Internet drag race

Auto industry rivals GM and Ford have steered their decades-long feud into cyberspace. So, which one is winning the Web battle?

A Mustang. A Camaro. A 2 a.m. stoplight. No cops anywhere. Ford Motor Co.'s global e-commerce unit and e-GM, General Motors Corp.'s new online division, inherit a fight that goes back 92 years. The field of battle is the so-called information superhighway. The stakes? Mark Hogan, e-GM president, says: "GM will become e-GM." He pauses. "No, that's not it: GM will become"

Ford and GM have absolutely hurled themselves into the business of selling cars online. Their lists of deals, alignments and relationships is dizzying. Ford/Yahoo Inc., GM/America Online Inc. Ford buys into Microsoft Corp.'s CarPoint. GM cuts a deal with NetZero Inc., a provider of free Internet access in Westlake Village, Calif. Ford creates Auto-xchange, an online procurement system, with Oracle Corp. Hours later, GM announces it has teamed with Commerce One Inc. to create a similar system.

(There's a deal that Ford and GM are doing together, along with the third member of the Big Three, DaimlerChrysler. The automakers last month unveiled plans to join forces on a common Internet automotive trade exchange that will offer procurement transactions for the Big Three, other automakers and their extensive supply chains.)

At first glance, GM and Ford's deals look scattershot. When discussing online business, they speak of new sales channels in one breath, in-car Internet access in the next and back-end supplier partnerships in the next. Colossal strategy? Or are the companies making it up as they go along, unable to prioritize or even distinguish among the opportunities?

In looking at GM's and Ford's Internet-related gambits, it's not unreasonable to ask: What the hell is going on here?

But that's the second-most important question. The most important question, as anybody who ever blipped the throttle at a traffic light could tell you, is: Who's winning?

We look at three critical areas -- the people in charge, the progress toward a Dell Computer Corp.-style build-to-order model and possible confusion in the sales channel -- and see which company could peel out to an early lead in the race to shorten delivery times, enhance (or replace? More on that later.) the car-buying experience and stay involved with the consumer throughout the life of the car.

The Bosses

GM and Ford each have CIOs and e-commerce chiefs who are widely respected by analysts and industry insiders. But if you believe that the man at the top needs to set the agenda when a mature, enormous company dedicates itself to online business, Ford is out front.

The influence of Ford CEO Jacques Nasser, a devil-take-the-hindmost boss if ever there was one, is mighty. (Business, Aug. 30.) Make no mistake: Right now, Nasser is Ford. And Nasser gets information technology.

"Nasser's commitment to the Net is absolutely genuine," says Csaba Csere, editor in chief of Car and Driver magazine in Ann Arbor, Mich. "He thinks the Net is a huge engine of economic growth, and he wants Ford to capitalize on that." Csere says he recently idly mentioned an idea for an Internet business to Nasser -- who, only half-kiddingly, said "he wanted to fund the idea right then and there."

G. Richard Wagoner Jr., GM's freshly minted CEO, is a lesser-known quantity. At 47, Wagoner -- named last month to replace John F. Smith Jr. -- is the company's youngest CEO ever. He says attracting Internet-savvy younger buyers is one of his "critical" challenges.

Until Wagoner makes his mark, GM's e-commerce initiative falls to Hogan. His challenge: Use a single online presence to sell more than half a dozen overlapping brands (like Buick and Oldsmobile, GM's semipremium brands, or the Chevy Truck and GMC Truck divisions). Those brands have long enjoyed independence and sometimes treat each other as bitter enemies.

"What matters is the ability of e-GM to come to decisions quickly," says Adam J. Weiner, a senior analyst at Gomez Advisors Inc. in Lincoln, Mass. "Hogan is very much aware of the need to make the right decisions quickly. He won't wait around."

How does Hogan sell the brands on electronic unity? "Show them the compelling capability of communizing software or code where we don't detract from a brand's image," he says. "The key message to (GM) employees is that we're moving from a make-and-sell model to a sense-and-respond model. It's all about the customer being in control."

Hogan's words are eerily similar to those of Jim Yost, Ford's CIO since last summer: "The Net has transformed the buying process," he says. "It was dealer- and manufacturer-controlled. Now it's consumer-driven."

So both Ford and GM are singing from the same hymnal. And it's the right hymnal for the times -- the one full of hosannas to the consumer. You'd expect that from giant operations with crack public relations teams. The difference: Nasser. He's a whip-cracker. His power is less diffused than any CEO's power at GM would be. And he believes in the Web.

  • Advantage: Ford by a fender

    Can We Build One for You?The ultimate goal is build-to-order automobiles, and both manufacturers are happy to acknowledge it. Achieving build-to-order is "very important," Hogan says. "In the GM system, there's $40 billion in inventory at any given minute. With a rapid order/delivery model, you can take a lot of that out. Vehicles don't age well like wine."

    "GM wants to move to direct sales in the next five years," says David Cooperstein, an analyst at Forrester Research Inc. in Cambridge, Mass. A new report from Robertson Stephens, a San Francisco-based subsidiary of Fleet Boston Financial Corp., warns that "build-to-order should only increase manufacturers' efficiency if fully integrated throughout the manufacturing process."

