Phone: 630-495-2282 Fax: 630-495-2260 Map/Directions

Automakers ease e-commerce expansion

November 24, 2010
It's back to basics: turning out vehicles

Long ago, in 1999, carmakers were fixated by the seemingly limitless possibilities of the Internet and electronic commerce. They created new divisions, hired executives to run them and poured millions of dollars into the new world of online enterprise. They thought they had hit upon a new way of making money beyond their traditional method of building and selling vehicles. Dealerships would fade away, shoppers would order direct from the factory, and drivers would pay automakers fees to download their e-mail or surf Yahoo! while driving home from work.

Three years later, Detroit's domestic automotive companies have throttled back those dreams and returned to their fundamental business basics: designing and building vehicles. Today, e-commerce initiatives must be proven before being launched, prices are more competitive and-perhaps the biggest change-the auto industry is telling Silicon Valley what it needs, not the other way around. "Somebody once asked me why I don't go to Silicon Valley," said Ralph Szygenda, chief information officer for General Motors.

"Why should I go to Silicon Valley when Silicon Valley is coming to Detroit?" Looking back, industry experts say carmakers were just like everybody else when it came to the electronic commerce hype. It was so big and so believable, no one could escape. Karen Francis, Ford's former e-commerce chief, said there was a fear that the automakers would be left behind. "You didn't know what you didn't know. You had to get in," she said. "You had to place a bet because the initial hype was such that this was going to provide unprecedented fill-in-theblank, and no company wanted to be caught with their competitors having an unprecedented advantage."

Francis said the auto industry was flush with money, so executives were hired and divisions developed even though e-commerce was still a fuzzy concept. In many ways, Francis' tenure in automotive e-commerce, which ended at Ford this month, illustrates the trajectory of the entire industry. She joined Ford last year while the automaker was making a big move into e-commerce. Just over a year later, with e-commerce becoming more an integral part of the company, her division was eliminated and most of its 350 workers folded into other divisions.

Ford invested $50 million to buy 462,962 shares of Internet Capital Group in December 1999, launched a free computer giveaway and subsidized Internet service program for employees, and touted putting e-mail, wireless telephone service and the Internet in millions of new vehicles by 2004. Former Ford Chief Executive Jacques Nasser even introduced Internet concept cars at the 2000 Detroit Auto Show. The dashboards were connected to the Internet so drivers could access e-mail. "In the same way Henry Ford put the world on wheels, Ford is going to put the Internet on  wheels," Nasser declared.

Two years later, the Internet Capital Group investment was written off as a loss. The stock now trades below 25 cents. The computer giveaway was halted, there's less talk about Internet dashboards and Nasser is gone. For the next few years, GM's Szygenda said, the auto industry will be one of the major forces driving technology development. "Speed, efficiency, global growth and vehicles . . . . You are not going to find too many industries where all four are going on at the same time with the same intensity."