The Race To Be Wired – Industry Trend or Event
Dale Buss
In a century-long rivalry’s latest chapter, Ford and GM each want to claim the mantle of world’s most Net-savvy automaker.
JACQUES NASSER STROLLED INTO AN amphitheater at Ford Motor’s Dearborn, Mich., headquarters one day in July to announce a major new Internet initiative, Wingcast. Nasser, Ford’s chairman and CEO, along with members of his executive team, explained that the program, a joint venture with wireless-technology provider Qualcomm, would bring Web-based communications into Ford vehicles. The scene called to mind many others over the last 20 years in which Ford executive unveiled initiatives that would take the auto industry in new directions.
But this time, the events did not unfold as planned. “I don’t understand what’s different about this” from General Motors’ already-operating OnStar system, a reporter challenged from the floor. Brian Kelley, head of the ConsumerConnect division that handles all of Ford’s business-to-consumer online activities, replied that Wingcast would follow “a very, very different model than OnStar.” The reporters lobbed other questions involving OnStar, putting a reverse spin on the session.
Ford executives had better get used to it. After squandering its Lead over the past two decades, GM is now looking at the Web as a means of redemption. The Detroit-based automaker has been every bit as aggressive as Ford in trying to convert itself into an Internet Economy player, establishing the only clear lead in any major segment — the “telematics” Web-based communications business of OnStar — and battling Ford every step of the way for bragging rights in other important areas.
Executives at both automakers have come to embrace the belief that how they fare online plays an important role in how they fare overall in the early years of the new millennium. Given their vast and complex business, GM and Ford execs have thrown their Internet efforts into overdrive, opening a new arena of competition between them. (DaimlerChrysler, the No. 3 automaker, has hung back.) (See sidebar, page 95.]
In fact, Ford and GM have leapfrogged each other since last summer, when they announced their proprietary online business-to-business exchanges on the same day. And there’s no reason to think that’s going to stop.
The transition to the Internet Economy will write a new chapter in a nearly century-long rivalry. Ford and its monochrome black product line dominated the road until the 1 920s. That’s when GM began offering Chevrolets in a variety of colors and implemented a step-up system that effectively passed buyers from Chevys to Pontiacs to Buicks to Cadillacs as they aged and prospered. But GM’s complacency and the invasion of Japanese imports drastically changed the landscape in the 1970s and ’80s.
As the American auto industry began recovering in the late 1980s, it was Ford that led the way even though it has remained smaller than GM. Ford pioneered in improving product quality, revolutionizing vehicle styling, improving labor relations, synergizing its resources on a global basis, and foreseeing today’s market dominance of trucks and sports-utility vehicles. GM still hasn’t matched Nasser’s worker-friendly gesture early this year in which all of Ford’s 335,000 employees worldwide received a 500-megahertz PC and $5-a-month Net access.
As a result of its trailblazing, Ford’s U.S. market share has remained roughly even at about 24 percent, while GM’s has continued its two-decade slide, now hovering around 28 percent from 35 percent 10 years ago.
Nasser has pushed Ford toward two goals: to become “world leaders in customer satisfaction and e-business.” Leading the company’s Internet run is Kelley, a 40-year-old former General Electric appliance-sales chief and Procter & Gamble brand manager who joined Ford a year ago and has recruited dozens of other Net-seasoned staffers from consumer-packaged-goods companies and consulting firms. In his plan, the Internet will touch just about every aspect of Ford’s business: It will help reinvent core processes such as production planning, reach consumers no matter what devices they’re using to get online, improve the purchasing process, enrich the ownership experience and create a proprietary mobile Web platform. Kelley believes cultural transformation will follow, as will cost savings and revenue growth and, eventually, acknowledgement by investors who haven’t appreciated the U.S. auto industry’s modern-era accomplishments.
As an industry, automakers still have a lot of under-the-hood work to do to claim Internet Economy legitimacy. Collectively, their one-to-one online-marketing efforts, for example, are “primitive compared with where we could be,” says Phil Bienert, manager of customer-relationship management and e-business for the North American arm of the Swedish-built, Ford-owned Volvo brand.
And while the Big Three’s agreement to form a single online exchange to deal with suppliers, Covisint, has obviated the early competition between Ford and GM’s separate exchanges, so far it has remained mired in old-fashioned problems. Covisint hasn’t cleared antitrust approval yet, and the automakers are already confronting distressed suppliers fearful that the enterprise will become just another tool for vehicle makers to squeeze price cuts and other concessions out of them.
In telematics, GM has an acknowledged lead of more than a year on Ford in Web-based capabilities, such as voice-retrieved e-mail and customized sports reports, deployed in production vehicles that will appear in showrooms this fall. OnStar’s early dominance of the business also allowed GM to snare agreements to feature OnStar in future Toyotas and Hondas — by far the strongest Japanese brands in this country — while Ford has had to settle for a faltering Nissan as the only other major committed customer for Wingcast.
Kelley argues that Ford’s telematics are more versatile than GM’s. Wingcast is based on a portable phone, rather than a device that will work only in the hard-wired environment of the car like OnStar. “In this business, speed isn’t necessarily going to win, and the technological solution, the architectural solution, isn’t a trivial issue,” Kelley insists.
