Eye For Auto Exclusive Interview: Mark Hogan, President of e-GM and GM Group Vice President

Clearly, this industry is going through some stages of learning, and communication has helped us to become more global. ..." (11/2/2001)

Chosen in 1999 to lead e-GM, Hogan has more than 26 years of experience at the automaker, including positions in manufacturing, global operations in Brazil, Paraguay, Uruguay and Argentina, leadership of planning for GM North American Operations and in public relations for GM’s Chevrolet-Pontiac-Canada group. From 1986 to 1988, Hogan served as general manager and comptroller at New United Motor Manufacturing, Inc., GM’s joint venture with Toyota.

On Sept. 13, Hogan was in Japan to announce e-GM’s joint venture with Suzuki, Fuji Heavy Industries and Isuzu. Named Japan AutoWeb Services, the JV will give retail customers access to pricing, configuration and location for 65 vehicle models in 179 different variations.

He traveled to Japan on the day terrorists in hijacked airplanes destroyed the World Trade Center in New York and seriously damaged the Pentagon in Washington, D.C., events which have challenged the world economy in general and the automotive economy in particular. Hogan was part of the consulting team that helped GM decide to launch its 0 percent interest rate retail campaign, named 'Keep America Rolling,' which has boosted vehicle sales, gained the automotive giant market share and forced competitors to absorb costly competitive campaigns.

You ended up marooned in Japan because of the World Trade Center incident. Had you initially intended to make this announcement in Japan?

"Yes. We kept it on track; actually, I flew from Frankfurt, where I was attending the Motor Show, the day after. We decided to keep it on track. We just didn’t make it a public event."

Did that affect the nature of the event, and what you hoped to accomplish with it?

"I think we got the point across. You never know if there’s a more effective way in 20-20 hindsight, because we just came off of a more public press conference and our discussion about the Telematics study with Toyota, which was very well attended, too. I think, given the circumstances of the events of September 11th, we clearly did the right thing in making it low-key."

What was it like, flying on that day? What were the thoughts of GM, allowing you to be in the air, and what were your thoughts, being there?

"Well, obviously it’s a traumatic time for the country and for all of us, but I think the immediate reaction we had is, we’re going to stand behind our President and our country and support ‘em. And the best thing we can do, from a General Motors standpoint, is to keep things moving. To move ahead. Don’t let this take us off center point with our business plan and keeping the economy going. We certainly want to do that. It’s not just a U.S. issue: it’s a global issue."

It must be interesting for you, from a GM side. You’re looking over at Washington where, with and Andy Card (former GM Vice President for Government Relations, now White House Chief of Staff), it’s sort of a GM show here. It takes you back to the earlier days of GM involvement with the national government.

"Well, we’re obviously very supportive of the Bush administration, and anything we can do from a company standpoint to support the country we’re going to do. And I think Rick has been very direct and consistent on that point. So we feel very good about the fact that the country has got a unified effort, to lick this problem once and for all, because it’s not just a freedom issue: It is clearly an economic issue that affects all major companies. So we’re bound and determined to help the country see it through."

On the Japan focus for the joint venture, how is this going to be influencing GM’s presence in the Asia/Pacific Rim area?

"It’s a great question. We have an avowed intention of achieving at least 10 percent market share by effectively the 2004 time frame. Part of that goal is to have a more effective distribution of our products and our alliance partners products. So, recognizing that the trend for online shopping and information gathering in Japan is paralleling the trend we see here in the United States, we felt it was very critical to get a functional BuyPower site executed in Japan, and we thought, what better way to bring in our alliance partners initially than through the BuyPower site."

"We determined that the best vehicle for that was to create a separate company, which we call Japan AutoWeb Services, Inc. I give our team and the alliance partners a lot of credit for working very collaboratively together in, still, what is relatively new space for all of us."

Is the BuyPower name going to stay attached and unaltered? Do the Japanese feel good about the BuyPower term?

"We’re, pretty frankly, happy with their initial reception of BuyPower, but if the market dictates that we change the name, we will. I think the important thing is that this BuyPower deployment is one of 40 that we’ve conducted and successfully implemented over the past year using this same architecture, which is a pretty significant undertaking and we’re very proud of our team for doing that."

Tell about some of the key successes among the 40: If you’re going to hold up one deployment, or two deployments, as examples to look back on, which would you say are the best and most illustrative right now?

