"As an industry we're continually asking ourselves, ‘What has technology promised us?' I submit what we should be asking is, ‘What are we doing to deliver that promise?' It's my opinion that automotive electronics are not just the key to delivering the promise... electronics is the code, the cipher, to unleashing the promise."
J.T. Battenberg III
Chairman, CEO and President
Delphi Automotive Systems
Delphi is serious about electronics. Note that as it has organized its businesses into three sectors—Dynamics & Propulsion; Safety, Thermal & Electrical Architecture; Electronics & Mobile Communication—there is greater emphasis on things electrical and electronic, title-wise, at least, than there is on the mechanical things that people might associate with an automotive supplier. After all: Don't suppliers operate in the Rust Belt? Isn't it about nuts and bolts, not bits and bytes?
So we talk to Dr. Robert Schumacher, director of Delphi's Mobile MultiMedia Business Line. That area includes such things as telematics. Digital audio. Entertainment. Communications. This area is exploding, with growth on the order of 30% to 40% per year "at least," says Schumacher. And so we ask him the obvious question: "What's an Old Economy company doing in a place like electronics?"
One of the things that Schumacher emphasizes about Delphi when asked about an Old Economy company (it) working with New Economy companies (such as Palm and Microsoft) is that, well, Delphi isn't exactly an Old Economy company, so far as he is concerned. If the point is that the New Economy companies in question (and others–like Hitachi and Sirius Satellite Radio–can be added to the list of the companies that Delphi is working with) are, in some aspects, consumer electronics companies, then he points out that Delphi has long been involved in consumer electronics-type technology "ever since we installed the first factory-installed radio in a car." That happened back in 1936. And he rapidly enumerates a number of devices (cassettes, cell phones, CD players...) that Delphi has been instrumental in making part of the natural order of things in the auto industry. He emphasizes that in many ways Delphi has been "first and fastest" in bringing consumer electronics-type products to the interior of cars.
All of which is to say that the Old–New dichotomy is not one that he seems to be particularly comfortable with. And with good reason, it seems.
What They're Doing.
In order to be a significant player in this area, Schumacher explains that there are three strategies in place:
1. Leveraging the evolving (and somewhat converging) Internet, PC, wireless communications, and multimedia technologies. "They are all coming together in the world outside the car; we're about leveraging it inside the car," he says.
2. Going after aggressive growth in markets by offering new features and functions. This is in the areas of hardware, software and even content (Delphi and Palm are among the investment partners in a company called MobileAria, a content-provider). Delphi is creating a number of products under the "Communiport" brand, such as the Communiport Infotainment PC, which is available on the Cadillac Seville and DeVille models; it is a combined navigation system, Internet and e-mail device, voice memo, hands-free phone, and address book unit. There is the Communiport Mobile Productivity Center (MPC) that features a pliable polyurethane cradle that permits the side-by-side mounting of a Palm V or Palm Vx and an Ericsson telephone.
3. Doing all this "on a fast time scale, on a consumer electronics time scale." If traditional automotive clocks run at 24- or 36-month speeds, then what they are working on at Delphi is more on the order of 12 months.
According to Schumacher, there is a wide array of things that they are doing to accomplish their objective to be a major player in this arena. They are working on/with connectivity including the wireless applications protocol (WAP), Bluetooth, Global Positioning System, and cellular (analog/digital); on portable device connectivity including cell phone integration, Palm and cell phone docking (as previously mentioned), and the aforementioned Bluetooth; computing platforms including Windows CE, Java, and QNX; media playback including MP3, DVD, and minidisk; reception technology including satellite digital audio radio service (SDARS), digital audio broadcast, and in-band on-channel; technology including voice synthesis and voice recognition.
Given all of that, it is fairly evident why they have formed what Schumacher calls "tight partnerships" with consumer electronics companies.
Teaching the New Tier Twos What "Quality" Means.
One of the interesting aspects of working with consumer electronics companies that Delphi experienced was that these companies were not used to dealing with the rigors that are faced by more conventional automotive suppliers—and note well that Schumacher refers to these companies as "tier-two suppliers." Schumacher points out that of all the electronics available to consumers, automotive electronics are the most robust and reliable. The physical testing that these components, devices, units, and systems undergo is exceedingly demanding. The quality metrics that they are measured by (e.g., PPM acceptability by the customer) are much higher. (Arguably, one of the reasons why this is so is that it is a heck of a lot more convenient to bring something back to a consumer electronics store than it is to have to roll into a dealer's service bay for who knows how long for a fix.)
"They didn't understand what we meant by ‘reliable software,'" Schumacher says. Delphi thought it meant "no bugs." Initially, some of the software people didn't think the same way. "Consumer electronics companies are accustomed to bringing out products with known defects," he claims. (Presumably this has something to do with the fast cycles in that industry: they'll get things right with the next one.) "We do not ship products to assembly plants with known defects." Schumacher says that Delphi's OEM customers expect Delphi to support its products for 10 years. OEM customers come back to them to pay warranty costs if their products contribute to warranty problems. This was another big change for the consumer electronics people to wrap their minds around.
Apparently, these tier-two suppliers have done a significant amount of learning. It takes from 12 to 18 months to really understand what it takes to be a part of the industry. And, given the number of products that Delphi is putting on the road and which it has in the pipeline, this learning has been accomplished with benefit for all parties.