uMAY 27,2013
`
`At Ford, 20 plants wil be idle for just a
`week this summer, not the traditional two.
`This is the Louisvile assembly plant.
`
`Is the sales
`call center
`obsolete?
`New theory: All
`must be e-savv
`David Barkho1z
`. i
`dbarkholzi1crain ;com
`As Internet leads, mobile phone
`calls and texts swamp dealerships,
`business development centers are
`starting to look counterproductive
`to some dealers.
`That's odd, given that the centers
`
`are separate staffs of salespeople
`who work leads on the phone and
`the Web. But some dealers say the
`centers can shield regular salespeo-
`ple from learing Internet sales
`techniques. And corrosive rivalries
`can form between the centers and
`regular sales staffs.
`Some dealers are dumping their
`business development centers, or
`BDCs, while others - who defend
`the centers as the best way to han-
`dle the rising tide of Internet leads
`- have worked out a truce between
`the two staffs.
`Chris Hil said dismantlng the
`business development center at Bil
`Joliet, IlL., was
`the only way to shake the regular
`sales staff from a "country club at-
`mosphere" that gave regular sales-
`people a pass on calling prospects
`and learning how to engage cus-
`tomers with smartphones.
`He said the seven specialists
`working the phones in the call cen-
`ter and responding promptly online
`to Internet leads were doing a good
`job of handling a growing list of
`prospects.
`
`Jacobs Auto Group in
`
`see CENTERS, Page 27
`
`.. '" J.. '- i-~ J V t~ 1)
`
`MAY 2 8 2013
`
`Entire contents If 2013 Crain Communications Inc. All riL
`
`reserved.
`
`$159/yEAR; $6/COPY
`
`~ PllilllVi'â
`'- ~
`Too busy for a shutdown
`
`Strong sales are killing a Detroit 3 summer ritual
`Plant closings and flexible labor contracts
`Nick Bunkley
`nbunkleyi1crain.com
`have broken the cycle of overproducing and
`The traditional summer auto plant shut-
`discounting. But the flp side is that automak-
`ers have to stretch their capacity quickly to
`down is quickly fading away.
`With tight inventories, rising sales and cus-
`keep up when the market is on an upswing.
`Ford Motor Co. is reducing its shutdown
`tomers flocking to big, profitable vehicles, the
`schedule for a second consecutive year, with
`Detroit 3 no longer can afford to halt plants for
`two weeks.
`20 of its 31 plants being idled for one week in-
`Higher demand for pickups, SlNs and
`stead of two. Chrysler Group is eliminating
`crossovers is largely behind the decisions to
`time off at three of 10 assembly plants, all six
`skip or shorten the downtime that historicaly
`transmission
`engine plants and five of six
`has coincided with the beginning of the new
`. plants; four Chrysler assembly plants wi shut
`model year.
`for one week.
`
`At General Motors, whose May 1 inventories
`were the largest of the three companies,
`sources say most plants wi keep their usual
`shutdown plans in early July. But a plant
`building large crossovers is expected to stay
`open, and a heavy-duty pickup plant will be
`idled for just one week. A GM spokesman de-
`clined to reveal specifics.
`The transplant auto makers have historicaly
`not scheduled significant summer downtime
`for model changeovers and have not an-
`nounced any major changes this year; most of
`their plants wil close for no more than a week
`
`see SHUTDOWNS, Page 27
`
`)
`
`I
`
`Not satisfied with OtiStat's steady pröfits,
`GM wants to create a global 4G powerhouse
`Dave Guilford
`dgu i Ifordi1cra i n.com
`ETROIT - General Motors' OnStar tele-
`matics unt has quietly become a profit
`margin superstar.
`Analysts peg OnStar's revenues at about
`margi of30 to 35 per-
`$1.5 bilion annualy, with a
`cent. That's about five times the 6.2 percent margin
`from GM's fist-quarer adjusted earings before
`interest and taxes in Nort America - where the
`vast majority of OnStar' s business is today.
`The question for GM now is: Can OnStar be
`more?
`CEO Dan Akerson and other top executives are
`itching to shake up OnStar's cozy safety-and-se-
`
`They see GM's deal with
`
`curity oriented, monthy subscription modeL.