"Well, besides the United States, where by the way our number of leads has doubled, literally, in the past month, clearly the job we’ve done in Brazil, with the Celta, has been by all accounts a tremendous success. We knew we were going to have a fair amount of success, just by the nature of the vehicle and the way we positioned it in the market. But combining that with essentially a build-to-order capability, and providing the functionality not just for the shopping and configuration but for the buying, and enabling each of our 500 dealers to have, literally, kiosks in their dealerships - it’s all come together, and created an online shopping and buying experience for the Celta which dwarfs anything anybody else has done. (The subeconomy Chevrolet Celta is expected to make 80 percent of its sales online)."

"We’ve gone to school on that, and we now think that we can not only use that model for other models in Brazil, but we can take it to other markets as well, and we’re actively pursuing that intention in other markets."

It’s an intriguing possibility, to be able to connect that kind of marketing to a vehicle launch, or a vehicle itself, where the vehicle ends up being the driver and not the brand line being the driver. Is that an intentional strategy, or a single entry try? How does that go?

"When we created the Blue Macaw concept, which is what we code-named it internally, we wanted to go after every element of cost in the vehicle engineering, development, manufacturing and distribution process. We had done a very good job in 1995 and 96 of conceiving of a new engineering and manufacturing strategy, which is pretty well documented. I won’t delve into it."

"At the time, the Internet was not that well defined and executed, but we did know that an ability to connect with customers on a one-on-one basis offered a lot of potential. I give the GM Brazil team a lot of credit for applying Internet capability to the distribution piece. That, in conjunction with our dealers, made it a lot more efficient for us. Here again we were able to save costs not only in the more traditional manufacturing and logistics issues, but here we took it out of the distribution piece as well."

"To me, that’s an end-to-end solution that’s pretty eloquent. It’s as far advanced as anyone else in the industry. And it’s provided us with a learning tool to continue to go forward for other markets, as well."

Does it offer 'handles' in the North American market? I could see it touching the same tensions that existed with direct Internet sales, where dealers might welcome an 'expert' one-vehicle kiosk on their floor, or might view it as a threat to their own expertise.

"Well, there’s no question that as the Internet has become much more of a way of life for us personally and professionally, the amount of apprehension the dealers have had has diminished. That’s not to say that we don’t have further education to do: We do. But our intent would be to take whatever learnings we have from Celta and spread them across the globe in a manner that’s very consistent with the overall goals of partnering with our dealer body. Because at the end of the day if we provide a product for customers that’s at the right price, and right location, and it’s high value and high quality, they’re logically going to migrate to that."

The flow of information has got to have increased significantly. When you’re talking about a BTO situation, you’ve got to have rapid input and rapid decision-matrix stuff, but just the average flow of information for car distribution must have gone to a new level with Celta?

"It has. It has, and you know, logistics, particularly in a country like Brazil that’s vast in size and not highly motorized from a highway transportation standpoint, and it’s certainly not enabled broadly from a rail transportation standpoint. So you have indigenous logistics issues in Brazil which make it very, very - you’re incentivized to do a very good job on logistics. And, certainly, the customer wants to see that, as well. We think those lessons are very applicable to every market, including this market."

The good implementation in Brazil seems to be an amplification of what you were talking about with the announcement of the JV in Japan. But with these partners, is this a new level of business? An amplification of existing incremental gains? How does it fit together with these partners for you?

"Well, on several levels. First and foremost we want to create business opportunities that we can work together in a real-time business on a day-to-day, hour-by-hour basis, as opposed to discrete products. Which is mostly what it has been today on product programs, but also on some purchasing linkage and even a little bit of logistics. So it made eminently good sense to make an online business with our alliance partners. And as we grow and mature in that particular business, we’re going to become more familiar with each other. And, actually, that’s what our alliance structure is all about. It’s not about acquisition and control of one company over another; it’s trying to understand and leverage the capabilities of each of our partners, because they’re unique. And to leverage that in a positive way, and yet not encroach on their business culture, which in independent ways has been part of the success for each of those companies."

On the one hand, it reminds me of the older days when GM would say ‘We’ll buy batches of your product,’ like the Chevy Sprint which grew into the Geo Metro, an interesting and innovative change for GM in product launch at the time. But maybe this is bringing GM back into more of a business-to-business relationship than a purchase-to-distribute relationship?

"I think that’s a very good way to put it."

The other thing it brings up is going back to the days of NUMMI (New United Motor Manufacturing, GM’s venture withToyota). You were deeply involved in that. Does this feel at all familiar, of does this feel like a different kind of step?

