Automakers Encourage Dealers; Combat Dot-coms

SAN MATEO (04/22/2000) - While carmakers were unveiling slick new models at the New York International Auto Show this week, behind the scenes, automakers were carefully crafting Internet strategies designed to head off disruption by dot-coms to the traditional manufacturer-distributor relationship.

In July, Ford Motor Co. will launch its Blue Oval Program, which gives dealers incentives to integrate an online e-commerce component to the dealers' sales and support channel. Dealers need an Internet sales manager and need to offer specified response times to online shoppers to get the Ford-sponsored benefits, which include access to Ford's 401k and employee discounts.

The program belies the importance automakers are attaching to the Internet for customer service, said Rob Leathern, an auto industry analyst at Jupiter Communications, in New York.

Ultimately, automakers such as Ford are promoting dealers' online efforts as another way of building customer loyalty to the manufacturer's brand, analysts said. What disrupts its established value chain are start-ups such as CarsDirect and AutoWeb, which buy cars in volume from dealers only to resell them to their online customers.

"When a customer buys a car from a dot-com, there isn't the loyalty to the dealer or the manufacturer. The car becomes a commodity and there is no opportunity for the upsell that everyone relies on," said Adam J. Weiner, a senior auto analyst at Gomez Partners, in Lincoln, Massachusetts.

In fact, Ford is telling dealers they will be shunned if they broker vehicles, Leathern said. Dealers brokering cars to CarsDirect, for example, will not get additional franchises or more vehicles above their original allotment, according to Leathern.

Although the number of car purchases made online is still low -- about 3 percent nationally, according to the Polk Co., a Detroit-based marketing and research organization for the auto industry -- it is obviously playing the role of a catalyst.

Behind all manufacturers' efforts, which run the gamut from General Motors Corp.'s dealer training programs to Saab's Internet Retail Information Service (IRIS), is the goal of better customer relationships.

For example, the IRIS system, created by Jacada Ltd., gives a nontechnical sales force at a local dealership, as well as the manufacturer back in Sweden, up-to-the-minute access to changing inventory, parts orders, final car sales data, as well as customer profile information.

If Saab can give its dealers better information, it gives the dealers a chance to offer better customer service. A Jacada executive notes the changing landscape of IT in all of this.

"It is the business part of the house that says, 'If I don't deliver an e-business or Web solution for my immediate or ultimate customers, I will lose my competitive advantage.' And because it is coming to the business part of the house, it becomes a time-to-market issue, not a [system] architecture issue," said David Holmes, senior vice president at Jacada, in Atlanta. "What's driving our deals today is not the IT shop, it's the VP [vice president] of sales, the CFO, or the VP of development."

But not everyone feels threatened by the Internet.

"It's the best thing that ever happened in the automotive industry," said Richie Bello, general manager of Apple Honda, in New York. Even if Bello's Honda dealerships have to live with reduced margins due to online competition, Bello is putting his multiple dealerships online.

"If I give them 2 percent to 3 percent over invoice, who cares? I can service them. What are you better off selling, 50 cars at 5 percent or 120 cars at 3 percent?" Bello said.

Sam Hedgpeth, president of Santa Clara, California-based AutoWeb, which maintains an online site that offers both a direct sales model through a relationship with CarsDirect and its own referral service for dealers, believes like many others who are part of the new economy that in the end the consumer will call the shots.

"Whether it is a dealer referral, direct [sales], or some other model, this is a consumer game. You can control things for a small period of time, but ultimately, consumers will get what they want," Hedgpeth said.

Partnerships connect cars

The New York International Auto Show continues to highlight sheet metal and engine performance, but the digital age is slowly finding its way inside the driver's cocoon.

Silicon Valley mainstay Palm announced a deal with Delphi Automotive Systems to create an in-vehicle Palm V docking station for sending and receiving e-mails and synchronizing calendars and corporate databases using voice commands.

The CommuniPort Mobile Productivity Center will plug in to the cigarette lighter port and use a form factor with a circular bottom that fits into a car's cup holder.

Auto supplier Delphi will add voice commands to Palm's HotSync technology for updating data via the cellular network. This will also include text-to-speech and speech-to-text to download and read e-mail messages and to send them as well.

Palm is the latest in a string of technology companies working with traditional IT industry players.

In the meantime, in June, with the backing of some very large corporate investors that include Ford and DaimlerChrysler AG, Sirius Satellite Radio will launch the first of three satellites to deploy a nationwide digital radio network with 100 channels that will be available only in cars.

By the first quarter of 2001, satellite radios will be available as after-market products. Later in 2001, Ford, DaimlerChrysler, and others will incorporate a Sirius radio receiver into their vehicles. After-market receivers are expected to sell for $300 to $600.

Many of the automakers will also leverage Sirius' partnership with ATX Technologies to integrate two-way cellular communications within the satellite receiver for e-commerce.

Using ATX, satellite radio listeners will be able to push a "buy" button to order music CDs, books, and other products Sirius intends to promote on its radio channels.

A similar satellite radio effort is under way from XM, a General Motors subsidiary. Most GM cars, however, currently use GM's OnStar for two-way communications.

Join the newsletter!

Error: Please check your email address.

More about DaimlerChryslerDelphi Automotive SystemsFord MotorHolden- General MotorsHonda AustraliaJacadaJupiterJupiter CommunicationsOnStarSaabSirius Satellite Radio

Show Comments

Market Place