UPDATE 3-Ford rises, Chrysler falters in key quality survey

* Ford competing with Japanese brands on quality -study

* Toyota, Honda dominate top of Consumer Report ranking

* Chrysler lags; only Ram pickup truck recommended
(Adds Chrysler comment)

By Soyoung Kim and Bernie Woodall

DETROIT, Oct 27 (Reuters) - Ford Motor Co (F.N) has made
the most progress in improving vehicle quality among major
automakers, while Chrysler ranks at the bottom of the industry
for reliability, according to an annual Consumer Reports survey
released on Tuesday.

Asian automakers dominated the magazine's influential list
of recommended vehicles, with Toyota Motor Corp's (7203.T)
Scion ranked the top brand followed by Honda Motor Co's
(7267.T) flagship brand. Toyota's flagship brand placed third.

Ford ranks as the only U.S. automaker that is competing
with Asian brands with "world-class reliability," Consumer
Reports said.

About 90 percent of Ford's vehicles achieved average or
better reliability, the study showed.

Ford's Mercury brand ranked tenth for reliability -- the
only U.S. brand to make the top 10 list. The Ford brand ranked
16th and Ford's luxury Lincoln brand ranked 20th.

"Ford definitely has closed the gap," said Rik Paul of
Consumer Reports. "We started seeing that a couple of years
ago. We didn't know at that time if it was a fluke or if it was
something they were going to be able to maintain. Last year,
they were still there and this year, they are still there."

In contrast, Chrysler's three brands all slipped further in
the ratings. The Jeep SUV brand ranked 30th, with Dodge just
behind and the Chrysler brand dead last in the ranking.

Consumer Reports said more than a third of Chrysler models
through the 2009 model year were "much worse than average."

Chrysler spokeswoman Jodi Tinson said the carmaker has
heightened emphasis on quality in the past 18 months, which has
cut its warranty claims by 30 percent.

"Eventually, Consumer Reports and other metrics will start
showing improvements," said Tinson. "It will take some time
because we are living with the past."

Chrysler emerged from bankruptcy on June 10 by completing
the sale of most of its assets to a new company led by Italy's
Fiat SpA (FIA.MI). Chief Executive Sergio Marchionne, who also
heads Fiat, will announce on Nov. 4 a five-year business plan
for turning around the No. 3 U.S. automaker, including new
product plans.

Steve Rattner, the former investment banker who headed the
Obama administration's restructuring of GM and Chrysler, said
last week that officials were divided about whether Chrysler
could be saved, in part because Consumer Reports did not
recommend any of its vehicles.

For the new report, the magazine endorsed one Chrysler
vehicle, the four-wheel-drive version of the Dodge Ram 1500
pickup truck.

"It did well in (our) road tests and rates average in
reliability," the magazine said.

Many analysts say Chrysler desperately needs new vehicles
to steer its faltering operations toward recovery. Chrysler's
U.S. sales plunged 42 percent in September from a year ago.

Marchionne said recently he was surprised at the lack of
product development done by Chrysler's previous owners,
Cerberus Capital Management [CBS.UL] and Daimler AG (DAIGn.DE),
in the two years before his arrival in June.

"Chrysler, well, they're not bringing out a lot of product.
You have to bring out product to improve," Paul said.

NEW GM MODELS ENCOURAGING

General Motors Co's [GM.UL] flagship Chevrolet brand, which
accounts for more than 60 percent of GM's U.S. sales, ranked
25th on the list.

The No. 1 U.S. automaker emerged from bankruptcy in July
backed by some $50 billion in U.S. taxpayer funding. GM is
counting on sales gains at Chevy at a time when it is selling
Saab, Hummer and winding down Pontiac and Saturn.

The magazine said that 20 of GM's 48 models have average
reliability scores. The automaker has a number of "strong
contenders" just released or in the pipeline, but it was too
early to have reliability data on them.

"We have seen some of their newer models doing better so we
do think perhaps they are on the right track," Paul said.

Hyundai Motor Co (005380.KS), the only major automaker to
increase sales in a slumping U.S. market this year, ranked
eighth, unchanged from last year.

Besides its influence with car shoppers, the annual report
is used by major automakers as a proxy for their performance in
improving and maintaining vehicle quality.

Consumer Reports is published by the nonprofit Consumers
Union and does not accept advertising. The publication's
"predicted reliability" study for new model vehicles is based
on an average of consumer ratings of the same model in the
recent years.

This year's report on auto reliability was based on
consumer feedback on more than 1.4 million vehicles, Consumer
Reports said. The reliability results will be published in the
magazine's December issue, which goes on sale next week.
(Reporting by Soyoung Kim and Bernie Woodall, additional
reporting by David Bailey; editing by Matthew Lewis and Andre
Grenon)