But Dennis Walsh, OnStar’s chief technology officer, says, “We’re putting as little computer power as possible in the car and making the network deliver the content or make the connection.” That way, Walsh says, GM can continue to upgrade an owner’s OnStar service for as long as he or she owns the car, even if it’s 10 or 12 years.
In other wired venues, neither GM nor Ford has grabbed a clear lead. They’re still trying to figure out the best way to let consumers order vehicles online. GM already is getting more than 1 million visits a month to its BuyPower portal, an area where Mark Hogan, president of its e-GM unit, believes “we clearly have staked out a leadership position” and “hope to stay in the lead.” Ford’s site, Ford.com, draws 1.5 million visitors a month, but is more corporate in sweep — not simply a gateway to purchasing a vehicle.
Ford’s early inventiveness has included online used-car showrooms in five cities and a pilot program with Priceline.com. Launched last November, the Ford-Priceline site lets Florida shoppers name their price for vehicles; Priceline transmits the information to Ford dealers starting with those closest to the shopper’s home and the first dealer willing to accept the offer gets the deal. “It’s something that no auto company has had a chance to look at before,” says Maryann Keller, a former auto-securities analyst who now is president of Priceline.com’s automotive division. “It’s like getting a chance to look at customers’ thought processes.”
The arch-rivals are also one-upping each other to coddle existing owners and to reel in potential new buyers online. GM’s Oldsmobile division got out front early last year with the most aggressive Net-related marketing in the industry, for example. But Ford has a sweeping marketing alliance with Yahoo, and is working with Austin, Texas-based Trilogy Software to create Net-based communities of enthusiasts for each of Ford’s brands.
Meanwhile, Ford’s new Percepta joint venture with customer-relationship management firm Teletech is consolidating all of Ford’s global call-center activities and databases into one operation. Percepta will make Ford owners’ car histories — including such details as when they change the oil — available to customer-service reps so they can deliver personalized warranty, loan and repair information.
Ford is also paying special attention to young customers, trying to wrap itself in the cloak of hipness. The company has invested in teen portal Bolt Media to develop a cobranded site whose regular content includes profanity-laced discussions about pubescent topics such as tattoos, sex and whether Britney Spears has had breast-enlargement surgery.
“We may not agree 100 percent with the content,” says Peter Look, president of Ford’s e-consumer business group. “Our assumption is we’ll be pushed out of our comfort zone, because the next generation of consumers will behave entirely differently than today’s generation.” Among other things, Ford is soliciting product-design suggestions from Bolt denizens.
So it goes across the broad sweep of the Internet Economy. Ford has a lead of at least several months on GM, for example, in developing quick “build to order” conduits on the Internet, thanks in large part to an experiment with a couple of models in a pair of Canadian metro markets. But last month GM beat Ford by a couple of weeks in announcing the creation of a vast new e-commerce site that GM would co-own with its dealers.
As dedicated as he is to forging Ford’s path on the Internet, Kelley insists that e-commerce “is not the be-all and only reason we exist.” He adds: “The business of making, servicing and selling cars will be our business for a long time. Nothing gets us away from designing a brilliant car.”
And for its part, GM soft-pedals the importance of beating Ford to the digital punch. A year ago, “first mover advantage was still thought to be important,” says GM’s Hogan. “But ‘first-prover’ advantage will be the defining indicator of success.
Yet the arch rivalry persists for global pre-eminence in the world’s most complex industry. GM executives were apoplectic after Nasser grabbed national headlines in July with a soul-baring speech at the National Press Club in Washington, where he announced that Ford would beef up the fuel efficiency of its gas-hogging fleet of sports-utility vehicles by 25 percent over the next five years.
So two days later, GM Vice Chairman Harry Pearce held his own press conference in suburban Detroit to note that GM’s SUVs already get better gas mileage than Ford’s — and to pledge that will continue.
Dale Buss (daledbuss@aol.com) is a writer in Rochester Hills, Mich.
MEANWHILE, OVER AT DAIMLERCHRYSLER
While Ford and GM have embraced the Internet, DaimlerChrysler has taken longer to buy into the Net’s promise. The company, after all, has had a more pressing claim on its resources: merging two giant automakers based in different continents into one global powerhouse.
But the Auburn Hills, Mich.-based Chrysler division says it is making strides in its transition to the Internet Economy. Exhibit A: it is the third major partner in Covisint, Detroit’s still-forming online business-to-business exchange.
The company is admittedly behind in telematics, says spokesman Jeff Leestma, but it is about even with Ford, thanks in part to DaimlerChrysler including systems in its Mercedes-Benz models since 1999, and that the company owns the Freightliner heavy-truck company, which has advanced telematics systems for big-rig drivers.
Leestma says that where Chrysler excels is not in the bells and whistles but in the blocking and tackling of the Internet. He cites the company’s coordination of numerous databases, for instance, and the ability to make them fully transactional between the dealer and the company. And DaimlerChrysler has hired the Cobalt Group to create and integrate custom Web sites for more than 2,100 leading Chrysler, Jeep and Dodge dealers.
The company is also dabbling in some funky nonauto-related aspects of the Net: Late last month, DaimlerChrysler announced that its venture-investment subsidiary had purchased a 23 percent share in Biometric Systems, a German company that has patented a new procedure for registering digital signatures with common pens.
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