Karen Francis VP Ford: Goooooooooooo Internet Rah Rah Rah

A Speech given before the Automotive News World Congress on January 15, 2002, at the Hyatt Regency Hotel in Dearborn, Michigan.

I'm delighted to join all of you this afternoon. Of course, it's always gratifying to be asked to return to speak before any forum. But the annual World Congress is one of the most respected forums in our industry and is always timed perfectly to coincide with the North American International Auto Show that once a year without fail invites the world's eyes to look to Detroit for a glimpse of its automotive future.

I want to clear up one point right away with our friends in the press. They've had a busy year -- not to mention the past week -- writing about Ford. One point that I hope to make is that, despite some reports, e-commerce is alive and well at Ford. In fact, e-commerce is evolving into its next stage of a very long life … evolving into a tool we use to support the basics of our car and truck business and allowing unprecedented internal and external communication. An early indicator of the importance of e-commerce and its evolution is the basic fact that Nick Scheele asked our team report directly to him.

And why not? The Internet is global. E-commerce is global. Nick's business is global. So, the fit is perfect, and my team, also global and serving all eight of Ford's car and truck brands, couldn't be more pleased.

ConsumerConnect has been an exciting place at Ford ever since it was created to give us a very fast launch into e-commerce. We knew we couldn't do it all by ourselves, so we sought out partners from among the best -- Microsoft, Oracle, Qualcomm, TeleTech and many more. We joined forces with our colleagues in the industry to create what has since evolved into the global supplier exchange, Covisint. And we launched new companies like Percepta, our call center and CRM platform; FordDirect, the venture with Ford dealers that allows online shopping for cars and trucks; and Wingcast, our telematics company that will be introducing new products and services later this year.

Without ConsumerConnect, Ford would not be as well positioned to take advantage of the growth that is about to occur once again.

Mark Twain once remarked that Wagner's music "is better than it sounds." I'd like to extend that idea and declare that the "music" from the Internet is also far better than it has sounded.

I'm sure everyone here has their own sets of numbers. I'll share with you some of the estimates and projections we believe are realistic. In five years, Internet penetration of U.S. households is expected to exceed 80 percent, with the highest penetration in the upper income groups bringing in more than $100,000 a year in income. Worldwide, e-commerce is expected to grow from $1.2 trillion to $6.7 trillion by 2004 in the U.S.

Ford.com receives 3 million visitors a month … representing consumers in more than 120 countries … we have website affiliations with leaders like Yahoo! CarPoint, Kelley Blue Book, and edmunds.com … and we offer direct, online shopping with our Ford Division dealers through FordDirect, which has placement on 11 affiliated sites in addition to its own which, combined, generate 17 million unique visits a month.

In less than a year, FordDirect has achieved pioneer status in our industry. There is nothing like it, and its chief executive officer, Devon Cohen, will be all too pleased to provide the details.

But as the Internet reshapes businesses everywhere, what about the franchise dealer system? Its critics have predicted its demise for years only to be confounded time and again. The critics have been confounded because they miss one vital truth. The dealer franchise system's strength … its ability to endure and prosper … is that it was created from the beginning as a system of shared responsibilities. The manufacturer designs, engineers, and delivers the cars and trucks that the dealers sell and service.

The manufacturer benefits from the economies of technological expertise and high-volume production. The dealer benefits from an intimate knowledge of his community, her entrepreneurial skills, and their abilities to innovate as market conditions change.

Without question, the dealer is closest to the customer geographically. But what about technologically? Here, I think, is where the real challenge lies. And that brings us, at Ford, to the new and expanded role of ConsumerConnect.

The past several months have been spent transforming ConsumerConnect from an organization that once spurred fast launches into e-commerce into one that brings Customer Relationship Management to the forefront and fully utilizes the assets and the technologies resident in the joint ventures. We also have taken our extensive customer data base and our retail education and training organization and combined them into a new group that will create what we believe will be a world-class Customer Relationship Management system that will bring enormous benefits for all of Ford Motor Company's car and truck brands.

This transformation has required us to become less visible publicly as we quietly but steadily build the tools and technology that will make our brands the stars and our dealers the heroes. Not stars and heroes in our eyes, but stars and heroes in the eyes of our customers.

I want to give you a look at what we've done, where we're devoting our efforts, and how we believe we stand with respect to our competition. We believe we have built a fully-integrated retail platform that brings everything together in one place, creating a competitive advantage for Ford Motor Company and our dealers.

It starts first with the Shopping Guide found on ford.com, which helps customers find the brand and the model that is right for them by taking their answers to questions about their price range, number of passengers, the kind of transmission they prefer, and their lifestyle. Our Shopping Guide can help identify which among our brands and models is right for you. And, based on independent evaluations, our shopping guide is best-in-class, thanks to the richness of its analysis.

Next is Dealer Connection, a broad name for a deep and robust infrastructure that allows the dealer to create a consumer-facing website totally integrated with Ford.

Dealer Connection provides online vehicle configuration, the dealer's inventory, price quotes by e-mail and financing or leasing.

The online configurator helps the customer build a virtual car or truck by choosing the color, the various options, determining a price, and linkage to a dealer through FordDirect. From FordDirect, the customer can search a dealer's inventory by year, make, price, model or color, print the window screen, and receive a price quote and arrange financing by e-mail.

