GM Moves to Expand E-Commerce Role

Countering its Rust Belt image by embracing the growing power of the Internet, General Motors Corp. on Tuesday created a separate entity to coordinate its global electronic business activities.

GM, the world’s largest company, said the new business group, known as E-GM, will be directed by Mark Hogan, a highly regarded executive who previously headed the auto maker’s controversial efforts to reduce small-car manufacturing costs.

With E-GM, the industrial giant aims to integrate numerous electronic-based initiatives--ranging from its online car-buying service to advanced vehicle communication systems--and enhance them for dealers, consumers and suppliers.

“We hope to build linkages to operations across the globe and make GM a real e-commerce business,” said Ronald Zarrella, executive vice president.

All the world’s major auto makers are exploring the Internet, but GM is the first to dedicate such a large internal group charged with strategic development of existing electronic activities and creation of new business opportunities through alliances with outside partners.

“GM really gets it,” said Scott McNealy, chairman and chief executive of Sun Microsystems Inc., which helped GM develop its e-commerce strategy and is a likely partner in future Internet projects.

Although experts lauded GM’s move to exploit information technology, there remains skepticism that the company can be nimble enough to outmaneuver smaller, innovative online ventures.

Already, online competition among car-buying sites is increasing. Just Tuesday, online auctioneer EBay Inc. said it may start offering vehicles on its Web site. And auto manufacturers are competing for Internet-savvy consumers with a variety of independent ventures, such as Autobytel.com and Microsoft Corp.’s CarPoint.com.

With its new entity, GM hopes to reshape the way it does business by placing under one department the responsibility for electronic business development, technology and operations. The group, whose size has not been determined, will set strategy for electronic marketing, sales and product management.

The auto maker already offers a variety of services worldwide through about 100 sites on the World Wide Web. But GM executives acknowledge that the company has failed to coordinate and leverage such activities.

In one effort to be more aggressive, GM said it will expand the subscriber base of its OnStar vehicle communications system from 75,000 customers to 1 million within the next 18 months.

The company said it will install the in-vehicle safety, security and information service as standard or optional equipment on 30 vehicle lines by 2001. OnStar uses global positioning system satellite technology to provide a 24-hour communications link to customers.

Ultimately, GM sees e-commerce development as a way to enhance the shopping experience for consumers, to improve manufacturing and distribution efficiency and to lower costs.

GM executives declined to provide specific projections of how much revenue it expects to generate from e-commerce in the coming years but said the potential is huge and could exceed $5 billion annually.

George Colony, president of Forrester Research, a Cambridge, Mass., Internet consulting firm, said GM’s global reach makes its move into e-commerce a significant step for the auto industry.

About 2 million consumers used the Internet last year to assist in their purchase of a new car or truck. That figure should reach 8 million by 2003, leading to about 500,000 vehicles bought directly over the Internet, Colony forecast.

The importance GM is placing on e-commerce was underlined by the presence of both GM Chairman John F. Smith Jr. and President G. Richard Wagoner at the news conference at the company’s downtown headquarters.

“We want to play aggressively in this business,” Wagoner said. “And we want to win.”

Hogan, considered a rising star in GM’s ranks, said the push into e-commerce amounts to a cultural shift for the auto maker, an old-line industrial company that has often been insular and resistant to change.

Even sincere efforts to revamp operations have often been resisted by union workers or dealers.

Hogan, 48, caused a stir earlier this year while pushing a “modular” production plan to make GM’s small-car operations profitable. The project, which would reduce union jobs, raised the ire of the United Auto Workers and prompted GM to delay its implementation.

And some dealers are wary of Internet projects, fearing that the auto makers want to sell directly to consumers. GM, however, said it wants to partner with dealers, not circumvent them.

Hogan’s initial focus will be on integrating several services that rely heavily on information technology, such as its GM BuyPower car-shopping Web site that links dealers and customers, GMAC online financing services and OnStar.

GM is also expected to announce several major partnerships in coming months to expand its Internet activities. The company, for instance, is talking with AT&T; Corp. about providing cellular linkups that will let drivers download services.

GM hopes the new Internet efforts will help it reach out to more affluent and younger buyers.

“We want to attract young buyers who haven’t been thinking about us,” Hogan said.

GM shares fell $1.69 to close at $60.81 on the New York Stock Exchange.