Fawning over the garden-variety cell phone is a far cry from the hope many auto executives held in the mid-1990s, when the notion of Internet and wireless access embedded in vehicles became fashionable. Many executives planned to compete directly against wireless providers, with plans to offer cellular and satellite products and services that worked only in the automobile. To be sure, some are still hopeful that Detroit can build automobile-oriented wireless products and charge customers monthly or annual fees for in-vehicle services -- including hands-free e-mail access, real-time traffic updates and concierge services for restaurants and concerts. They see telematics as a way to get revenue for the vehicle's entire life cycle of 10 years or more, not just at the point of sale. "We have to build upon our foundation," said Scott Kubicki, vice president of OnStar Core Services, who noted in an interview that OnStar is not yet profitable as a standalone division and would not say when it would move into the black. "Once people realize the value in this, it will start creating more revenue for us. It hasn't taken off as fast as we wanted it to, but we think it will." Even pessimists at the conference noted that within five years embedded diagnostic technology could allow mechanics to detect engine problems remotely and alert drivers before breakdowns occur. And according to several surveys, 50 percent to 70 percent of calls made by 120 million wireless phone users in the United States begin in automobiles, so customers are clearly accustomed to using wireless devices on the road. But a number of problems could thwart automakers' efforts to wring profits from telematics, insiders and independent experts warned. An obvious hurdle is the disparity in cycle times between the technology and automotive industry. In Detroit, engineers need at least 18 months to take a vehicle from concept to execution -- add three more years if the vehicle doesn't share many parts with another vehicle already in production. The so-called cycle time is at least three times longer than in the electronics industry, where products flow in six-month cycles. Because of that imbalance, automakers that insist on embedded telematics will produce vehicles that have outdated technology just a half-year after they roll off the assembly line. Or, customers will have to bring their vehicles back to the dealership or to an after-market shop for hardware and software upgrades as long as they own the car. Another problem is a relative lack of technology expertise among automobile executives and dealers. Automakers have diversified during boom times into aerospace, railroads, television and boats -- only to bail out in downturns because the potential cash cows became financial suck holes. That makes many executives wary of expanding into wireless as the economy limps out of recession. "What are the chances we'll manage telematics well?" asked Jack Withrow, director of telematics for Chrysler, the Auburn Hills, Mich.-based division of DaimlerChrysler. "The odds are against us. We can stick with the core business and sacrifice some returns but build the business... If we don't, we'll find ourselves in a heck of a lot of trouble real soon." "We cannot reinvent the wheel"
Some Detroit veterans acknowledge that, regardless of how much automakers study wireless access and electronics, they probably will lag behind chip, wireless and electronics companies. Intel, Sun Microsystems, AT&T, Verizon and dozens of start-ups in California's Silicon Valley are interested in partnering with automakers. "Network carriers provide a unique set of services, functionality and applications, and they spend a lot of money to do it," said Peter van Alstine, vice president of telematics for the automotive practice of Cross Country Automotive Services, a Boston-based consulting firm. "We won't be able to do that. We need a partnership model...to execute on time, on budget and flawlessly. We cannot reinvent the wheel and compete with them. What's the point?" Dealers are also holdouts. Car sellers are notorious for their circumspection of new technology and many are just starting to experiment with online sales. Showrooms suffer high employee turnover, so a constant stream of new salespeople would have to learn the intricacies of telematics in order to persuade consumers to purchase the service. But the most daunting issue, executives say, is a relative lack of consumer acceptance for wireless devices embedded in the vehicle. According to a recent survey by research group GartnerG2, 99 percent of people said they did not even know what "telematics" meant -- despite OnStar's lauded advertising campaign with Batman and the Batmobile. Consultants also say that auto executives misunderstand consumers and therefore have inappropriate marketing pitches. Critics are urging automakers to minimize their emphasis on " safety and security" features (remote door-unlock and airbag deployment alerts to police) and instead tout traffic information and passenger entertainment, including OnStar entertainment options from ESPN and Disney. "There is no doubt the hype of telematics has exceeded what's been delivered," said Mike Finley, vice president of enterprise business for Ford's mobile division, Wingcast. "If the customer's airbag never deploys, it will be a tough sell to get them to re-up." Pessimism has become so pervasive that some experts worry about a morale drain in the emerging sector. GartnerG2 automotive analyst Thilo Koslowski said the entire niche may be in a hangover from the hype of 2000 and 2001, when automakers were touting grand plans for telematics to revitalize the "Rust Belt" and make vehicles more vital. "The telematics high has cooled off significantly," Koslowski said. "There was a big vision and dream to realize revenue for car manufacturers, and now we realize that won't happen anytime soon and that vision was overly optimistic."
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