General
Motors, the world’s biggest automaker, created its e-GM business unit in August
1999. The unit is focused on harnessing the power of the Internet, driving innovation
throughout the organisation and creating e-services for both customers and suppliers.
Mark Hogan, vice president of GM Group and president of e-GM talked exclusively
with just-auto’s Brazilian correspondent Rogério Louro about the
automotive world of the Internet.
Go deeper with GlobalData
just-auto: Some companies that have invested in the Internet are in
bad economic shape. Is this a recession of the Internet revolution?
Hogan: No, the Internet is an excellent business. But there are some
companies that have a good idea and technology but no head for business. The
Internet evolution will favour the enterprises that unite traditional administration
with modern ideas. The company that makes this "marriage" will enjoy
a large gain. And the companies that don’t embrace e-business with competence
will fail
just-auto: And e-GM? What is your evaluation of the company?
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Rick
Wagoner approves of e-GM |
Hogan: We are surprised with our performance, in less than two years.
We’ve topped our expectations, we have the approval of GM Group president Rick
Wagoner and we believe in a great increase in Internet use over the next few
years. We are the automaker with the most developed Internet services and business.
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By GlobalData just-auto: Which are the other automakers with well developed Internet
services?
See Also:
Hogan: Ford and Toyota.
just-auto: e-GM has partnerships with others automakers, like Ford,
Toyota and DaimlerChrysler. Why would rival automakers try to work together
in the digital world?
Hogan: We combined efforts to meet consumers’ needs. When they look
for a car on the Internet they want objective information, without advertising,
and want to compare different models. They don’t want to see only one brand
of vehicle. Because of this we need to form associations of car sales sites.
In business-to-business sites the partnerships help to improve efficiencies,
reduce costs and operate lean. All the different brands of vehicles have seats,
a steering wheel and brakes so we can work together with the same suppliers
to reduce production costs and the final price to us, and consumers.
just-auto: How does B2B commerce help GM to reduce costs?
Hogan: We negotiated purchases worth about $US 1 billion in the first quarter
of 2001. B2B helped us to make cost reductions of 10 percent, and the negotiations
were concluded quickly.
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GM
Brazil makes 65 percent of its Chevrolet Celta sales via the Internet |
just-auto: Which are the most developed countries for vehicle sales
on the Internet?
Hogan: Brazil and then the United States. In Brazil we started selling
our new Celta model on the Internet in September 2000. It was the first high
volume Internet sales initiative in the automotive world and, in its first month,
the Celta became the world leader for Internet vehicle sales. Since it was launched,
we have sold more than 40,000 units and about 65 percent of sales were via the
Internet.
In the United States, the percentage of car sales completed on the Internet
is much smaller. For example, we receive about 1.2 million hits on our GM BuyPower
site each month, but only one percent complete the transaction on-line. However,
the site influences dealer sales. Since it was launched, GM BuyPower has helped
us to sell over 860,000 new vehicles. Just last year, BuyPower influenced sales
worth $US8 billion for GM.
We also have Internet vehicle sales experience in the United Kingdom and Taiwan.
In the UK we sell all Vauxhall models on line but in Taiwan we didn’t have dealers
so we implemented a direct distribution system to fulfil online orders.
By the end of this year we will have expanded GM BuyPower to 45 countries and
expect to cover 90 percent of Asia.
just-auto: What’s your expectation of Internet vehicle sales growth
worldwide?
Hogan: Sales will increase across the world, but in different proportions.
In the United States we expect that Internet sales will represent six or seven
percent of total sales in the next four years but only two percent in Japan. We
think that the Internet will be strong in Taiwan and China – in five years it
will account for half our sales in those markets.
just-auto:
Why the big difference?
Hogan: Japan and Europe have difficulty quickly accepting Internet sales,
it’s a cultural problem. But this doesn’t happen in all of Europe. In Scandinavian
countries, for example, we expect a large increase. But in Germany and Spain Internet
sales will increase very slowly. We have good expectations for Taiwan and China
because the two countries don’t have a dealer network to distribute the cars and
we can invest in a direct distribution system for customers who order by Internet.
just-auto: How will you increase Internet sales in Europe and Japan?
