Dan Akerson Remarks to Boston CEO Club

[Bruce Nunnally]

BOSTON – General Motors Chairman and CEO Dan Akerson addressed the Boston CEO Club on Thursday, discussing the potential for greater in-car connectedness. His prepared remarks follow. As always, the speaker’s words are definitive.

Thank you, Jay (Joseph Hooley, chairman, president and CEO, State Street Corp.).

It is a pleasure to join you today.

I know Boston is a big baseball town, so let me begin by thanking you for scheduling this event when the Red Sox are on the road.

I’ll never forget one particular Red Sox game I attended with my Dad, who was a Navy man. Ted Williams hit two homers, so it was a very special day all around.

I bring this up because I want to use two Ted Williams quotes to frame my remarks today.

The first is: “Baseball gives every American boy a chance to excel. Not just to be as good as someone else... but to be better than someone else.”

The second is, “No one has come up with a substitute for hard work.”

I like these quotes because what’s true in baseball is also true in business – at least in most respects. In business you have to bat a lot better than .300 to keep your job.

At GM, we aspire to play at the Hall of Fame level, so I want to share some of the things we’re doing to get there.

You’ve probably been hearing a lot about GM lately, and most of the news is good.

Our stock is performing well. We are on the cusp of earning an investment-grade credit rating. And we were just added to the S&P 500 index.

Obviously, investors like what we’re doing. So, what exactly do they see in GM?

They see a company with a fortress balance sheet that allows it to weather economic storms while keeping capital investment strong.

They see a company that is working hard to operate profitably around the world.

That’s a mark we are hitting in every region except Europe, and we are hardly alone in that regard.

Most importantly, investors see that GM is producing the finest lineup of cars and trucks, from top to bottom, in its history.

For example, journalists have been handing out the North American “Car of the Year” award for two decades and it has never gone to a Cadillac – until our new ATS sports sedan won this year.

The ATS is one of the cars helping Cadillac grow faster than it has in almost 40 years.

Chevrolet’s growth has also been robust. It has now posted 10 consecutive quarters of record sales, and we’ve turned it into a global brand.

Finally, investors see that GM has recaptured its entrepreneurial spirit and started to innovate once again.

Innovation isn’t a word I use lightly – or without facts to back me up.

For instance, GM has been ranked No. 1 on The Patent Board’s list of innovators in the automotive and transportation industry for seven consecutive quarters.

But the patent office isn’t the real world. That gets defined by customers.

So how are we innovating for them? One way is by bringing analog cars into the digital world.

We see the automobile becoming the next major technology platform – and one with far better battery life than an iPhone.

Now, if we could just get people to trade in their cars as often as they do their phones, we’d be on our way. But that’s another story.

The opportunity we see has been created by the increasingly ubiquitous smartphone – and the irresistible desire people have to stay connected wherever they are.

Consider these statistics: the average U.S. consumer spends 2 hours and 38 minutes per day on smartphones and tablets.

That tops the 15 hours per week they spend in cars as a driver or passenger.

Marry the two and you have a megatrend that we intend to harness for competitive advantage.

Calling connectivity a “megatrend” is no exaggeration.

In a recent study, J.D. Power found that more than two-thirds of new car buyers already own a smartphone. For 80 percent of them, connectivity strongly influences the new car purchase decision.

Personally, I think they’re under-calling the market. The number will be 100 percent before you know it.

I only have to look at my youngest granddaughter to know it’s inevitable. She’s just wired differently than you or me. She thinks she can change TV channels just by swiping her hand across the screen.

Anyway, when you ask drivers what kind of connectivity they want they say “hands-free calling”... “navigation”... and “automatic crash notification” in that order.

These features are the bread and butter of our OnStar unit, which has turned three simple buttons – one for calls, one for directions and one for emergencies – into a very successful business with more than 6 million subscribers.

However, when you probe deeper, you discover that people really want connectivity to give them a better quality of life in their car.

Nearly 80 percent of consumers want greater safety... followed by “a better driving experience”... and better customer care.

Translated, people want connectivity to keep them out of accidents and traffic jams... keep their cars from breaking down... and keep their kids entertained... or at least occupied.