`AT&T to provide 4G LTE
`connectivity - the fastest tye of wireless Inter-
`net connection now avaiable - though OnStar
`next year as the enabler. Akerson told stock ana-
`lysts this month that the 4G deal "opened up what
`I think are potentialy lucrative lines of business
`that don't exist" in OnStar today.
`"So when we look at what we can do with a 4G
`pipe into a car," Akerson said, "you can change
`the business model almost entirely."
`GM foresees expanded offerings such as custom
`apps, streaming entertainment and enhanced
`
`see ONSTAR, Page 26
`
`S6(;S-vOgig li HIH03d
`O~ ~N8ld M vGvL
`ON I HOnSN308H I dd I II Hd
`lN3QIS3~d HOnSN30HH AOd3l
`
`1,1,11111 II iI II II II' " I ¡¡ I, II '11'1'111 II 111'1'1," ! 11111 II 1I1'11 i
`
`b1~8W LZSO N8 10 *1 11808tOt~
`ZD919 lI8IQ-S HJSKKOin8KKKKKKKK BrQB8~8#
`
`Automotive News
`I N
`
`TRACT
`
`TO VIRAL VIDEOS - autonews.com/traction
`
`--
`
`-~ II (;v
`:0' II E -(;OSS
`=~ !: 10(;0
`=00 ii
`:N'"
`~..~=~z
`:;Lf
`=N
`
`5Ed
`
`-"
`
`-
`
`OWNER Ex. 2030, page 1
`
`

`

`A key to OnStar’s services is subscribers’ instant connection from their General Motors vehicles to live advisers in the command center.
`limited benefits beyond third—generation
`cellular technology, he says.
`Transmission of photos and videos is
`markedly better in 4G, Lanctot says. But
`most of what GM proposes to do could be
`done with 3G.
`GM executives counter that 4G will help
`them overcome the lag between the speed
`of new-vehicle development — four to five
`years — and the constant churn of digital
`technology. The 4G connection will allow
`GM to update software remotely, Ross says.
`“We're making it so that the car can be up-
`dated with new apps and services over time
`after it’s been delivered,” he says.
`GM also faces the challenge of selling an
`embedded system, as opposed to a Blue-
`tooth-enabled
`connec-
`tion that lets a driver’s
`smartphone run through
`the vehicle's entertain-
`ment system.
`Systems such as Ford
`Motor Co.'s Sync offer
`such services with many
`of the entertainment op-
`tions
`that GM plans,
`Lanctot says.
`“In terms of something
`sexy to sell the car, [On-
`Star] is not as sexy as it used to be,” he says.
`“I can connect by phone and use Pandora.”
`Phil Abram, GM's chief infotainment offi-
`cer, says an embedded system has advan-
`tages. In a video interview with Engadget at
`the Consumer Electronics Show in January,
`Abram said phone-based connectivity has a
`key flaw: It leaves the car when the phone
`does.
`That means that outside-the-car functions
`such as remote start and remote unlocking
`are unavailable, he said: “You can't reach
`out and interact with your vehicle when
`you’re not in it.”
`Although many issues remain unsettled,
`GM is newly determined to wring more mon-
`ey from its quiet telematics profit machine.
`Lanctot says OnStar has untapped value.
`“They have a very powerful engine,” he
`says. “It's like they're just realizing it or
`something. They're getting it tuned up and
`using a little higher octane."
`
`Lanctot suggests another use, one that
`dealers may not welcome: GM could evalu-
`ate dealers by tracking what percentage of
`such notifications they convert to service
`business.
`I Get more from current subscribers.
`OnStar has about 5.7 million active users
`in North America, Inch says. Before the
`2008-09 recession, the number had been
`more than 6 million, he says. Inch says the
`percentage of paying customers, as opposed
`to new-car buyers during their free trial pe-
`riod, is confidential.
`Other informed sources say GM converts
`about half of new-car buyers to subscribers.
`The current OnStar model, honed by initial
`OnStar President Chet Huber, becomes
`profitable at about 30
`percent retention,
`they
`say.
`But GM wants to win
`over more vehicle own-
`ers and potentially sell
`them a more lucrative
`mix of services.
