When it comes to e-business, GM gets it

When General Motors recently announced that it was forming a new worldwide e-GM business group, one of the biggest surprises was the aggressive language some GM executives used. They seemed hell-bent to show analysts that they get it about e-business.

Turning GM into a supple internet-enabled corporation will be a massive undertaking that is guaranteed to meet with strenuous opposition from employees and dealers. But the executive put in charge of the e-GM group, Mark Hogan, said at the news conference that he would move quickly and decisively. "I am not going to ask for permission; I'm going to ask for forgiveness."

In case you missed it, the world's largest automaker has announced it will consolidate all its business development, strategic electronic-marketing, electronic-sales, electronic-product management, technology and operations departments. The company says this "will lay the groundwork to transform GM's traditional automotive operations into a global e-business enterprise".

Hogan had previously gained a high profile by being a chief architect of Project Yellowstone, a "modular" production scheme that would have GM doing only final assembly of vehicles, with large subcomponents built by other companies. The plan was heatedly condemned by GM's unionised workforce.

Many North American auto executives would love an arrangement like Project Yellowstone. They envy Dell Computer's similar system, through which the company custom-builds a computer from brand-name components in response to a customer's order placed via the internet. The final product is shipped within 48 hours of the order being received. The computer is "manufactured" by the web of internet-connected partners in Dell's supply chain.

Of course, Dell not only practices a form of modular production, but also cuts costs by selling directly to customers. If GM did the same, thousands of car dealers would see their existing raison d'etre largely evaporate.

At the moment, regulations in many jurisdictions prevent carmakers from selling directly to the public. But internet-savvy consumers will rebel at laws that guarantee car dealers thousands of dollars of profit simply for handing over a new set of keys.

GM will have no choice but to take charge of potential buyers' online experience. It is finding that close to half of prospective buyers surf the Web for information prior to purchase. Once buyers have the information they desire, GM says it wants the process, from information gathering to car buying, to be "seamless".

And what is to become of dealers who don't share that vision? As e-GM chief Hogan told one reporter: "They are all businessmen, and some might not go along with that. If that's the case, we will have to part company."

Like their counterparts at Merrill Lynch, GM executives are realising that companies can compete in the digital economy only by fundamentally changing their business models.

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