Lots of companies meet a few of these needs using USB ports and Bluetooth connections.

At GM, we use Bluetooth as an adjunct to OnStar, which puts us a couple of steps ahead of the game.

A handful of companies use embedded 3G Wi-Fi on a few of their models. But these approaches only scratch the surface of what’s possible.

Imagine that your vehicle can predict that it needs a new battery and then automatically schedules a visit to your dealer before it dies on the Mass Pike in rush hour.

How cool would it be to have your car automatically call Dunkin’ Donuts when you’re a mile away so your coffee and cruller are ready and paid for when you pull up?

And wouldn’t your kids love to stream “Fast and Furious 6” into the backseat instead of endlessly watching the same DVD for hours on end?

Some of this is possible today. Some is still years off. But all of it will require far more bandwidth and much higher download speeds.

In other words, we need a bigger pipe to bring data into the car – and that pipe is 4GLTE mobile broadband.

This is one of those situations where past is prologue.

When I was with MCI and General Instruments back in the 1980s and 1990s, we had the biggest data pipes in telecom. Bar none.

We used them to surprise and delight customers, and we created tremendous shareholder value in the process.

At GM, we don’t know everything that the future will bring. But the core of our strategy is to do a better job satisfying customers than anyone else.

That’s why we’re going to turn millions of our cars and trucks into nodes on the Internet through the industry’s largest global deployment of 4GLTE.

Every brand we offer – from Chevrolet to Cadillac – and nearly every vehicle we sell around the world will soon offer 4GLTE, starting next year in the United States and Canada.

It’s a global rollout because that’s what customers want – and we have the scale to deliver.

For example, a CapGemini survey reveals that 78 percent of Chinese consumers want connected services in their vehicles. In developing markets, that number drops only to 64 percent.

Now, some of you are saying, “Why do I need an embedded solution if I already have a 4G phone?”

The answer is simple: faster mobile data speeds, lower latency and the ability to process voice and data simultaneously.

Our integrated solutions will also help prevent distracted driving.

To me, there is nothing scarier than a texting driver looking down at his handset.

But if done right, technology can actually be part of the solution to keeping drivers’ eyes on the road.

It all comes down to hardware and software design and execution. That’s one of the great advantages of OnStar, which is fast becoming a global service.

It’s also a benefit of multimedia centers like Cadillac CUE and Chevrolet MyLink, which provide hands-free control of mobile devices.

Of course, getting 4G into our cars is just the foundation. As one tech blogger recently pointed out, “It’s an App World. The Web just lives in it.”

To really blow this out, we need to borrow from the smartphone playbook and entice thousands of “codaholics” to write apps for our cars.

This is the strategy that made Apple and Android the dominant players in their space, and it’s why we’re sharing our remote and in-vehicle application interfaces with third parties through a new website called developer.gm.com.

So far, we have about 2,000 registered users and our flexible app framework will help them help us keep the technology in our vehicles at the cutting edge – even years after the sale.

With an army of coders working to write 4G-optimized programming for our cars, our GM App Shop may someday be as popular as iTunes or the Android Marketplace.

In turn, that will open the door to unlimited possibilities for our customers – and attract even more development and content partners to GM.

Some of you probably work on the Route 128 corridor, and I hope your gears are turning.

Others of you are probably scratching your heads and saying, “This isn’t the GM I remember.” Well, good. We’re not.

In fact, one investor recently told me how refreshing it is to talk product strategy with the GM team, instead of things like credit risk. It’s refreshing to us too.

And leading through innovation will help keep us successful for generations to come.

We know we still have to get the fundamentals right. That means designing great-looking vehicles, delivering outstanding quality and reliability and preserving our fortress balance sheet.

But thanks to tenacity and a lot of hard work, we’re now in a position to be expansive in our thinking and aggressive in our execution.

That bodes well for everyone, whether you’re a GM customer, a stockholder or a codaholic... and it’s going to be a great ride.

With that said, I’d like to take any questions you may have.

[Cadillac Jim]

Perhaps repeating the developer portal URL is appropriate here:

https://developer.gm.com/