`Also, Akerson told stock
`analysts this month that Akerson:
`GM undercharges cellular Beyond safety
`providers for calls made
`and security
`through OnStar.
`“We do want to change this from primarily
`safety and security business to one that’s
`more feature-rich and where we get some
`real money from it,” Akerson said. “We've
`never been properly compensated in my
`opinion ... from the carriers.”
`I Expand its geographical footprint.
`In addition to its users in the United States
`and Canada, OnStar has 500,000 in China,
`where the service's popularity is growing.
`GM will launch OnStar in Mexico in the sec-
`ond half of this year.
`Part of the 4G plan is to offer OnStar glob-
`ally, a goal that could greatly increase the
`user base and revenues. Akerson said in re-
`marks to analysts that the goal is “global
`leadership in connected vehicles."
`“We are going to roll out 4G LTE across all
`GM brands and regions starting in 2014 in
`the United States and Canada,” he said.
`Citi’s Michaeli says embedded telematics
`services will growat a double-digit rate in
`this decade, with faster growth in China.
`Calling 4G service a game—changer, Michaeli
`wrote in. a recent investor note: “GM is
`uniquely positioned as an automaker both
`through OnStar’s early mover advantage in
`embedded telematics and GM's robust po-
`sition in China."
`
`GM wants to reboot OnStar, beginning
`with 4G LTE rollout in 2014.
`
`froamcs ossraa
`I connectivity: 2G
`I Service areas: 5.? million users in
`L|.S. and Canada: 500,000 in China;
`will be launched in Mexico this year
`
`I Billing: 2 monthly subscription levels
`I care services: Safety/crash
`notification, navigation, security,
`cellular phone service resale
`
`NEXT-GEN DNSTAR
`
`I connectivity: 4G LTE
`I Service areas: Global
`
`I Billing: Possible flexible fees as part
`of cellular-dataplans
`
`I Added apps, services: Streaming
`entertainment. vehicle diagnostics,
`improving car ownership and driving
`experience
`
`
`infotainment business.
`Apps could direct consumers to available
`parking spots, the cheapest fuel or the best
`route for a multistop trip, Ross says. If a ve-
`hicle owner opted in, GM could inform an
`insurance company of monthly miles driven
`to qualify the owner for cheaper,
`low-
`mileage insurance.
`GM has an OnStar app allowing vehicle
`owners to participate in RelayRides, a car-
`sharing service inwhich they can rent their
`vehicles for short periods.
`GM also plans more typical online services
`— streaming music, audio books, movies,
`podcasts and the like, Ross says. Analyst Itay
`Michaeli of Citi Investment Research in
`New York sees vehicle-to-vehicle communi-
`cation and in—vehicle advertising as other
`options.
`I Build a stronger link to dealers.
`GM uses OnStar and the array of sensors
`in the Chevrolet Volt plug-in hybrid to track
`performance of the car’s complex electric
`drive system. Now GM wants to make
`broader use of its ability to monitor vehicle
`components remotely.
`Inch says that with 4G, OnStar will be able
`to send the onboard diagnosis of any prob-
`lem to a customer’s dealer, who could con-
`tact the customer. That could increase deal-
`er service revenues. GM also sees it as a way
`to detect emerging problems early, mini-
`mizing warranty work and recalls.
`Analyst Roger Lanctot of Strategy Analyt-
`ics in Newton, Mass., says that could be a
`major plus.
`“Between the vehicle diagnostics and the
`dealer integration, that's where the rubber
`hits the road,” he says. “That's very valuable
`aftermarket business.”
`
`
`
`Abram: OnStar’s
`embedded setup
`has advantages.
`
`“I would tell you to stay
`tuned. This won’t be your
`traditional OnStar that’s just
`a [business-to-consumer]
`subscriber service with a trial
`period with a subscription, _,
`whether it’s month "to month
`or year to year.”
`4
`Terry Inch, OnStar COO
`
`Embedded vs. smartphone
`Not everyone shares the enthusiasm for
`4G. Strategy Analytics’ Lanctot says the
`AT&T deal announced Feb. 25 was “a little
`bit of a headline-grabber." While 4G is bet-
`ter than OnStar’s current 2G service, it offers
`
`OWNER Ex. 2030, page 2
`
`