Telematics Update: Visteon Limiting Telematics Future Investment

Visteon leaders, disappointed with "take" rates for navigation systems and other advanced electronics on luxury cars, are moving to cut their research and development exposure on future telematics systems. (2/5/2002)

"We are reevaluating our forward investment in telematics, but we're definitely not getting out of certain multi-media products like rear seat entertainment. We will continue our work with Bluetooth, and we consider our work with Visteon Voice technology an area where we can continue to grow," said spokesman Greg Gardner, manager of corporate public affairs.

Visteon Chairman Peter Pestillo, in a mid-January conference call, said that telematics was moving rapidly as a technology, but not moving into production rapidly.

"It requires heavy investment, it requires a lot of software effort at which we're not the best," Pestillo said during the call.

Automotive leaders have spoken of "de-contenting" of cars, with recent buyers seeking slimmer standard feature packages and shunning exotic radio and navigation systems, even in luxury vehicles.

Pestillo's statement came in answer to a question about which units Visteon would sell, divest, or spin off to reduce its exposure. Visteon is in a pricing dispute with its major customer, Ford Motor Company, which has demanded significant price cuts as Ford itself closes plants and trims 35,000 jobs worldwide. While Visteon does not plan any plant closings, and anticipates only about 500 layoffs, Ford's price demands were $175 million more in reductions than Visteon had budgeted for. The matter is in arbitration.

The Tier 1 supplier has reviewed its operations and has determined that cutting 10 percent from R&D is a key to surviving the current economic downturn.

Telematics offers a tempting target as part of those cuts, though telematics itself does not come close to the 10 percent total cuts planned within Visteon R&D. The telematics group at Visteon includes staff both in Dearborn, Michigan, and a small software development staff in a suburb of San Jose, California. No plans have been revealed for job cuts among that staff, but company leaders have said that developing their own software is a cumbersome process and one that is not always crowned with success. It may be easier for the supplier to purchase software from outside sources.

"Wall Street's looking for us to more clearly define our core competencies," said Gardner.

Visteon Voice, the company's hands-free communication product, is already installed in the Jaguar S-Type and X-Type and the Infiniti Q45. The system is being marketed to other vehicle platforms. The company is also planning to stay a strong player in advanced audio systems over the long term.

The supplier is not actively marketing navigation systems.

As for specific telematics development cuts, Gardner said no definite decision point has been set.

"We haven't said we want to make a decision on this by such-and-such a day. It's not the intention to string it out indefinitely," he said.

Thanks To Tim Moran Of Telematics Update.com