The following interview with Delphi’s Frank Ordonez on the topic of telematics is courtesy of Automotive Distribution Network’s (Parts Plus and IAPA) Network Magazine.
Telematics is not only shaping the future of automobiles, but also that of the aftermarket. After a lackluster debut more than 12 years ago, the telematics landscape is experiencing a surge that is redefining automobiles as we know them today.
According to Precksha Saksena, organizer of the 2008 Telematics Detroit Conference and Exhibition, telematics is, in the purest sense, “deeply embedded hardware or software and telecommunications for the purpose of providing and facilitating applications that serve the car and its occupants. Telematics enables safety, security, monitoring of vehicle health, remote diagnostics and emissions compliance. For the occupants, embedded systems can be used to provide dynamic location-based services such as navigation, traffic information, and a suite of driver’s services based on 2-way connectivity.”
With the aftermarket facing telematics-related challenges, Network Magazine contributing editor Travis Scott Bowden spoke with Frank Ordonez, president of Delphi Product & Service Solutions (DPSS) and vice president of Delphi Corporation, to learn how the Automotive Distribution Network can best take advantage of this exciting technology. Ordonez is also a member of the Delphi Strategy Board, the company’s top policy-making group, and he oversees the corporate sales and marketing task team. Chris Slesak, manager of Telematics New Business Development & Programs for DPSS, and Ben Johnson, director of Global Product Development for DPSS, also participated in the discussion.
Travis Scott Bowden: Is Delphi developing a telematics business solution that can benefit the automotive aftermarket?
Frank Ordonez: This time last year we saw a major wave coming at us in the telematics area. Being the company that Delphi is, in the original equipment business, we had a lot to do with the telematics systems already out there. Delphi’s been in telematics for a long time, and we see this as a wave that is going to continue. We have our minds wide open. Telematics essentially has to communicate two ways — back and forth — between two devices. A radio is a one-way telematic — it only communicates one way. What’s new here is the way to communicate from the vehicle back to the service providers or the manufacturers. It is fair to say that Delphi is working on an aftermarket strategy for telematics with some aftermarket companies.
Bowden: Right now, if a customer buys a brand-new Honda Accord LX, the car comes with their Maintenance Minder™ system, which recommends service and diagnoses vehicular problems. And then the system directs the motorist to the nearest Honda dealer. Same thing with GM and OnStar. How can the aftermarket gain a piece of the telematics pie?
Ordonez: You can’t fault the OEMs for what they’re doing. They can see clearly that there’s an opportunity. The OEMs know the vehicle talks to them. They have a whole dealership network throughout the United States. They know by adding a couple of links to the diagnostic line in the vehicle they can go inside and find out what’s going on inside the computer, check tire pressure, and so on. The reality is it’s taken OnStar a good eight years to gain some recognition in the marketplace that their service is pretty valuable. In the early days of OnStar, probably most motorists were saying, “What’s this? Why do I need this?” Manufacturers have already started using this as a way to tie the customer into the dealerships, at the bare minimum, throughout the warranty period. And they’re going to try to lock up the maintenance work while they’re doing the warranty work.
Bowden: So the dealers are looking to telematics to further cultivate customer loyalty, even after their new car comes off warranty?
Ordonez: That’s where their mindset is, there’s no question. The manufacturers are expanding their thinking to own that customer from the cradle to the grave. In the past, they handed off that customer to the aftermarket after the warranty period expired. However, it isn’t all gloom and doom for the aftermarket because the reality is that the manufacturers don’t have the capacity to service the aftermarket. Even if they wanted to, they could not replace every Parts Plus Car Care Center or Goodyear or Joe’s Garage. But they can start changing consumer behavior to take their vehicle to the dealer after the warranty. There’s no question that telematics is part of that equation.
Bowden: Do you think motorists trust the diagnostic opinion/service recommendation of a telematics module more so than a service dealer or even dealership personnel? That is, will more motorists elect to not put off repairs if the service recommendation is seemingly coming from the vehicle itself?
