HAWTHORNE, NY – Forecasting a skyrocketing demand for telematics systems in passenger vehicles by the end of the decade, an IBM Corp. executive predicts future wireless innovations will provide drivers with delivery of far more automated information and applications to and from the vehicle.

Delphi has sold 3 million telematics devices while IBM has ambitious goals for the segment.

These systems most likely will be digital instead of analog and will seamlessly incorporate cell phones, personal digital assistants (PDAs) and other devices into the fabric of the automobile – probably via a wireless Bluetooth interface.

James S. Ruthven, program director for IBM Telematic Solutions, heads a team of specialists working to create these systems for auto makers, insurance companies, trucking firms and vehicle owners.

Current telematics services that feature applications such as vehicle tracking, emergency assistance and diagnostics now are provided through human call-center employees.

"We see the services portfolio changing to vehicle-specific information being delivered and used automatically," Ruthven says. "IBM envisions the telematics platform as key to the wireless delivery of capabilities, such as horsepower on demand, vehicle software upgrades and repairs."

Working with top auto makers such as Ford Motor Co., IBM is attempting to solve remaining telematics challenges. These include privacy and security, voice-recognition accuracy and vehicle simplification.

Ruthven predicts the use of human call-center operators will begin to fade in the 2007-2010 period. At the same time, telematics systems will add a Java-based architecture to allow for the secure, automated acceptance and delivery of information and applications to and from the vehicle.

Only about 5 million vehicles today have some type of telematics content. Ruthven says the growth potential for vehicle telematics is tremendous. With only 10% to 20% of current vehicles being shipped with some sort of telematics systems, 80% to 90% of vehicles being manufactured represent a large untapped market.

So far, telematics have been built only into luxury vehicles. Medium- and economy-priced cars and trucks should add these services in the future, he says. A good example is OnStar, the General Motors Corp. roadside-assistance service that was once an exclusive Cadillac option. It now is found in many lower-priced GM cars and trucks.

For IBM to expand its foothold in telematics, it must catch up with industry giants Delphi Corp. and Motorola Inc. Robert W. Schumacher, chief of Delphi's wireless business, says his company has sold more than 3 million telematics modules to GM, Honda Motor Co. Ltd. and other car makers.

Delphi also writes much of its own software that's embedded in the hardware. "We use a homegrown operating system," Schumacher says. Schumacher estimates the current telematics content per vehicle is about $15, with the average cost of telematics modules in the $600 to $700 range. The content per vehicle will soar to about $50 in five to seven years, he predicts.

At the same time, Schumacher sees the cost of telematics modules plummeting to about $200, made possible by integrating telematics systems with radios. Delphi, which makes some 6 million vehicle radios annually, is about to increase that output when it starts making radios for Ford trucks and vans. It recently won an order for 1 million radios from Ford; deliveries start this fall.

The radio business gives Delphi a big advantage in selling telematics, and that should only get better as the integration of telematics and entertainment goes forward. "Entertainment is the killer application for vehicle telematics," Schumacher says. "Telematics is more than safety and security."

He says Delphi envisions the use of hard drives or flash drives in vehicles that could hold entire music libraries, games and movies for back-seat passengers. But Schumacher also sees a substantial commercial market, citing the increasing need for tracking the millions of containers shipped into the U.S. every year.

Oil companies also are concerned about terrorists hijacking tankers and using them as bombs. Schumacher says Delphi has started working with companies shipping hazardous materials to provide better methods for tracking and safeguarding shipments.

The entire trucking industry is a big market opportunity, Schumacher says. There are 20 million trucks on the road today and few have tracking systems. Companies want to know where their trucks are and when they arrive at their destinations. Telematics is about a $4.5 billion global market for hardware and service, says Frank Viquez, director of automotive electronics for ABI, a market research firm in Oyster Bay, NY.

That figure nearly will triple to $13 billion globally by 2008, he predicts. The current telematics penetration rate in new vehicles is about 15%.
Viquez forecasts that rate will hit 45% in 2008. Research cited by IBM puts revenue for telematics hardware and service at $7.2 billion globally in 2001. And this research forecasts a $23 billion global market by 2007.

