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GM's OnStar seeks growth in Brazil, Europe in tech push

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GM's OnStar seeks growth in Brazil, Europe in tech push

September 15, 2010 - 9:16 am ET

DETROIT (Bloomberg) -- General Motors Co. is seeking to expand its OnStar communications service into six new markets, including Brazil and Europe, to attract buyers seeking technology and safety features.

The provider of accident alerts, directions and vehicle diagnostics, also wants to add subscribers in Mexico, South Korea, the Middle East and Australia to build on its rapid growth in China, said Chris Preuss, OnStar's president. OnStar has about 5.7 million subscribers in the U.S., Canada and China.

GM, now managed by former telecommunications and technology executives, is putting greater emphasis on selling OnStar to consumers. Those managers include CEO Dan Akerson and former CEO Ed Whitacre, who both have led telecommunications companies, and Chief Financial Officer Chris Liddell, who joined GM from Microsoft Corp.

“They all believed OnStar had a great brand presence and maybe atrophied a little bit in its marketing approach,” Preuss, 44, said Tuesday in an interview in New York. “The telematics space is going to be one of the most competitive areas in the industry. I fully expect this to be a slugfest.”

OnStar, which debuted in the U.S. and Canada in 1996, is free in more than 30 models for the first year, then offered on a subscription basis for $199 to $299 annually depending on the level of service.

About 5 percent to 7 percent of GM customers said they bought their vehicle “for no other reason than they had to have OnStar,” Preuss said.

China subscribers

GM is counting on expansion overseas to bolster profit as it prepares for an initial public offering to reduce the government stakes held by the U.S. and Canada. GM's first-half sales in China overtook deliveries in the U.S. for the first time.

OnStar enrolled its first customer in China in December and surpassed 70,000 subscribers last month, OnStar China President Jonathan Hyde said in a telephone interview. GM expects to reach 200,000 Cadillac and Buick subscribers in the country by the end of the year and eventually will add Chevrolet, he said.

Subscribers in China push OnStar's blue button 10 times more frequently than users in the U.S., Preuss said.

“Car buyers here are particularly interested in technology,” Hyde said in a Monday interview from Shanghai. “The consumers in China are very engaged with the service.”

OnStar China

Usage patterns in other markets may not resemble those in China, where many of GM's customers are buying their first vehicle, Hyde said. Chinese drivers also find turn-by-turn directions particularly useful as rapid building has led to quickly changing roads, he said.

OnStar, which works in China with SAIC Motor Corp. and China Telecom Corp., may need partners in new markets to help build its infrastructure of call centers, operators and a cellular network, Preuss said.

It took almost seven years for OnStar to generate positive cash flow in the U.S. as the unit invested in hardware and built up a subscriber base, Preuss said. OnStar is profitable and increased annual revenue the past seven years, he said, without giving specifics because GM doesn't report the figures publicly.

OnStar will consider avoiding costs in some new markets by using a data-only model that doesn't use external call centers, Preuss said.

The OnStar hardware gets a ninth update in 2011 models. The latest technology translates drivers' verbal messages to text on their mobile phones and allows users to update the social media site Facebook with voice commands.

Skype, Twitter

The features are being tested for ways to reduce drivers' distraction, Preuss said. The texting technology may allow users to have their text messages read to them and reply to messages using four preset replies, for example.

“We're not going to separate people from their devices in the car,” he said. “Technology can solve this.”

OnStar is in talks to add applications including the video-calling software Skype, and social networks Twitter and Foursquare, Preuss said. The unit added a Google Inc. service called eNav earlier this year that allows drivers to send Google Maps destinations to their vehicle.

The services are aimed at Ford Motor Co.'s Sync, the voice- activated music and information system the company offers through partner Microsoft Corp. Ford has been selling Sync since 2007 and added features such as touch-command controls and voice-activated climate control this year.

Ford's technology, available as a $395 option on some models, helps make cars more profitable and is included standard on higher-end vehicles.

Free services

OnStar may offer some entertainment and information services, including those that link to a user's smartphone, without a subscription or fee because that technology will eventually become standard throughout the industry, Preuss said.

The new version of OnStar will have enhanced services for emergency response, which alerts an OnStar operator when a vehicle crashes. These are features for which OnStar will be able to continue charging, Preuss said.

“When people plunk down $200 to $300 a year, what they pay for is safety and security,” he said.

OnStar is studying ways to use the service outside of the car, where immediate contact with an operator might be useful. OnStar says it unlocks 1,833 doors every day.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100915/OEM06/100919916/1131#ixzz0zhqcmSbw

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