Ordonez: Your intuition is right on. Yes, I believe motorists are trusting it. As a parallel example, we have our diagnostic modules, the DS500 and DS800. One of the things we do is Service-Bay Quality Control, which is similar to what the OEMs provide with their diagnostic systems; however, we do it live in front of the customer. We connect to the link, get all the codes down, interpret them and deliver the customer a sheet of paper with the diagnosis — that is a “wow” moment for the customer. Because it’s no longer only the opinion of the service writer: “Oh, I think you’ve got a bad spark plug.” No — the computer is telling you that you have a problem and is supplying information clearly marked — “Red is bad; green is good” — to help the service writer sell needed services with more credibility. You can condition the consumer to react that way. I’m thinking of the broader perspective. You’ve got a personal computer, which is practically a self-diagnosing device. Or your fridge goes down and all the codes come up and tell you what’s wrong with it. The consumer nowadays doesn’t trust guesswork with anything they buy, and the vehicle is no different; in fact, there are more electronic capabilities on your car to diagnose the problem than most other devices.
Bowden: How can the Automotive Distribution Network’s Parts Plus Car Care Centers and ASP shops best take advantage of telematics technology? How can they avoid being cut out of the equation by the OEMs?
Ordonez: That’s a very complicated question. Essentially, the big issue with telematics is not the technology, per se; the biggest issue is the business model. You can connect an independent shop to a customer through Bluetooth telephone technology right now. But can you imagine telling your spouse, “OK, once a month I want you to take this line, connect it to the DSL, connect it your Bluetooth, so you can send it to the garage down the street so they can overnight tell me what’s wrong with the car.” It’s got to be a passive diagnostic system — it’s got to be what OnStar does. OnStar is actually querying the vehicle directly, asking the vehicle what’s wrong and then telling you. That’s part of the business model we’re talking about. I think repair is just one arm of the solution we’re looking at in the area of telematics. Repairs by themselves or repair diagnostics by themselves will not necessarily carry the day.
That’s where the OEMs have it right: It’s safety; it’s unlock and lock the doors remotely; it’s diagnostics; it’s concierge service; it’s point-by-point navigation. It’s a lot more than just one service. Going back to the garages: I’m thinking of companies like AAA — they already offer travel, they already offer, in a way, navigation, and they have travel agencies. What if they hook up with the Automotive Distribution Network on a vehicle diagnostic service? Or maybe AAA will want to do it with their own shops. Or perhaps the automotive aftermarket as a whole puts an effort together, enabling the customer to say, “I want to go to the Parts Plus Car Care Center.” We need people in the aftermarket to start thinking about this because it will take a couple of years to put this together.
The OEMs have a huge advantage — they’ve got dealers throughout the country. No matter where you are, they can point you to a nearby dealer. A Parts Plus Car Care Center doesn’t have that same kind of network. If I’m from Arizona, but I’ve driven to New York, where do you send me that’s convenient? That’s why an independent network needs to be built up. And the consumer should have the right to determine that they want their info directed to a Parts Plus Car Care Center.
Bowden: That sounds like a potential rights issue — a legislative battle. I mean, do you own the car or does the carmaker own you?
Ordonez: You might be too young to remember, but think back to the time only IBM computers would use IBM cards to read the code. The government stepped in and said, “You can’t do that. You can’t ensure sales that way.” I think we may be looking at the same thing. Technically, as the consumer, I own that car, right? So I should have the right to allow whomever I want to monitor that car or not. And it may not even be a legal issue — it may be a customer issue. Five years ago, the vehicle companies said, “We will own the space of entertainment in the vehicle.” You couldn’t listen to your iPod in your car. Over time, the consumer has said, “No, that’s not your decision; it’s mine.” If the customer demands that they don’t want the signal to go to the dealership, if they instead want the signal to go to Frank’s Car Care Center, eventually they’ll get it. It may not be much of a fight in the end. Again, it goes back to the manufacturers not having enough capacity in the first place to service the entire aftermarket. Some of these OEMS already have problems servicing their own warranties because they don’t have enough capacity to handle their own warranty work. You call them up for an appointment, and in some cases, you’re talking 20 days out.
