GM wants to bolster nonauto revenues
DETROIT, Jan 11 (Reuters) - General Motors Corp.'s
North American president said on Monday the automaker wanted to
leverage its customer databases to attract billions of dollars
in nonautomotive money through such products as home mortgages.
As Walt Disney Co. does with its customers, GM
intends to boost profits through household relationships,
Ronald Zarrella said at an automotive conference. The company
will use its customer lists to build higher-profit businesses
like service and parts, insurance, financing, and rentals.
The targeted services include on-board communication like
GM's OnStar navigation and communication system, entertainment,
safety and security, and other personal services, as well as
nonauto services like Internet access, digital radio and
investing, all on one bill, he said. Many of these businesses
have profit margins of as much as 25 percent, compared with 8
percent to 12 percent for more auto-related business.
As part of its efforts, GM intends to bring the cost of its
OnStar system down so it can be made available on all its
vehicles within the next two years, Zarrella said.
GM has about 50,000 to 75,000 OnStar subscribers but hopes
to build that base enough to encourage independent hardware and
software developers to develop programs that could be marketed
on the OnStar system, he said.
"The ultimate value of OnStar is not in the hardware but to
create a subscriber base that can lead to a broader
relationship with these customers," Zarrella said.
OnStar, which allows subscribers to call an operator
through a cell phone to get directions, make restaurant
reservations or obtain emergency assistance, is available to
Cadillac and some Buick owners for about $22.50 a month plus
monthly phone fees and a one-time installation fee of about
$1,200. Zarrella said the ultimate goal was to make the system
standard in some marques and cheaper than at present in others.
He declined to estimate what the initial investment would
be other than to say it would be minimal.
As part of the relationship-building strategy, the world's
largest automaker will target its own employees and retirees
before going after higher-end households, Zarrella said.
He emphasized that the strategy began with exciting vehicle
designs.
((--Detroit Newsroom, 313-870-0200))
Reynolds Russell, Registered Investment Advisor
Editor, "Graham and Doddsville Revisited"
web.idirect.com
Subject 19528
"There are no sure and easy paths to riches in Wall Street
or anywhere else." (Benjamin Graham)
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