"Well, it certainly wasn’t on the radar screen when we started talking about NUMMI. We actually started discussions back in 1982, so it seems a long time ago, but it’s actually going on 17 years in the joint venture. You know, our relationship with Toyota, as embodied by our partnership in NUMMI, has grown and matured over time so that it’s pretty unique in the automotive world. It’s given us license and opportunity to talk about other areas of collaboration, whether it be in telematics or advanced technology vehicles, because of the level of trust we’ve built up between the two companies. We really don’t even realize, yet, with our alliance partners, save for Isuzu, who we’ve had some pretty long history with."

"So we think the business format of working together in a joint venture, whether it be in the assembly of vehicles, or an online partnership, such as we have with JAWS, offers a similar opportunity for collaboration and partnership in the building of mutual trust and respect. Because at the end of the day, you can catalog the successes of joint ventures in the automotive world, and they almost all certainly rise or fall on the ability of the two parties to create an environment of trust and respect."

They also seem to rely on each party being willing to change, to accommodate the needs of the joint venture. Has that been a concern to you?

"Well, it was always a challenge at NUMMI. I’ll never forget the first day I started, back in 1985, at the time the president of NUMMI was Tatsuro Toyota, who is a very nice man and who I consider a close friend even today. He sat me down and said 'Look, Mark, the only way we’re going to be successful in this joint venture is if we take off our Toyota hat, and our GM hat, and put on our NUMMI hat - and do everything we can to optimize the success of NUMMI.'"

"That’s a story that’s an admonition that we give every GM and Toyota guy that goes into that joint venture. And the same thing goes with JAWS."

Was there a single event that allowed JAWS to happen, or was this the result of numerous small things falling into place?

"I’d say it’s more the latter. I mean, there are a series of epiphanies we’ve gone through as alliance partners, recognizing that the newest member of the alliance, Fuji Heavy Industries, AKA Subaru, we were actually looking at things we could do with them. Because we had active joint ventures with Isuzu on diesel engines, both here and in Poland, and with Suzuki obviously with CAMI. So we had real, live opportunities to work together with those two partners."

"We didn’t, yet, with Subaru. And that was clearly an impetus. But we came to find, as we discussed the various possibilities of the Internet in the Japanese market, that we and our partners had a converging view of how to be successful through an online communication process with potential customers. It was upon that converged thought that we built the business model for JAWS."

What were the moments in the process where you got excited - the kind of time in a meeting where your nostrils are dilating, your eyes focused and you realize 'this could be the moment when we can really do something?'"

"Well, I want to say it was perhaps in late last year/early in ’01, where we were able to bring the company presidents together, and we talked about it at a very high level, what the vision was, and after that meeting, seeing the support in, and the enthusiasm, frankly, from our alliance partners, we knew that philosophically we were on the right track. Then it was ‘Can we execute it from a technical standpoint?’ And that’s when we sent the guys out to get it done."

That’s both an exciting and a chilling moment, though isn’t it? You’re handing it off to the practitioners, rather than the visionary leadership?

"My experience, more often than not, is when you hand it off to the practitioners and you give them the right kind of goals and objectives, and the right tools, they 99.9 percent of the time get it done. It’s when top management hasn’t laid it out clearly and put the enablers in place that we sometimes fail."

That relationship, are you picturing it only from the e-side, or are you picturing it going all the way down into the heart of the plants?

"You’d have to think there’s an opportunity to take this capability and perhaps move to a build-to-order model. Without getting too specific, that’s part of our vision."

The picture from the plant side, when you’re down there among the machines and all the issues, this kind of thing can look awfully airy. You have unique experience in having a foot in each area. What do you think the sign will be in the manufacturing community that this is something real, that influences their daily life?

"Well, I think through a lot of hard work and determination, and I’m going to principally speak about our migration to lean production here in North America, we’ve essentially set up our supply chains and our management chains and manufacturing process to be able to build, essentially, to order."

"It’s more of the customer-facing pieces of the business that have been the challenge for us. And the same goes for Japan. Whether we’re producing a Chevrolet Cruze at the Kosai Suzuki plant, or any other manufacturing facility, I think it’s going to be the ability of the customer, or willingness of the customer and dealer to operate in a build-to-order environment - because I think from a manufacturing standpoint we’re essentially there."

So for the folks in manufacturing, the existence of this may be a sign that their abilities will now come to the front?

"Absolutely. And you know what else is exciting, from a manufacturing front, is that we would much more prefer to be able to build to what we call ‘sold orders’ as opposed to ‘dealer orders,’ and we would like to have a much more personal relationship with the customer even in the manufactring process. And by that, I mean: Why not let the customer participate in the assembly process via web cams? There’s no reason why we can’t do that. Whenever we’ve socialized this idea with prospective customers, whether they be here in the United States or in Europe or in Latin America or Asia, by and large it’s a very exciting opportunity for customers. You know, after all, it’s one of the major purchases one makes in a lifetime."

