You may still think of your car as a handy way to get from Point A to Point B or maybe as a reflection of your awesome status in the world. But Detroit wants to bring you up to date: "We will do nothing short of transforming our cars into portals to the Internet," Ford Motor Co. Chief Executive Jacques A. Nasser told reporters at the North American International Auto Show in Detroit on Jan. 9.
That's right--by this time next year, in many Ford and General Motors Corp. cars, you will be able to send and receive e-mail, check stock quotes, find out what's playing at the cineplex, shop the Web, make dinner reservations, and of course make those incredibly vital phone calls--all with built-in systems. How can a driver do all that and still be able to steer and watch the road, you might ask yourself. The carmakers have a solution: hands-free, voice-activated technology. People will talk to their dashboards instead of veering across lanes while dialing phones or playing with PalmPilots. This approach, the Detroit giants are boasting, will give people all sorts of digital services with no more distraction than they get from talking to a passenger.
Even better, it will give the auto companies a nice new source of recurring revenue as the seller of car-based communications services. By inking deals with some of the biggest names in the Internet world, Ford and General Motors hope to make billions by purchasing wireless capacity wholesale and then reselling it to motorists.
By keeping hardware to a minimum, the auto makers hope to avoid sticker shock. Ford says its hardware will cost just a few hundred dollars. Instead, the real revenue will come from charging subscribers about $10 a month for basic service and potentially far more for add-ons. On many models, GM provides for free its OnStar navigation and safety system, which it uses to bring in wireless and satellite signals. The hardware will be standard in 2001 Cadillac DeVilles and Sevilles. However, it hopes to boost the current $17-to-$37 OnStar monthly fees by adding e-mail and Internet and wireless phone services--pulling in $10 billion in annual revenues in a decade.
That would be welcome news to Wall Street: Auto stocks are already under pressure because investors doubt that sales in 2000 can match 1999's record. Says President Mark T. Hogan, head of the e-GM group: "Wall Street likes the subscription model, so we're pushing OnStar."
FRIEND OR FOE? Auto analysts, though, worry that high-technology and telecom companies may bypass Detroit and deliver services directly to motorists. Says Merrill Lynch & Co. analyst John A. Casesa: "It's unclear whether the auto companies will be able to capture the value of it."
The solution for Detroit would seem to be to partner up. Hence, the rush of deals unveiled at the Detroit auto show. General Motors, for instance, announced that it would eventually be using America Online Inc.'s browser and that it had struck a deal for free Internet access with NetZero Inc. Says General Motors Vice-Chairman Harry J. Pearce: "We're trying to decide who are friends and who are foes."
Not every auto maker in the world is rushing to wire its cars. Executives at rivals such as DaimlerChrysler, Toyota Motor, and Honda say that they aren't pinning their futures to Net-cars. In fact, Richard Colliver, sales chief at American Honda Motor Co., says that he prefers to keep his company focused on the core business: making cars. Remember?