Dow Jones Newswires -- July 19, 2001
Dow Jones Newswires
France's PSA, Ford, Gear Up In-Car Telcoms Alliance
By DAVID GAUTHIER-VILLARS and BETH DEMAIN REIGBER
Of DOW JONES NEWSWIRES
(This story was originally published Wednesday)
PARIS -- French carmaker PSA Peugeot Citroen (F.PEU) and U.S.'s Ford Motor Co. (F) should
announce later this summer that they have reached an agreement to merge their European auto
communications services units, sources said Wednesday.
Prior to the planned agreement with Ford, PSA reshuffled the ownership of its auto communications
- or telematics - unit Egery, relegating French media giant Vivendi Universal (V) to the role of
minority shareholder from that of equal partner.
PSA and Ford are pursuing talks with rival carmakers, including Renault (F.RNA), to widen the
scope of their telematics alliance. People close to the deal say DaimlerChrysler AG (DCX) is
discussing joining the alliance, though officials there declined comment.
The new unit will develop a platform to provide a host of wireless services for motorists such as
emergency assistance, navigation, weather forecasts and even recommending hotels and restaurant.
"We've already started to work together," a person involved in the project said, "but with the
summer break, we're considering what would be the best timing to announce the deal."
Under the two-way pact, Egery will be combined with the European arm of Ford's Wingcast
telematics unit that the U.S. group set up in mid-2000 with Qualcomm Inc. (QCOM).
Egery was initially set up in September 2000 as a 50-50 joint venture by PSA and Vivendi
Universal (V) with initial capital of FRF50 million.
However, PSA has since then taken over operational control of the project, having asked Vivendi
to lower its stake in the venture to 25%.
Jacques-Christophe Midey, in charge of cooperation project at the group's strategy division, said
that during the development phase, PSA realized that Egery was a cornerstone of managing the
relationship between its brands and motorists.
Vivendi said that its stake in the project, although reduced, will still allow it to distribute wireless
content to motorists.
The danger for PSA was to see Vivendi muscling in on its privileged relationship with motorists. The
temptation would have been high for Vivendi, which sells everything from mobile phones to compact
discs, to use Egery as a channel to market its own products and services.
Vivendi's spokeswoman said the media group will likely remain a shareholder in PSA and Ford's
wider alliance.
Officials at PSA and Ford declined to comment on the current state of their tie-up.
However, the carmakers said they are keen to share the costs of developing a range of in-car
wireless services for it appears that customers want their cars to be connected to the outside world
but aren't necessarily ready to pay for it.
"Not being certain of the revenues but being certain of the costs, there is an immediate benefit in
joining forces with other carmakers," said Midey.
The alliance "vindicates (PSA Chairman Jean-Martin) Folz's strategy" of staying independent and
achieving economies of scale through cooperation and joint ventures with other manufacturers, said
Jim Wright, analyst at Lehman Brothers in London. PSA and Ford already have a joint venture to
make diesel engines.
The two companies expressed a willingness to cooperate in the field of telematics in September
2000 adding they would aim to bring other carmakers into the venture.
France's Renault said it is in talks with PSA and Ford about joining their telematics link-up but that it
continues to study alternative options.
"We won't be in a position to announce our plans in telematics before later this year or early next
year," a spokesman at Renault said.
He added that Renault's telematics team works hand in hand with that of 36.7%-owned Nissan
Motor Co. (NSANY), although Nissan is planning to use Ford's Wingcast for its Infiniti
top-of-the-range vehicles in the U.S.
Other carmakers joining the project would create more scale and allow them to raise the standards
of the technology, Lehman Brothers' Wright said.
However, Toyota Motor Corp. (TM), which last week detailed a platform-making joint venture
with PSA, said it hasn't been approached on the subject. A spokesman for Bayerische Motoren
Werke AG (G.BMW) said it doesn't expect to join forces with Peugeot and Ford's project, either.
And Germany's two top volume carmakers, Volkswagen AG (G.VOW) and Adam Opel AG
(G.ADO) - the German arm of U.S.-based General Motors Corp. (GM) - said they see demand
and technological potential for telematics offerings expanding, but will stick with their own in-house
systems.
Still, VW unit Audi of America (G.AUD) in April said it would partner with OnStar for its
revamped A4 to be launched this year, as European and U.S. systems differ.
Opel cars also feature OnStar, a unit of GM, which provides in-vehicle safety, security and
information services using the Global Positioning System, or GPS, satellite network and wireless
technology.
Tony LaRocca, an OnStar spokesman based in Zurich, said in Europe, though, OnStar has no deals
with carmakers beyond the GM group, so far.
Midey said PSA wants to launch the service in the fourth quarter of this year. He said that in a first
stage, the service will likely be sold as part of a package like optional extras such as fog lamps or
sunroofs.
"It would be difficult to charge a monthly subscription at the beginning for a service that isn't
immediately visible to customers," said Midey.
He added that the roll out of in-car communications services had been delayed mostly by
technology constraints as telecommunications companies failed to deploy reliable broadband
wireless networks on schedule.
PSA had initially aimed to have one million vehicles connected by 2002. "We maintain this target,
but it won't happen before 2004," Midey said.
Company Web sites:
ford.com
psa.fr
onstar.com
-By David Gauthier-Villars, Dow Jones Newswires; 33 (0)1 4017 1740,
david.gauthier-villars@dowjones.com
(Beth Demain Reigber in Frankfurt contributed to this story) |
