SAN MATEO (03/06/2000) - It could be said that the Internet is creating as much change in the auto industry as the introduction of mass production assembly lines did earlier this century. Leaders in the multibillion-dollar industry are pushing profound changes in manufacturing supply chains with business-to-business trading exchanges (see related article, above). And the notion of a consumer-configured car is on its way to being a reality. The two automakers recognized as leading the e-commerce charge are General Motors Corp.
(GM) and Ford Motor Co. The president of General Motors' eGM division, Mark Hogan, recently spoke with InfoWorld Executive News Editor Martin LaMonica about e-business and the auto industry.
InfoWorld: It appears the Internet has become an integral part of GM's strategy. How is it affecting your business?
Hogan: Yes, and it's touching us end to end, so to speak. The business-to-consumer piece is getting big inasmuch as more than 50 percent of prospective customers are going to the Net for information about automotive purchases before they purchase. So having a strong presence with accurate information on the Net's very important. And, oh, by the way, the functionality of that shopping/buying experience online is really important, too. That's why we did the AOL [America Online] and Net-Zero [cross-marketing] deals [in January], because we think it will promote GM products through improved functionality and connectivity to our search engine, GM Buy Power. The net goal of our alliances with AOL and Net-Zero will, we believe, generate 10 to 15 times the number of leads going into GM Buy Power today. We've got 600,000 hits a month at Buy Power today. So it tells you how massive the improvement's going to be, and we expect that increased leads will lead to increased sales for GM.
We view them as complementary, not competitive, because they're different business models.
InfoWorld: You partner with them mainly to broaden your reach?
Hogan: Yes, and the Net-Zero partnership has the extra advantage of allowing us to target customers more precisely because of the data that they get with their new subscribers. Subscribers opt in to Net-Zero by providing information to 40 questions, which presents a broad spectrum of their consumer interests, so we can target and be focused on how we approach those potential customers. And we think it's going to lead us to be smarter about how we do online marketing and sales and, hopefully, be more efficient in that process. So the business-to-consumer part is something that we're actively trying to promote by broadening our perspective online and improving the functionality of our tools, including a rapid refresher of GM Buy Power, which is our search engine, where we intend to have 60-day refreshers to continue to upgrade the functionality to the point where we think we can get to "best in class," so to speak, and keep it there.
InfoWorld: How about in business-to-business?
Hogan: There are two business-to-business major streams of effort within the company around the Internet's serving to change the way that General Motors looks at its entire business -- the first is B-to-B [business-to-business] internal. We have over 300 internal-facing Web sites around the world, and we do that largely to transact the business internally, meaning the design, engineering, and manufacturing of vehicles, and also the financial tools that GMAC [Financing] brings with car financing, markets financing, and capital-equipment financing. A lot of those processes can be streamlined internally by using the Net. Prospectively, we've set a target of reducing our internal costs by as much as 10 percent by Webifying our internal business. And there's a massive broad-based effort internal to the company to do that. And then the third stream of effort -- the second B-to-B effort -- is business-to-supplier and business-to-dealer. And the business-to-supplier piece is why we create a trade exchange. We believe exchanges will revolutionize the way that purchasing in the automotive sector is going to take place. And this kind of B-to-B effort, along with some of what the other major Fortune Five companies like GE are doing, will, in my opinion, surprise [people] in terms of how fast [business-to-business electronic business] comes to pass.
InfoWorld: Auto dealers have been wary of e-commerce because consumers could ultimately buy directly from manufacturers. How do you address those partners?
Hogan: We are working very hard [with dealers] to make them Internet-friendly and Internet-capable. And we are working actively, in conjunction with our dealers, to create this new business partnership, which takes them out of the traditional mode of having a lot of vehicles on dealer lots and taking that number down considerably and concentrating more on the initial sale. And then [have them focus on] the downstream experience, in terms of ownership and content that goes with the ownership experience, both including the upgrading of options and components because we're using a lot more plug-and-play type of modules. For example, you might want to upgrade your "infotainment" system.
We're going to enable that through software and readily changeable hardware systems. We can change, literally, the handling of your vehicle by downloading software into your vehicle. And we can also get information into your vehicle via our OnStar system. We're going to have the first production vehicle that can connect to the Internet later this year. And we'll be able to downstream data not just from our national sources, but also locally through our dealer body.
InfoWorld: So much of your efforts are based on technology, and you have a business background primarily. What's the relationship between people like you and the technology people? Do you kind of see it as a partnership between the two groups, and initiatives come out of both groups?
Hogan: Well, I have a chief information officer who works for me at eGM. He's also reporting to our chief information officer of the company, Ralph Szygenda, and we work very collaboratively. I call it a "matrix," in terms of understanding what technologies are out there that we need to deploy, both within vehicle and within company, to be able to take advantage of Internet opportunities. And as you can appreciate, General Motors gets a lot of opportunities presented to us from a variety of different companies involved in the Internet, both pre-and post-IPO, if you will. And we're evaluating all of them and, frankly, there's some very, very good ideas out there that we think'll make us more efficient and will probably put these small start-up companies on the map, like Commerce One.