Bloomberg News

GM’s Facebook Moment Brings U-Turn on OnStar Settings: Cars

September 28, 2011

Sept. 28 (Bloomberg) -- Dan Akerson should have spent more time paying attention to Facebook.

The General Motors Co. chief executive officer had to scale back ambitions yesterday for the automaker’s OnStar service, reversing a decision to track the locations of people who left the program after a flap in Washington about privacy concerns. Facebook Inc. came under fire several times in the past two years for making privacy settings hard for users to understand and control.

“It just feels to some consumers like they’re being betrayed or somehow tricked,” Heidi Shey, an analyst at Forrester Research, said in a phone interview. Personal data and privacy issues make up “a very sensitive area that hasn’t been figured out in terms of how this information can be used or should be used.”

GM said yesterday it will disable the data connection to vehicles once customers cancel the OnStar navigation, safety and security service. The Detroit-based automaker had said last week it would keep collecting information and may sell it under terms of service due to go into effect Dec. 1.

Akerson, a telecom industry veteran, has pushed OnStar to become a differentiating feature that would boost sales. While information on drivers’ habits is valuable, some of the opportunity was squandered because GM poorly communicated its move, said Jeremy Anwyl, CEO of auto researcher Edmunds.com.

Facebook Foibles

Facebook introduced simpler privacy settings in May of 2010 and reduced the amount of user information that was publicly available after adding features that shared data with outside websites. CEO Mark Zuckerberg also changed how the Palo Alto, California-based company handles user-location and facial- recognition features earlier this year.

“Facebook pushes as hard as they can until everybody pushes back, and then they back up a little bit and hopes in the future you won’t be paying as much attention,” Anwyl said. “They’ve even changed the vocabulary so that we talk about ‘sharing’ instead of tracking. That’s a very nice spin on something people look at as invasions of privacy.”

OnStar will now let customers decide whether to allow a data connection and how the automaker treats what it collects, said Vijay Iyer, a company spokesman.

GM had the right idea to try to use OnStar to get information on how customers drive, said Roger Lanctot, an analyst with Strategy Analytics Inc., which advises automakers on navigation and telematics systems. Had OnStar offered customers a choice from the start and given perks to those who opted in, it would have gotten participation without seeming invasive, he said.

‘Wrong Way’

“They were doing what they should be doing but in the wrong way,” Lanctot said in a phone interview. “This data is worth hundreds of millions of dollars. To offer nothing is a kick in the teeth.”

OnStar received no contact from the Federal Trade Commission as of yesterday, Iyer said. Senator Charles Schumer of New York had called on the regulator to investigate the data- collection policy. Senators Al Franken of Minnesota and Christopher Coons of Delaware also objected to the information tracking in a letter to the company last week. All three are Democrats.

“Many of our customers or subscribers were really unhappy with the decision,” Linda Marshall, OnStar’s president, said yesterday in a phone interview. OnStar failed to make clear that it wanted to be able to share information on warranties and recalls with customers that canceled the service, she said.

Anonymous Data

The company, under its existing privacy policy, may still sell or share “anonymized” data on current customers’ vehicle location, speed and seat-belt use with third parties.

OnStar, which GM started in 1996, provides accident alerts, stolen-vehicle tracking and navigation to buyers of new Chevrolet, GMC, Cadillac and Buick vehicles. GM began selling OnStar FMV, an aftermarket version, in July for $300 plus subscription fees that start at $199 a year.

Automakers face “huge” pressure to innovate on technology that monitors and communicates the health of their vehicles, Forrester Research said in an Aug. 11 report that warned of possible consumer backlash against the industry.

GM updated OnStar’s hardware beginning with the 2011 Chevrolet Cruze to allow users to listen to Facebook updates using voice commands. OnStar has said it is testing similar capabilities for text messaging and Twitter.

OnStar generates more than $1 billion in annual revenue and is profitable, Greg Ross, vice president of business extensions, said in a January interview at the Detroit auto show.

GM’s OnStar competes with systems such as Ford Motor Co.’s Sync, Toyota Motor Corp.’s Safety Connect and Lexus Enform, and Hyundai Motor Co.’s Blue Link.

Ford’s Stumble

Carbuyers have balked at new technology before, Forrester noted in its August report. Ford, plagued by malfunctions of its dashboard touch-screens running Sync technology, saw its namesake brand fall to 23rd from fifth in J.D. Power & Associates’ new-car quality survey in June.

Akerson, who previously led Nextel Communications Inc. and MCI Communications Corp., told reporters less than a month after becoming CEO that he had already taken a “deep dive” into OnStar.

“It used to be the automotive version of ‘I’ve fallen and I can’t get up,’” he said in a briefing with reporters in September 2010. “I don’t want that; the team does not want that. There are plans in place. It’s exciting, it’s differentiating and it may be one of those variables in a purchase decision that tips in our advantage.”

--With assistance from Eric Engleman in Washington. Editors: Jamie Butters, Bill Koenig.

To contact the reporter on this story: Craig Trudell in Southfield, Michigan, at ctrudell1@bloomberg.net; David Welch in Southfield, Michigan, at dwelch12@bloomberg.net.

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus