Mark Hogan is in the "Web on wheels" driver's seat, trying to put GM on a collision course with Gen X.
Mark Hogan is, in many ways, your typical auto-industry guy. With 26 years at General Motors under his belt, he can talk assembly lines, manufacturing processes and efficiency models with the best of them. Over the course of his career, he’s overseen factories and operations in locales as far-flung as Fremont, Calif., Detroit and Brazil.
But Hogan’s current job is one-of-a-kind in the auto industry: He is the first executive to attempt to turn America’s biggest and most conservative car company into a sleek little Net start-up. As the recently appointed group vice president of the new division e-GM, he is in charge of all of GM’s attempts to digitize, streamline and move at Internet speed.
Hogan’s new tasks include a mission to coalesce GM’s online properties — which include GMBuypower.com (for comparative information about GM cars) and GMAC (for car and home financing) — into one catch-all portal for consumers. He’s supposed to streamline the assembly-line process so that a customer can order a tailor-made dream car and receive it within 10 days (i.e., no more settling for what’s available on the dealership lot) — for less than they’d currently pay.
And most intriguingly, he’s been assigned to envision the future of the car — how to turn our beloved automobiles into networked communication tools. GM’s first “Web car” — which enables drivers to check their e-mail, stock quotes and weather and use other online services — was introduced last week. Salon Technology talked to Hogan in the wake of this announcement, to get his opinions about the future of fahrvergnugen and find out how the Net was changing the car industry.
What do you see the car of the future looking like?
The world’s changed so fast, even the differences between cars and trucks are blurring. The vehicle of the next decade and beyond will be much more of a utilitarian vehicle; it will be a means of getting you from point A to point B, particularly from a commuting standpoint. You’ll see more functional shapes, more functionality within the vehicle and clearly a move toward cleaner vehicles . We’re working hard on hybrid vehicles, which are a combination of electric power and low-displacement gas or diesel, with very low emissions.
Tell me about the “Web car” that GM introduced last week.
We have this service called Onstar, which is a combination of a satellite-connect GPS system with a wireless connection. It’s a service that we introduced about four years ago and it’s really taken off; we have upwards of 100,000 subscribers today. It offers safety and security — if you’re in an accident our Onstar operator can detect whether you’ve had an airbag deployment. We call the vehicle to see if you are OK, and if there is no answer, or if you request support, we’ll send an emergency vehicle right away. We’ve saved a lot of lives with this service. There’s also a concierge service that will allow you to connect with our call center and make hotel or restaurant reservations; or you can get directions if you’re lost, or order flowers if you forgot your anniversary.
Now we’ve expanded this service, and what we are now showing is Virtual Advisor, which brings the Internet into the vehicle. You can create your own menu of information on the Internet and download that to your vehicle and, through voice activation, literally request stock quotes or sports scores or even e-mail while you drive. We also have text-to-voice capabilities [so the car can read information back to you]. In a sense it’s the first step towards turning the vehicle into a browser on four wheels.
How much time do people spend in their cars, and how much would they be using a technology like the Virtual Advisor?
On a weekly basis, there are over a half a billion hours of eyeball time that customers spend in their vehicles. I used to live in the Bay Area and I’m well aware of the traffic patterns there; some days you might be stuck for a couple hours. If you can make your time in the vehicle more efficient by conducting activities and services over the Web, all of a sudden your life can be more efficient. That’s really our goal.
What about safety? Aren’t you worried that people will be too distracted with their e-mail to notice other cars on the road?
That’s why we are using strictly voice activation; we don’t want anybody playing with a keyboard in the front seat. Cell phones are bad enough.
How many people will be using this, and how will it affect the cost of a car?
We anticipate that we’ll have over a million subscribers by next year, as we go into a factory-install mode. And we believe it will virtually become standard on most of our vehicles over the next three to five years. Probably other manufacturers will join us; soon you can consider the vehicle as being a device on the network, just as your PDA or your wireless is becoming.
We’re going to build the hardware cost of Onstar into the price of the vehicle, about $400. That gives you a free year of subscription service, and then you pay an annual or monthly subscription fee — depending on the level of service, about $15 to 40 a month.
You already have an electric car, the EV1, which has been around for a year and a half. How successful has it been?
It’s done pretty well; we haven’t sold 50,000, it’s more in the thousands, but the customers who have bought them — and many of them are Californians — love them, swear by them, are, in fact, our most zealous fan clubs. We’ve got movie stars like Danny DeVito who are really passionate about it … But it’s just a two-seater — we learned quickly that people like the functionality of four doors and cargo space — and people want more range on their vehicles [the EV1 gets only 100 miles on a charge].
The most important thing is that we’ve learned more about the technology and it’s allowed us to get to the next generation of efficiency, and we’re bringing that into the development of our hybrid vehicle.
You’ve spent 26 years at GM, working in their Brazil headquarters, at a joint venture with Toyota in Fremont and most recently as head of GM’s small-car operations. Why do you think you were you selected to be the head of this Net initiative?
