don’t work. Trying to merge two disparate company cultures and management styles is challenging even under the best economic conditions, never mind the current global economic climate. Second, to achieve real and long-lasting success, automakers should devote as much of their resources as possible to improving quality.

Here’s why.

In 1993, the late G. Edwards Deming—the man most credited with introducing quality concepts to Japanese automakers—published a book called The New Economics. In the book, Deming poses a rhetorical question: “What is the most basic problem anywhere?”

His answer? Quality. Essentially, Deming’s thesis is that if a company can solve the issue of quality, then everything else in its business strategy should fall into place.

Similarly, J.D. Power and Associates supports the notion that improvements in quality result in numerous positive benefits. Over the last 40 years, we have seen that with high quality comes improvements in customer satisfaction, increases in customer retention, and an increase in the volume and value of goods and services purchased by brand-loyal repeat customers.

Let’s look at China as just one example.

In 2008, the Chinese automotive market experienced a mild slump. After years of double-digit sales growth, passenger car sales in 2008 grew just 7 percent.

Despite this slowdown, Japanese-branded vehicles— which are generally priced higher than their competitors—gained 2.6 points of market share. Lower-priced competitors, on the other hand, did not fair as well. Korean brands managed an increase of 1.4 percent, but brands from Europe (-0.8%), the USA (-1.6%) and China (-1.6%) all experienced declines.

As a result, Japanese-branded vehicles today account for roughly 30.2 percent of all passenger cars sold in China, the highest share among all competitors.

On top of this collective achievement of Japanese brands, several models performed with particular distinction in 2008.

The Toyota Corolla was the highest-selling passenger car in China overall—the first time it has been the sales leader in China— netting 217,000 new customers for the year. The Nissan Tiida was the highest-selling car in the entry midsize segment (120,000 sales). The Honda Accord was the highest-selling car in the upper premium midsize segment (170,000 sales), and the Honda CR-V was the SUV volume leader in China in 2008, netting an additional 80,000 sales.

Now, the natural question arises: What do these Japanese vehicles have in common that makes them so popular, especially when they tend to cost more than their competitors?

If we look at J.D. Power’s Initial Quality Study (IQS) for vehicles sold in China, we may find the answer.

The J.D. Power and Associate’s IQS measures consumer-reported problems after 90 days of new-vehicle ownership. These include consumer perceptions of vehicle quality in 10 major areas: Vehicle Exterior; Driving Experience; Features/Controls/Displays; Audio/Entertainment; Seats, Heating, Air Conditioning; Vehicle Interiors; and Engines/Transmissions.

In our 2008 China IQS, Japanese-branded vehicles earned higher—or equivalent—ratings to competitor brands from Korea, the United States, Europe, and China in every one of the aforementioned major areas.

In fact, Japanese-branded models ranked highest in initial quality in five of the six segments identified in the survey. These include:

• Honda Fit (highest in the entry midsize segment)
• Toyota Corolla (highest in the midsize segment)
• Nissan Teana (highest in the upper premium midsize segment)
• Toyota Crown (highest in the luxury segment)
• Honda Odyssey (highest in the MPV segment)

So, while we cannot say with absolute certainty that higher quality led to greater sales, the data is certainly compelling.

Getting back to the idea of a Chinese automaker buying Volvo Cars. While a Volvo acquisition appears attractive on the surface— it offers a global brand, advanced design and engineering, safety leadership, and a global distribution network— I think Deming, if he were here today, would counsel Chinese automakers to reconsider such a move.

He might say: “No need to look elsewhere for quick solutions, because there are none. Quality is the basic problem everywhere. Work on improving your own quality and you will be on your way to creating your own long-term success.”

If the performance of Japanese automakers in China is any indication, it looks like Mr. Deming was exactly right.