General Motors Corp. has poured $1.6 billion into electronic commerce initiatives like the Covisint Internet supplier exchange as part of a four-year drive to integrate its e-business systems, executives of the world’s largest automaker said on Thursday.
The broad “e-structuring” has generated $800 million in cost savings and helped drive down the automaker’s total information technology spending to $3.2 billion annually from $4 billion in 1996, GM’s Chief Information Officer Ralph Szygenda told reporters and analysts from around the world at the end of a three-day company presentation here.
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By GlobalDataThe Internet ventures, as well as related in-vehicle communications systems like OnStar, are set to pick up speed in the coming months and years as GM pushes to use its global breadth to grow sales and profits in new ways, Chief Executive Officer G. Richard Wagoner said.
Among the changes being made possible through Internet technology will be the ability to receive a custom-ordered car in 10-15 days by 2003, said Harold Kutner, the company’s supply chief, who is overseeing GM’s participation in Covisint, the Internet buying exchange GM formed with Ford Motor Co. and DaimlerChrysler AG .
Kutner said research GM conducted has found that 80 percent of buyers would consider placing a specific order for a new vehicle if the wait-time were no longer than two months. Currently, less than 10 percent of new car buyers in the United States custom-order a vehicle, usually opting to take what dealers have on their lots. The number is higher in Europe, about 30-40 percent.
Although some automakers have discussed building special-order cars in three to five days, Kutner said many customers would be willing to wait longer to ensure they got the vehicle they want on a reliable date.
“We’re not emphasizing the time as much as the reliability,” he said.
Kutner added GM would have to cut its vehicle inventory by 50 percent and trim its 5,000 suppliers to streamline the system and get cars to customers faster.
Mark Hogan, president of GM’s e-commerce unit, said the company’s GM BuyPower Internet selling site is getting 2-1/2 times the number of “hits” in the United States of its Ford counterpart since a revamping of the site in April. GM BuyPower will be rolled out to 16 countries by the end of this year.
The four-year-old OnStar, the communication system that allows drivers to make dinner reservations or call tow trucks from their cars, currently has 220,000 subscribers and is on pace to have 4 million by 2003, Hogan said.
The company is on plan to add Internet and telephone links to OnStar later this year and is experiencing a 70 percent renewal rate from some of the early users in the Cadillac Escalade sport utility vehicle, Hogan said.
Wagoner estimated OnStar is “a few” years away from profitability, adding the company plans for now to keep ownership control, although he did not rule out a spinoff in the future.
“Today there’s no question it’s going to grow faster and realize greater potential if it’s part of GM,” he said.