There was a fairly lengthy discussion in the company about whether we should bring in someone from the outside who was very familiar with the Internet, or whether we should use someone who is from the traditional business who can learn about the Internet and can essentially move GM to an e-commerce model. The conclusion of that debate was that we should try to use a car guy who’s been in the business and understands the guts of it.
They chose me because, not only did I have that experience, but I guess I have a reputation for being a quick study and actually pretty impatient with bureaucracy. My motto is don’t ask for permission, ask for forgiveness. In a company, like GM, that has management roots that are similar to those of the U.S. military, that’s something you need to navigate through.
How much do you know about the Net?
I started to use the Net when I was in Brazil in 1992, 1993, to find out how my favorite baseball team was doing, the Chicago Cubs — because they didn’t report baseball scores in Brazil.
While I don’t pretend to be a technologist, I do think I understand it and have a great opportunity to spend time with people like Scott McNealy [of Sun Microsystems] and George Colony [of Forrester Research] … last night [I] had dinner with Michael Dell. Because we’re General Motors we’re pretty interesting to them. We’ve had some people like Scott saying, “You’re running the largest Internet start-up, hopefully you’ll impart some lessons to us.”
You are going to build a portal at GM.com, to provide access to information about GM’s cars, businesses and financing centers. But since you can’t actually sell cars online — the dealers do that — will that negatively impact your plans for online profits?
No. Our distribution network has carried us to be the largest company in the world, and we’ve been at it for better than 80 years. Will the distributors have to change to be much more Internet-based? Yes. Will the ownership experience have to be more pleasing than it is today, in general? Yes. Some dealers do a very good job; our Saturn franchise does a terrific job at that. But we know we have to improve quite a bit and I’d say that the dealer network of the future is going to be much more focused on customer orientation. The nice thing about the Internet is that the customer is king, and they have absolute control over the transaction. That wasn’t necessarily the case before the Net.
Has the Net had a significant impact on the car industry over the last few years?
To be straightforward about it, it changes everything we do — it changes our manufacturing model, because rather than having long pipelines of work-in-process inventory, and long pipelines of finished-good inventory at the dealerships, we’re going to shorten both. As a consequence, our factories get smaller and more efficient; the size of the individual dealers gets smaller and more efficient; and we spend a lot more time in personal contact with our customers using the Web.
What about the way the cars are assembled? I understand you are trying to produce cars the way Dell produces computers, with a 10-day turnaround for new orders.
The Dell model is clearly a great business model. We think we can approach his level of efficiency — in a sense, building to order what the customer orders online — and we are working hard to get some pilots up and running hopefully as early as next year. The great potential of this is that the customer gets the right vehicle at the right price at the right place, in their time frame. We think that customization is exactly where the market is going to be going.
A vehicle is plus or minus 5,000 different parts coming together to develop a flawless car and operating system. We’ve developed a concept that brings most of these parts together in what we call subsystems or models.
???It will take out cost and improve quality,
those plants that used to handle 5,000 parts are now handling a fraction of those parts today, and the quality and efficiency at the assembly plant goes up as well.
Is the Net significantly changing the way people buy cars?
Less than 1 percent of customers who buy new vehicles today buy them through the Net, but we expect that will change. People are becoming more confident in the security of the transaction, and so we expect that number to increase 10-fold over the next five years. Will it replace the buying experience today? No. A lot of people will want to test-drive, go to a showroom and get the feel of the vehicle; but there will be more and more customers, particularly the 20-somethings, who will feel comfortable buying the vehicle over the Internet.
And what about car prices?
There’s no question that there’s a heck of a lot more information today than there was three years ago; upwards of 40 percent of our customers who are shopping for new vehicles today go to the Net for some type of information first. That is having an impact on the transaction price.
There’s actually been real deflation in car prices over the last five years, to the tune of 1 to 2 percent a year. It’s going to continue for the foreseeable future, and the only way manufacturers will be able to remain profitable is to absolutely embrace the Net and its efficiency.
You’ve made a lot of mention of the Gen X market; but GM is not known for being as innovative in design as other car companies. Does e-GM have a mandate to tailor design and marketing to younger, Net-savvy customers?
We are testing iterative design on the Net by going to virtual communities where we know these target customers are. Through a variety of means — some interactive games and interactive media — we are getting Gen Xers and even Gen Yers to help describe the future vehicle of their choice. And it’s exciting to us because in the past we’ve used traditional math models and fiberglass and clay, and hardware clinics where people sit and look at them. The iterative design opportunities that the Internet offers means that we can design vehicles in real time, [and] be much faster and be more precise in hitting the mark in terms of what our target customers want.
What do Gen Xers want in their dream cars?
Functionality — that means big space. They want power, pulling power. The aspirational vehicle, as we’ve tested it so far with Gen Xers, is a Hummer. That’s a big vehicle, the one we used in Desert Storm. Hummers and Suburbans are what they like, so clearly they aren’t motivated as much by fuel economy, although we know they are clearly keen on the environment.
What are the challenges of getting a staid old company like GM to adapt to Net time? What do you anticipate the biggest hurdle from within will be?
We really have to change the mind-set of our employees internally; that’s top-down-
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