Chris Slesak: Consumers receive OnStar free for a year or less, and they can turn off the service at any time. But what they can’t do at the moment is redirect that signal to another service provider or an independent shop. And today, even if you successfully challenged it, where would you point it? Independent shops aren’t equipped to receive the signal.
Bowden: Fair enough. So what sort of investment will the Network and its shops have to make to utilize telematics?
Ordonez: At some point, every shop needs to have the correct electronics linkages. It’s going to be a matter of survival. The real issue is the cost of the device in the vehicle that will talk to the box on the other end at the Car Care Center. I think a shop could afford a $200, $300 or even a $400 box to receive a bunch of signals from numerous cars, but the issue is the cost of supplying those $200 boxes to the cars themselves. It’s really a matter of coming up with an affordable box for consumers and developing a network of shops to receive the signal.
Ben Johnson: We’ve looked at a variety of models where the shop may elect to buy these devices for their best customers if we can get the cost of the hardware down. Your best customer is already the one you’ve got, right? So implant that device and either subsidize or share that cost with the consumer.
Ordonez: Right now, as the technology matures, the focus is on getting the cost down. The technology itself is proven.
Bowden: How fast is the telematics market growing?
Ordonez: We believe in that in four years, 30 to 40 percent of the OE cars will be equipped with some form of telematics device. At that point, the average consumer is going to start saying, “What about my car? Why is my car not equipped with this?” Well, you can give them an aftermarket solution. It’s coming and we’ve got to start preparing now. By definition, our mindset in the industry is to worry about what’s going on in the shop today — not to look forward — because the industry is working on yesterday’s vehicles.
Bowden: Will every car on the road have at least some form of pure telematics in the next decade?
Ordonez: By 2013, one out of every six cars will have a telematics device, assuming that there are still around 300 million vehicles on the road. Half the vehicles coming out will some form of safety/security telematics. If you define telematics in the broad range, yes, nearly every vehicle on the road in the next 10 years will some form of telematics because, by definition, navigation is telematics. You can already get Zagat Survey restaurant reviews and ratings on a $200 navigation system from Best Buy. The Delphi navigation system can tell you the speed limit on the road you’re on and whether you’re driving too fast. There are traffic and weather updates. And one of the major OEs has a network in which the cars passively formulate traffic congestion just by talking to other cars on the road. Let’s say, Honda — they can formulate traffic, for instance, downtown, just by all the Hondas talking to each other and warning the other Hondas to stay away from the congested area.
Bowden: So in the future if another Honda cuts me off on the freeway, will my Honda curse out the other one?
Ordonez: (Laughs.) Could be.
Bowden: Can you go over some of the other cool, innovative features coming our way via telematics?
Ordonez: We have had a call from an insurance company that’s interested in using telematics to better understand driver habits. The company wants to entice drivers to let them monitor them by offering rate deductions if you’re driving “correctly” and at the “right” speed limit. Telematics has implications for everybody: the aftermarket, the music and film industries, the diagnostics and repair industry, the restaurant industry — it’s all potentially there. The technology is already there for you to download a film at the gas pump, and the only reason you can’t do it today is because it takes 15 minutes to download the video—that’s too long. The Internet is definitely coming, along with verbal e-mails. You can already link your car to your personal computer at home. Your kids go out with your vehicle on Friday night and you can monitor that car from your computer to see where they’re going and how fast they’re going. In real time, the car will also be able to see if it’s going to have an accident and send the police there. We’ll know there’s going to be an accident before it even happens.
Bowden: Is this a race against time for the aftermarket to get into the telematics game?
Ordonez: Well, we don’t have to wake up tomorrow with a solution. But we need to be aware that we have to develop a telematics plan for the aftermarket. I encourage the aftermarket and the Network to meet this challenge with Delphi.
For additional information on the Automotive Distribution Network (Parts Plus and IAPA), visit www.networkhq.org.
For additional information on Delphi, visit www.delphi.com.