Sure - and if you were buying a house, you certainly would drive out to the construction site and see what it looked like?

"Exactly. We’re very excited about it, and we think we can enable it so that the customer, in the future, can literally participate in the assembly of his or her vehicle, and we can do it in an assembly setting that’s pretty exciting. Show the body framing, for example, where literally that’s where most of the robotics are in the plant. Or in the paint shop, or even in trim and final - maybe going through water tests or whatever. Things that are visually exciting."

"By and large, when people tour assembly facilities, people get excited about it. Unfortunately, we don’t have the time or resources or capability, nor do our customers, to be able to go to these facilities and see them assuming we have tours. This opens up another level of possibility in terms of connection with the customer, because at the end of the day, the big promise of the Internet is our ability to connect with customers. Not just through the purchase experience, and then making it an episodic touchpoint every two to three years depending on the lease or repurchase cycle. We want it to be a very personal, constant experience."

And with web cams, you could do that in a lean-intensive way?

"Right, and the other business aspect of having kind of a build-to-order model or lean production model is the amount of inventory you take out of the system, because inventory, by definition, is a form of waste. So if you can build it efficiently and freshly, it’s going to mean better things from a quality standpoint, and obviously the savings in working capital can accrue to the company and the customer."

Does that mean we should look for a non-locate-to-order world in the future?

"My personal opinion, and there’s some debate in the industry, is that we’re moving to a build-to-order model. Now, will we go cold-turkey and be 100 percent build-to-order? I don’t think so. There’s still something like 80 percent of our vehicles today are sold off of dealer lots, so we’re not going to change that overnight. But there are certain advantages, which I’ve enumerated, which seem to make build-to-order compelling. In the meantime we’re enabling our markets, through our BuyPower site, which is a locate-to-order capability site, the ability to do that. And I think that’s a logical migration path."

Is BuyPower taking a role in the change in the European block exemption: the market change that may lead to, and any of the implications that may lead to?

"Well, we do have locate-to-order now in Vauxhall, in the U.K., we have it at Opel, and have enabled BuyPower in our other markets. In fact, we’ve got BuyPower running in 16 markets in Europe. And as we’ve gone to lean production here in the states, so have we in Europe as well. In fact, our newest plant, in Glovitza, Poland, is among the most efficient we have in the worl, building the Opel Aquila. So we’re very confident about our lean manufacturing capabilities there. And there’s certainly a willingness on the part of Carl-Peter Forster, who’s the new chairman of Opel, and Kevin Wale, the new chairman (managing director) of Vauxhall, and Nick Reilly, who runs all of our sales operations in Europe, to really embrace this capability."

I guess that goes to the question of what e-GM has to say about a post-World Trade Center world in general. You’re jumping the communications snarls that we all saw crop up at national borders; certainly the flow of information on e-GM didn’t die during that time.

"In fact, it’s accelerated our traffic. Since September 11th it has, I believe, doubled. There’s been a marked increase. Now, certainly, part of that is attributable to the Keep America Rolling campaign, which has been a tremendous success. But there’s no question people are using the Internet in ever-increasing numbers to go shopping for vehicles."

When the Keep America Rolling campaign, with 0 percent interest rates, was being discussed, how key was e-GM to that? Were you brought in at the earliest discussion phases?

"Yeah, we were part of it. I sit on the strategy board, so we were brought into it, in the loop, and certainly what we do from a marketing presentation to market standpoint, we think about things now in two dimensions where we used to think about them in one. We think about an offline AND an online component, and that’s been a metamorphosis that I think e-GM’s really helped enable over the last couple years of our existence, because we’re a constant presence at the highest decision-making levels of this company."

"The other huge and important piece of this is that Rick has made it one of his four top business priorities, meaning e-business leadership in the automotive sector."

The Keep America Rolling program, had that been thought up before or after the World Trade Center attack? Was that laid out simultaneous with the event, or was it something planned beforehand that came to fruition at about the same time?

"I guess the way to state it is, we were thinking about what other things we could do to stimulate the market. Certainly the events of the 11th accelerated that thinking. There were already signals that things were starting to slow down."

