Customer Loyalty Key to Automotive Profits

         'Digital Loyalty Networks' Prove 70 Percent More Profitable

    NEW YORK, May 8 Ten out of 15 major automotive
manufacturers had below-average shareholder returns in the last five years,
compared to their respective capital markets around the world, while 15 of
18 Tier 1 suppliers also dropped below their capital market averages,
according to a new study by Deloitte Research: Automotive Digital Loyalty
Networks: Driving Shareholder Value Through Customer Loyalty and Network
Efficiency.  Flat vehicle demand, global overcapacity, fierce competition and
price squeezing are the frequently cited causes, but the more fundamental
problem is a decline in customer loyalty, according to the study.

    "In the not so distant past, the automotive industry would tell the
consumer what to buy.  With the Internet, consumers now want to tell OEMs what
to build," said Paul Wellener, Americas Practice Leader at Deloitte
Consulting. "Today's buyers are better informed, want results faster and are
less tolerant of poor service.  The bottom line today is that consumers prefer
to buy products from manufacturers that leverage the reach and speed of the
Web."

    Higher shareholder returns are obtainable, according to the report,
through a customer loyalty and supplier network strategy, which Deloitte
Consulting terms a Digital Loyalty Network (DLN).  A DLN enables automakers
and their suppliers to create truly customer-differentiated, super-integrated
value chains.  Working together in a digital network that incorporates
specific information about consumers and their stated desires, automakers and
their suppliers are able to "sense" and identify the most promising new
customers, improve the loyalty of existing customers, and enhance company
value by responding in the most profitable manner to both groups on a
one-by-one basis.

    "Digital loyalty networks are successful on two fronts:  first, they boost
customer loyalty while decreasing the time and investment it takes OEMs to
maintain current sales," said Wellener.  "Second, DLNs improve the network's
value by increasing its speed and responsiveness to consumers, thus increasing
their loyalty."

    The key, according to the study, is synchronizing back-end supply chain
management (SCM) with front-end customer relationship management (CRM)
capabilities to provide dynamic differentiated responses to customers'
specific demands.  In the global manufacturing sector, while only 13 percent
of companies are currently pursuing DLN strategies, these companies are
typically 70 percent more profitable than their counterparts.

    "Digital loyalty networks work in real time with the help of Internet
technologies," said Wellener.  "Each member of the network experiences the
competitive advantages of lower costs and higher productivity.  Integrating
the supply chain and aligning its priorities with the needs, wants and value
of the end customer is what Digital Loyalty Networks accomplishes."

    According to the report, some automakers have begun to address low
shareholder issues with build-to-order (BTO) strategies that customize
delivery to meet various customer requirements.  This extends the "pull"
production paradigm from suppliers to the dealer showroom and is a first step
in recognizing customer power.  Others have started using telematics, the
emerging Internet-based technology built into vehicles, to establish a new and
powerful channel for instantaneous communications with customers.

    "However, BTO and telematics approaches address only one dimension each.
If the auto industry wants to gain back profitability and shareholder value,
they need a new approach that addresses both ends of the spectrum to create
customer loyalty," said Wellener.

    Automotive Digital Loyalty Networks details the strategy needed to create
a successful DLN and provides examples of what manufacturers such as General
Motors and Ford are doing to develop them.  But, according to the study, it is
not solely the responsibility of the OEM:  The group effort required involves
dealers, OEMs, suppliers and service providers and their use of customer
feedback.  The DLN concept includes:

    -- Digital Sensing: the ability to gather input from customers and other
       members of the network in real time.
    -- Digital Collaboration: using real-time input rather than traditional
       build-to-forecast models design, to develop, plan, purchase,
       manufacture, distribute and sell vehicles.
    -- Digital Differentiation: the heart of DLN, it involves using digital
       information generated in real time to determine how a company should
       respond to each customer.

    "The power to differentiate customers and match them with the most
value-added response is what distinguishes a digital loyalty network
from other strategies," said Wellener.  "Differentiation focuses the OEM's
ability to use customer input with the ability to synchronize the supply chain
to create customer loyalty and add value for all members of the digital
loyalty network.  When this is done well, everyone wins, including the
customer."