Customers can find dealers by zip code, get maps and driving directions, schedule test drives and appointments. Based on independent evaluations, Dealer Connection is best-in-class, largely because our own dealers' websites are consistent across the spectrum, are fully integrated with the manufacturer, and offer a depth and range of inventory unmatched in the industry.

Next, online partnerships. FordDirect operates in 50 states, but our customers may find themselves shopping on CarPoint, Yahoo!, Edmunds, or Kelley Blue Book. Wherever our customers shop or do their research, we want to be there, too. So, we've forged online links with leaders like these to increase the number of connecting points between our customers and our dealers.

Finally, owner services, for the all-important services that follow the sale. Launching soon, our newest platform, MyFord.com, found on fordvehicles.com, will offer Ford customers online service information personalized just for them, based on the very car or truck they drive. MyFord.com allows the manufacturer, the dealer, and the customer to stay in continuous touch with information on such basics as oil changes, tire care, safety advice, insurance, loans or leases, and access to financial accounts and makes owning and caring for a new Ford car or truck as easy as using the Internet itself.

I am pleased to say that ConsumerConnect built this platform in close collaboration with Ford Division and took 11 online modules and consolidated them into one place.

MyFord.com is one example of what we will be trying to do for our brands by enriching the after-sale experience. Our dealers are crucial to making all of this successful because it is in the dealership where much of the after-sale experience occurs.

We have set out deliberately to create a system that they will not be forced to buy, learn, adapt to, and see rendered obsolete in a few years. There is no Ford-provided equipment in the dealership, except perhaps for some equipment critical to the service bay. Ford's role is confined to provide guidelines, consultation, applications and support.

Right now, our dealers need only personal computers to tap into the applications we have online to keep abreast of marketing and sales developments and service updates. Any PC at the dealership, with the appropriate level of security, authorization and speed, should be able to access any application over a single secure and protected network.

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That's a quick look at what we're doing for our dealers and our customers. But if we could all step back together as an industry, I'd like to pose the larger question.

Before I do, I want you to reflect for a moment on just what made the Internet such a revolutionary force in the world. It wasn't designed by any one person or any one group of people. The rise of Internet was made possible through a series of protocols, conventions, and agreements that allowed disparate systems and programs to talk to one another, to make ease-of-use possible, which, taken together, slowly and then with increasing speed, took the Internet from the domain of the specialist and to where it has become commonplace in everyday life.

As an industry, we are challenged at every turn on cost. Our dealers frequently operate multiple franchises from competing manufacturers. Right now, our best retailers -- and they are often the same group of entrepreneurs from franchise to franchise -- will soon be faced with an impossible business model. And that is the cost of acquiring and supporting multiple communications pipes and protocols across all of their individual franchises.

Let me give you an idea about the kinds of costs our dealers are incurring. In mid-2000, we talked about infrastructure costs with a group of our larger dealers, representing most of our brands. On average, these dealers sell 1,500 to 2,000 new cars and trucks a year, along with slightly lower volumes of used vehicles.

Their average monthly costs for hardware, software and usage fees? More than $8,000.

Their average monthly voice and Internet communications costs? More than $4,000.

Their average monthly data communications costs, including connection fees to the manufacturer? More than $8,000.

These figures tell us that our most important business partners are spending something more than $250,000 a year on infrastructure, and that figure will only go up as each OEM duplicates infrastructure and creates its own virtual private network.

Is this a situation that you would adopt and pay for out of your own pocket if you were the entrepreneur? Absolutely not. But that is exactly where we are headed unless we come together and do something soon.

How can we, as an industry, look the dealer -- not to mention the consumer -- in the eye and claim to be delivering on the Internet's promise of lower cost and high quality if we force dealers to pay for multiple solutions?

Can we, as manufacturers, agree on a security protocol so that a multi-franchise dealer in one location needs only one high-speed pipe to the Internet and the OEM's? Is there an opportunity for NADA and other large dealer organizations to help govern standards?

But it's past time to ask, "What if …?" We must go beyond "What if" and together ask, "How can we?"

We've had cooperative breakthroughs before. One of them was made in November 2000 when Ford, General Motors and DaimlerChrysler released the "Olympus standards," a comprehensive technical guide on how to wire a dealership for the Internet age. The Olympus guidelines are updated regularly, and the third version is ready to go. Thanks to this cooperation, which also has involved NADA, we have produced an industry document that provides timely, technical guidance that is replete with detail.

While no one person and no one company has all the answers, I am prepared to pledge my commitment to see that cooperative work like this continues, finds a wider audience, and brings the vision that all of us know is within reach into actual day-to-day practice.

The choices before us come down to two. One is stay the course, continue on as we have, and stay satisfied with change that comes only at the margin. That's the safe approach, the comfortable path, but over time, it is unquestionably unsustainable.

The other is much riskier, less certain, but full of huge potential. It will require all of us to break with business-as-usual, bring the best minds and talents of our industry into a laser-like focus, and forge a solution that propels all of us into the next evolution of e-commerce that has begun to quietly but irreversibly unfold.

Intuitively, we know our customers are ahead of us. Their online preferences are clear as they are convincing. The choices are up to us. Do we join them or resist? And by resisting, fail to realize our mutual potential? If we embrace change together, we can position ourselves and our dealer-partners to thrive and prosper well into the next century.

Thank you.