"It certainly got the industry up and aware, too, but our premise was, first and foremost, was that we had a big role in this economy. You know, still one out of every six jobs in this economy are tied to the automobile industry. So we felt a big part of it, and realized the import of keeping it going. We also felt we had, you know, ongoing responsibilities to our shareholders, and we didn’t want to just let this thing unravel around us. We thought by virtue of our size and breadth and scope, we had the economic as well as social cause to get things going. And I think the results have been pretty positive."

It makes me think of a very, very large shock absorber, controlling the input a little bit. GM is choosing to use its economic power to smooth a couple of otherwise jagged curves in the market?

"That’s true. And, actually, I’m pleased with the vast majority of responses from our largest U.S. based companies. They’ve been measured, and they’ve been supportive. And I like the way the country’s coming together, too."

You really are taking some risk, and really are making some large sacrifice and corporate investment here.

"We have a really big responsibility as a company. And now we are a global company, too - so when we’re talking about ‘Keep America Rolling,’ we’re also thinking about keep Germany rolling, and Brazil rolling. Because whatever market we participate in, we’re generally one of the top two, three or four companies in size in that market. So by definition, we have a responsibility, both an economic and social responsibility."

In this campaign, how mature is e-business becoming? Does this current economic crisis really represent e-business’ adulthood, or at least its graduation from early schooling?

"Well, there was a lot of notoriety given to the so-called dot.com bubble bursting. When you think about it, in retrospect, any good company, whether it’s a new economy company or an old economy company, if it doesn’t have a solid business model, based on solid business principals, the laws of economics are going to take over. There are solid new economy companies that have a great business model and are weathering the storm. Those that didn’t, you can go back to the business 101 textbooks, and probably find some flaws in the ways they chose to execute."

"I think the great thing about the way General Motors has approached e-business is, we did it in a very concerted and methodical way, not going overboard, not making wild acquisitions, and we staffed it with very talented people. At the end of the day, any good business kind of lives and falls on the talent of its people."

You had to absorb an awful lot of outside criticism, analyst, media and e-community criticism, for not moving splashily and fast. For not saying what everybody else was saying. That must have been a very frustrating time for you?

"Actually, it wasn’t. I really don’t pay much attention to it. If I went to school on everything that’s read or said about GM, e-GM or me, personally, I wouldn’t have enough time in the day to do my job. So it’s important to get a temperature reading once in a while on those commentaries that come from sources that are meaningful, and trusted. But we really didn’t blink an eye and overreact when people said we were moving at automotive speed as opposed to Internet speed. And, frankly, I think we’ve learned as a company that we can move faster, and it’s helped us not just in our Internet business, but in our core business."

Is there an example you could use for that?

"Well, I think just because of our move to our use of what we call math data to be able to design and then execute math models to take time out of the vehicle development process is a real learning. And so the SSR, (Chevrolet’s Super Sport Roadster, comfirmed for production in 2003) which is one of the most exciting vehicles we’ve developed in a long time, is coming out ostensibly in less than 24 months. It’s a lot of the math tools that I’ve emphasized that have Internet connectivity to them because we’re designing and engineering this vehicle around the clock, whether it be at our various engineering centers or with the supply base or within GM proper. And there’s other vehicles in the pipeline that are going through that more rapid product development cycle, too. I would have to say we’re learning from that."

Would you characterize the SSR as GM’s first 'follow the sun' developed vehicle?

"No, actually, well, you can go back to what we were trying to do with the so-called Delta vehicle, or the Epsilon vehicles. (Epsilon, beginning production in 2004, is GM’s first global midsize platform, co-developed by Saab and Opel). When I say more of the development cycle in the SSR is around the clock, I’m thinking more of their supply bases, as opposed to our core engineering bases. The Delta and Epsilon programs clearly have product development responsibilities around the globe, because that’s more of a global platform. The SSR is strictly focused on this market."

It’s interesting to see 'global' vehicle development change from 'we bought parts from everybody' to 'we actually worked together on this vehicle.'

"Clearly, this industry is going through some stages of learning, and communication has helped us to become more global. It wasn’t that long ago that an overseas assignment for a GM guy might mean getting transferred from Detroit to Fort Wayne, Indiana. I say that somewhat facetiously, but this world has changed and gotten a lot smaller and more connected over the last ten years, in great measure due to the speed of communication. The Internet’s had a big piece of that."

What about the paradox of this great speed of communication, and the desire to communicate remotely, against the pressure to collocate and have people face to face?

"It’s a fine line. We want to do more with video conferencing and online collaborative engineering, but there’s a lot to be said for human interaction and what that means. We’re learning and getting better in terms of online communication, but at the end of the day, the best communication is elbow-to-elbow."