    "We've got to connect the front to the back," Ford's Yost says, referring to the company's Web presence and its procurement and manufacturing systems. To do that, he says, Ford will "focus on the middle, on getting a seamless process." How far along this path is Ford? "It's always difficult when you've got legacy systems and practices," Yost says. "IT's mind-set has changed. We used to focus on creating efficiencies. We still do that, but now our focus is (on) delivering high value to the customer. We're asking (Ford IT) people to do something fundamentally different."

    The Web has forced GM to rethink its systems as well. Before GM refocused on the Internet, "we had a lot of autonomous units that didn't let us do all the knowledge sharing and communicating we would have liked," says GM CIO and group vice president Ralph Szygenda. "We had 1,300 e-mail servers. Now we've got 150."

    Naturally, both automakers have partnerships devoted to increasing supply-chain efficiency. GM's TradeXchange, created with Walnut Creek, Calif.-based Commerce One, is aimed at creating an online parts purchasing system. And the company's Saturn division, which often marches to its own drummer, recently linked up with Computer Sciences Corp. in El Segundo, Calif., Siebel Systems Inc. in San Mateo, Calif., and The Reynolds and Reynolds Co. in Dayton, Ohio, to launch a Web-based system that would handle customer service and inventory management. The Saturn project may be a pilot for other GM divisions. Szygenda, who recently saw "chief Internet strategist" added to his title in a move that underlines the importance of the Web to GM, says the company "will move some aspects of this system to other divisions."

    Meanwhile, Ford has teamed up with Oracle to create Auto-xchange, an online procurement system for suppliers.

    Dan Garretson, a senior analyst at Forrester, calls GM's system "more sweeping . . . a more comprehensive trading exchange." He says the Ford/Oracle Auto-xchange focuses on direct materials that actually go into the vehicles, while the GM/CommerceOne system "wants to bring everybody in," including suppliers of indirect materials such as office supplies, which don't actually go into vehicles. And that's a lot -- GM spends about $87 billion per year with more than 30,000 suppliers worldwide. Ford pegs its annual purchasing at $80 billion, with more than 30,000 suppliers.

    Some experts say both GM and Ford have promised more than they can deliver. Analysts are skeptical about the automakers' claims that TradeXchange and Auto-xchange will be fully deployed this quarter as promised. However, GM did open TradeXchange to at least some suppliers in December.

  • Advantage: GM pulls even, with a front-to-back Internet vision that's both broader and further along than Ford's.

    Dealer's ChoiceA recent headline in The Wall Street Journalread: "Auto Executives Seek to Rebuild Ties With Dealers Irked by Recent Moves." One of the moves in question is automakers' apparent desire to end-run dealerships -- even while they praise them as vital partners for the foreseeable future.

    Dealers are the immovable objects in a carmaker's irresistible drive to serve consumers. Laws vary by state, but they generally make it impossible for anybody but a licensed auto dealership to sell a new car. The National Auto Dealers Association (NADA) has lobbied long and hard to make this so. "Dealers have customers," says NADA spokesman Mike Morrissey. "The consumer buys cars from them."

    Both Ford and GM understand the power of the dealer -- and speak accordingly. "They're very important," says Ford's Yost. "And they will remain important for quite some time."

    So why are the dealers ticked off?

    The fact that GM and Ford are investing like crazy in online buying services has something to do with it. The carmakers insist they look forward to a rosy future with their dealers. But you can't blame dealers for wondering. Both are finessing the dealer uprising. Peter Look, president of Ford's E-Consumer division, concedes: "Over the past year, as we launched so many online initiatives, we weren't thinking through the entire process. We hadn't interacted well with our dealer body. We've corrected that. The dealers know we're not going to go around them."

    GM's Hogan says much the same thing, calling GM's relationship with dealers "strong." And in the future, he says, "the dealers' revenue source will be enhanced by focusing on the ownership experience."

    Moreover, Gomez Advisors' Weiner says studies indicate "the visit to (a) dealership is not so despised until negotiation." He says "when it comes to consummating the transaction, the Net won't displace dealers." OK. But does anybody like going to a car dealership? This uneasy partnership bears watching.

    Given that both Ford and GM appear to be addressing their channel conflicts, Ford may win this category by default. Reason: With Volvo, Lincoln, Jaguar and even an Aston-Martin sale or two, Ford offers more premium brands in the U.S. than GM, whose premium U.S. marques are Cadillac and Saab. And premium brands, where service and relationship are more important than price alone, stand to be affected less dramatically -- or at least less quickly -- than low-end marques.

  • Advantage: Ford by a Jaguar hood ornament.

    So for now, give Ford an edge over its rival. A small edge. Margin of victory? Maybe one Jacques Nasser visit to one slow-on-the-uptake manager's office.

    In any case, here's the lead-pipe cinch: Ford and GM will forever try to beat each other's brains out online. Why? A Camaro. A Mustang. A stoplight. No cops. That's why.

  • Copyright © 2000 IDG Communications, Inc.

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