Hogan: We think that services using wireless telecommunications technologies
are a good solution.
just-auto: Internet vehicle sales can be good for consumers, but how
does linking direct sales with dealers work?
Hogan: The relation between Internet sales and dealers is a challenge in
the United States, for example, because of the individual state laws and the size
of the dealer network. In January and February we conducted a test to integrate
Internet sales with Oldsmobile dealers in Minneapolis. Now, we are conducting
a pilot with Chevrolet dealers in Washington. The purpose of this pilot is to
test dealers’ and consumers’ acceptance of e-business which includes e-pricing
and a locate-to-order car inventory. The results will be evaluated and we’ll establish
the best way to unite dealers and Internet sales. But all Internet vehicle sales
are concluded by the dealer.
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The
Gravataí factory where the Celta is made using GM’s "industrial condominium" production system |
just-auto: Will dealers need to change the way they work?
Hogan: Historically the transaction starts at the dealer where customers
see the vehicle model and this will not change. But we want dealers to use aftersales
services more to improve their business.
just-auto: In future consumers will ‘build’ a car to order on the Internet.
Can they configure the car’s engine, equipment, colour, etc?
Hogan: We are working with consumers so they can choose the vehicle’s
equipment and order the model directly from the factory. We then send the completed
car to a distribution centre and on to the showroom where the customer collects
it. We use a process like that with the Celta in Brazil. But for fast delivery
of the vehicle we need factories to be prepared to work with Internet sales,
with manufacturing flexibility like we have in the Brazilian Gravataí*
plant where we make the Celta. This plant is one of the most modern in the world.
just-auto: You will use the Gravataí plant example to build
another plants?
Hogan: At the end of the year we will open a plant in Lansing, Michigan
similar to the Gravataí plant. And, next year, we’ll open another plant
in Lansing using the Brazilian plant work concept.
just-auto: The Internet is not just for sales. How is it evolving in
terms of in-car entertainment?
Hogan: We have OnStar, the most evolved telematics system in the world.
It is available in the United States and Canada, and we will soon introduce the
system across Europe. OnStar automatically notifies us about airbag deployment,
tracks stolen cars, allows remote diagnostics and provides concierge services,
routing assistance and information services. We can also communicate directly
with drivers. The system operates with voice commands so the driver doesn’t have
to take his eyes off the road or move his hands from the steering wheel.
just-auto:
And what is the future of OnStar?
Hogan: With OnStar we will have an "all-connected car" with new
services and ways of helping our customers. Today we have one million subscribers
and by the end of the year we expect this to double to two million. We have partnerships
with Lexus and Honda and we are talking with others about using our system.
just-auto: What are the main barriers to the evolution of the Internet?
Hogan: The Internet makes it easier to buy vehicles and other products
because it is open 24 hours a day, seven days a week. We can sell cars while
we sleep. It doesn’t close, so we can’t either. We need to have good services
and we need to listen to consumers’ desires and change quickly. Today’s consumers
expect fast responses. But some people are still reluctant to send credit card
details through the Internet. So we need to make payment transactions more secure.
With regard to car sales, many customers still want to test drive before they
buy. Order-to-delivery times need to be reduced and logistics also need to change.
* The GM Gravataí plant was opened in July 2000 and has a new production
system GM calls an "industrial condominium" where the company and
16 suppliers have created an automotive complex that functions as one single
plant. The Gravataí plant receives pre-assembled modules delivered just-in-time
by suppliers that share space at strategic points alongside the production line.
 MarkHogan biography Mark Hogan was born in Chicago on 15 May 1951. He earned a bachelor’s He joined General Motors in 1973 as a factory analyst in the Electro-Motive |
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To Automotive The For General Motors Strategic Review |
