General Motors Corp., the world's largest automaker, said it will offer factory-installed cellular telephone service with Internet access in 1 million cars and light trucks this year to boost revenue.
GM is seeking partners to deliver telecommunications services and content such as entertainment and customized traffic reports, Chairman Jack Smith said in an interview. GM could announce a partnership with a large telecommunications company in a few weeks that would let the automaker keep a portion of the monthly service fees, said Mark Hogan, head of GM's Internet unit.
GM is in talks with Bell Atlantic Corp. to put the cell phones in the cars, sources familiar with the plan said. GM wouldn't say to which telecommunications company it was talking, but sources said an agreement with Bell Atlantic, the No. 2 U.S. local phone company, may come as early as next week. Bell Atlantic declined to comment.
The company views cellular phones and its satellite-based OnStar driver communication systems as key to generating revenue after a car is driven off the dealer lot, a goal other automakers are pursuing. Ford Motor Co., the world's second-largest automaker, plans to make Internet access standard on some Lincoln models starting in the 2001 model year.
"It can certainly be big if they do a good job on the service side and the pricing," said Lehman Brothers Holdings Inc. analyst Nicholas Lobaccaro.
To succeed, GM's services will have to displace the cell phones that millions of Americans already carry in glove compartments. That will be hard, but not, impossible as safety concerns about hand-held cell phones grow, Lobaccaro said.
As GM installs OnStar in millions of vehicles, it will gain the clout needed to drive down prices for cellular services and content to better compete with existing cell-phone service.
GM shares, which rose $3.43 3/4 today to close at $76.37 1/2, have gained 12 percent in the past 52 weeks after it recovered from strikes in 1998. Ford, which climbed $1.50, to $53.68 3/4, has declined 14 percent on losses in Europe and South America.
OnStar could generate $40 a month in revenue per vehicle, Hogan said, and the company plans to install the hardware for the service on almost all of the 9 million vehicles it makes annually.
"You can imagine, if we develop a subscription fee for every car we make, what an opportunity it would be for us to increase the value of GM," Smith said.
In late 1998, GM started offering OnStar on all Cadillac Escalade sport-utility vehicles as a dealer-installed option. GM expects to install OnStar in 3 million vehicles in the next few years, up from 100,000 now.
OnStar now lets drivers contact a 24-hour service center for directions or help in an emergency. Cadillac started offering an option this month in which the OnStar service center will place a cellular call to any phone designated by the driver with the pull of a single console button, Cadillac spokesman Chris Preuss said.
This approach means drivers don't have to endanger themselves by taking their hands off the steering wheel to make a phone call, Smith said.
The service is offered on luxury models such as the Escalade, but "like any other option, it will eventually trickle down to the entire lineup," Smith said.
Eventually, GM will link this service to a hand-held unit that drivers can carry with them when they leave the vehicle, Smith said.
All major automakers are scrambling to make sure drivers are as connected to global communications grids in their cars as they are in their homes and offices, Smith said. GM plans to expand the menu of services available through OnStar to include voice-activated Internet access as well as premium radio and TV channels, he said.
"We want to make sure we have a chance to be the first mover," Smith said.
Smith declined to specify companies that might supply OnStar's telecommunications service and content, but he said hardware might come from Delphi Automotive Systems Corp. or Motorola Inc.
The automaker earlier this week agreed to a marketing alliance with America Online Inc., the biggest online service, and said AOL will provide some of the content to OnStar.
The largest wireless companies in the United States include AT&T Corp., Vodafone AirTouch PLC, Nextel Communications Inc. and Sprint Corp.'s PCS Group.
CAPTION: GM Chairman Jack Smith, shown Monday at the Detroit auto show, says he hopes to "increase the value of GM" by offering telecommunications services in its cars.