Viquez predicts the telematics industry will shift from analog to digital for next-generation service.

"You have to automate the service because the cost difference is phenomenal," he says. An example he cites is an estimate that OnStar's expense per transaction currently is $1 with a human operator.

That would plummet to $.05 per transaction via automation. Such savings are necessary to lower subscription costs. Viquez estimates only about half of OnStar’s 5 million units sold since 1997 are in use by current subscribers. An OnStar spokesman declines to comment on subscriber servicing costs, but insists customers want to hear a voice at the other end when they call for help – and they’re willing to pay for that.

There might be some automated services provided by OnStar in the future, he says. But the business plan now is to continue to offer a human interface for most services.

The spokesman says OnStar will announce an embedded digital service in an ’04 model later this year, making automated service more feasible.In the last three months, OnStar has received 600 automatic airbag notifications per month. There were also 400 stolen vehicle location requests per month. Altogether, OnStar receives 6,000 emergency button pushes, 14,000 remote-diagnostic requests and 13,000 roadside-assistance requests each month.

All were handled by humans monitoring the calls. Subscribers perceive that real contact with an advisor is helpful in getting them through a very difficult situation, the spokesman says.

IBM has some ambitious programs to help it become a bigger player in telematics. It already has launched a number of joint projects designed to help it grow as a telematics software developer for the auto industry. These include:

• Telematics Resource Manager, a system IBM jointly developed with Ford and announced at Convergence 2002. TRM is being developed as the next generation of telematics. Its software is designed to provide hands-free and eyes-free technologies to improve driver safety, privacy, convenience and connectivity.

TRM would allow drivers to connect to the Internet for reading and sending e-mails, retrieving news, stocks and sports information and many other services. Ford says there are no plans at this time to incorporate TRM in a production vehicle. (Delphi is developing a similar service, but it has not set a date for introduction, either.)

• A joint project with International Truck and Engine Corp. that will hit the road next year in new trucks featuring telematics services based on IBM developments. The systems will offer interactive, wireless communications to and from light and heavy commercial vehicles. International also will make IBM telematics available in the aftermarket.

• A unique "Pay As You Drive" insurance coverage program. IBM developed the system for Norwich Union, the U.K.'s largest general insurer. The telematics device will collect data automatically from customer cars, so premiums can be based on when, where and how often the vehicle is used.

• An OnStar-type system for Hyundai Motor Co. Ltd. that's based on IBM technology. It will offer airbag-deployment notification and other safety and convenience features. Later versions could include diagnostics. Launched in Korea, it is not yet available in North America.

• The first e-owner’s manual developed for ATX Technologies, an OnStar competitor. Using voice-recognition technology, drivers can learn about the vehicle's operation while on the road.

It eliminates the time-consuming task of digging through a vehicle manual for needed information. IBM says future versions can notify drivers audibly when, for instance, freezing temperatures require that outside mirror defrosters should be activated.

Since 1999, PSA Peugeot Citroen has used an IBM diagnostics system that enables 90% of repairs to be made within four hours on 80% of its vehicles within a day. Peugeot uses a tele-assistance system for a multiplexed vehicle population of 1.5 million vehicles worldwide.

IBM also is developing more advanced versions of this system with its automated analysis initiative. The system is designed to capture transient and intermittent problems that never seem to show up in the dealer’s service bay. It will use data recordings that analyze collected data – all while gathering a history of a car's performance.

Perhaps IBM's most ambitious telematics development is the "Artificial Passenger." It uses conversational telematics that simulate interactions between a driver and front-seat passenger.

The AP would engage a driver in games or entertainment when drowsiness is detected. And without causing driver distraction, the AP would deploy early warning systems that report potentially hazardous external conditions or possible mechanical problems.

Ruthven says IBM patented the system in 2001 and estimates it will debut within two to three years in a production vehicle. He's confident such a system will enable IBM to increase its presence in telematics.

Ruthven declines to say how much his company's telematics business will grow during the remainder of the decade, but he suggests it could keep pace with IBM's overall aggressive corporate-growth targets.