GM drives into e-commerce with new unit
In a major e-commerce push, auto giant General Motors announces e-GM, a separate Internet business unit that will house all of the automaker's e-business efforts.
GM executives said the new business unit will be led by former GM vice president of small car operations Mark Hogan, and will put a wide range of GM products and services, such as its BuyPower Web site and OnStar technology, under one roof, focused exclusively on positioning GM as a major e-commerce player.
GM executives said that this new group will allow them to focus on what they referred to as the "Generation I" group, which they defined as customers who are independent, informed, impatient, and demand immediate gratification. The company said they want to deliver products and services at "their pace and fast."
"The announcement of this e-commerce initiative signals a systems change for GM that puts customer relationship front and center," Ronald Zarrella, president of GM North America, told reporters and analysts.
For instance, Zarrella said the company will use its OnStar technology, an advanced safety and security system in the vehicle that automatically contacts a service person if an airbag goes off in a car or can provide the driver directions by automatically contacting a service advisor, to build a direct relationship in the car with the customer. Zarella added that OnStar is installed in 31 models today.
GM executives said they expect to grow its OnStar subscriber base from the existing 750,000 to 1 million by the end of 2000. They plan to do this by making OnStar a standard in some GM models and available as an option in others.
Building on its e-commerce strategy, Zarella also said the company has built a Web car, which will allow drivers to connect to the Internet via voice connectivity. GM said testing for the vehicle will take place this fall and expect the car to enter the market by the end of next year.
GM's chief operating officer Richard Wagoner said that the company's e-commerce approach is also heavily involved around partnerships, involving its local dealers. He added that GM is willing to work with the local dealerships to form these partnerships. The company said more alliances and partnerships will be announced in the next few months.
"We want to go after it [e-commerce] hard," he said.
Cambridge, Massachusetts-based Forrester Research said in the Internet economy, 33 percent of U.S. households are online and 13 percent of those online are transacting every month.
According to Forrester founder and president George Colony, GM needs to focus on the "high-income, high-optimistic" segment of the online population along with young adults, which the company needs to attack early on in its e-commerce strategy.
By 2003, 16 million cars will be sold in the United States and of that number, 8.5 million cars will either be purchased over the Internet or researched online, Colony said.
He added that GM will face four challenges in this space: harmonizing channels by bringing together local dealerships through partnerships and future alliances, branding itself early on to the online consumer GM is targeting, backend capabilities and whether or not GM can save 5 to 10 percent in materials and manufacturing to build a car on the backend via the Internet, and maintaining "deeply committed" executive leadership willing to drive its e-commerce strategy to success.
GM executives were very optimistic about gaining in this space and said they want to become a global leader in e-commerce.
e-GM's newly announced president Hogan said, "We're pretty convinced that we're going to transform the company to an Internet company."
Hogan added, "We also really have to engage our 15,000 dealers globally. We have to get them to work with us and we will work with them...We want to show a new face to our customer base. We want to attract the young buyers that haven't necessarily focused on us. We're going to put this team together at a very rapid pace."