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OT Plug for the net
BW ONLINE DAILY BRIEFING
NEWSMAKER Q&A January 11, 2000
DaimlerChrysler's Bob Eaton: "Ultimately, Every Transaction Will Be on the Net"
But the carmaker's co-chairman doesn't think wide-ranging Net connectivity belongs in every car
How will the Internet change the auto industry? On Jan. 9, Robert Eaton, co-chairman of DaimlerChrysler, sat down at the North American International Auto Show in Detroit with Kathleen Kerwin, Business Week's Detroit bureau chief to discuss several topics, including how much Net communications capability will be built into future DaimlerChrysler models. Eaton is more skeptical than many rival auto execs about customers wanting these capabilities built into their cars. Here are edited excerpts from the conversation:
Q: Ford and GM have been announcing new deals to build Internet communications into their cars. In your opinion, how extensively will Internet-connected devices be built into cars?
A: I'm a firm believer that the biggest thing happening in this economy is in communications -- hardware, software, the Internet, business-to-business communications. And I believe ultimately that every transaction this company does, inside and outside, will eventually be on the Internet. That doesn't mean we'll go around the dealer. But we'll work with the dealer on the Internet, work with the customer on the Internet. It's just so damned much cheaper to do it that way....
[The Internet] is driving the economy. It will have an effect like the automobile had in the early part of the century, that the steam industry had before that. And we're in a period of instantaneous communications. So, by definition it will happen a lot faster. That's going to be the thing that pervades our lives, our economy, etc.
That said, coming back to cars, in the luxury end of the market, people are willing to pay for an almost unlimited amount of technology. In [small cars], it's totally different. There, people want to be able to bring their portable communications devices with them, whether it's a cellular phone accessing the Internet, or a GPS [global positioning system] they use while they're hiking. Are we going to imbed all of those things in every car? No.
The [auto] market has demonstrated very well that [it's difficult] to raise prices. In the last three years, the transaction price for cars hasn't increased, despite all the new stuff regulators are requiring us to put into cars. There's not a lot of appetite for putting a CRT in there that's going to give you voice-activated e-mail, phones, fax machines under your dash, and all that sort of thing.
The mass part of the market will be people bringing their own communications tools with them. How many cars do you want to have hard-wired telephones in them? When you change phones, you want to take the one with your number with you.
Q: What is DaimlerChrysler doing to keep cutting costs?
A: I think it's a continuum of what we've been doing for a long time. Our target from our Score cost-cutting program was about $2 billion [in reduced costs] last year. [General Electric CEO] Jack Welch once said he thought that the opportunity for productivity was infinite. The conventional wisdom is that that has to end sometime -- you can't just keep cutting costs 5% per year forever. But I think what's happening now [with the Internet] is going to let us keep prices from rising.
Q: If you have a long-term relationship with a supplier, are you going to get into Internet auctions in buying from suppliers, the type of thing Ford and GM are talking about?
A: No. I don't see auctions coming. First of all, we won't buy that many pencils and sheets of paper and stuff. We buy things like suspension parts, where you've got a two-year lead time. The supplier has got to have a design capability, a testing capability, a manufacturing capability. You don't need the Internet for that. That's ridiculous. Why do you need an auction for that? As an engineer, before I draw the first sketch on a sheet of paper, I want to know who the supplier is, and how he's going to want to manufacture it. I don't want to finish the design and then auction the damned thing off without taking advantage of the supplier's knowledge and manufacturing processes.
Q: How will car dealers change as a result of the Internet?
A: We started trying to change our dealers a long time ago. They weren't changing as fast as we would like, so we started putting in the Five Star program where their processes get audited by outside auditors, and we keep racheting up the standards. Now, on the Internet, we're starting to only recommend dealers [in the program].
Q: But aren't dealers eventually out of business if the Internet is used for auto distribution? Dealers cost too much.
A: I don't think the dealers are making too much money today. They're just inefficient. Our objective is not to put them out of business. We want to get real costs out of the system -- with dealers as well. But for as long as I can see forward, I see the dealer being in the loop.
But every meeting I go to, we put more content into our cars because the government wants it, or customers want it. Yet the cost of cars doesn't go up. We have to get the costs out somewhere, including the dealer network.
EDITED BY THANE PETERSON
businessweek.com |
