4 Million Subscribers

OnStar works.

That's the message from OnStar President Chet Huber, who says the telematics service fast is becoming a big plus for General Motors Corp. and a huge competitive advantage others will have a difficult time matching — if they are even bold enough to try.

Now in its 10th year of operation, OnStar is on the verge of hitting the 4 million mark in active subscribers this month, and the service is proving a key selling point in new-car showrooms, Huber says. Subscriptions have grown 30% from 2004 levels, OnStar says.

Critics have been waiting for GM to pull the plug on the division almost since its inception, convinced the service, which uses labor-intensive call centers staffed around the clock to help subscribers unlock their car doors, track stolen vehicles or call rescue workers in the event of an accident, would be too costly to maintain.

OnStar now boasts about 500 employees and operates call centers in three North American cities: Troy, MI; Charlotte, NC; and Oshawa, Ont., Canada.

Huber won't reveal what OnStar's revenue is but says it is operating in the black and hitting the financial bogeys set for it by GM. More importantly, he contends, OnStar is providing a competitive advantage in the showroom.

OnStar now is a highly recognizable brand, thanks to advertising that played off the latest Batman movie and a follow-up campaign that featured real-life testimonials from satisfied subscribers.

“Two years ago, we were a question on ‘Jeopardy,’” Huber says, highlighting how much OnStar has become a household word over the past decade. “And one of the contestants even got it right.”

Awareness of the brand from new-car buyers has reached 100%, OnStar says, and unaided awareness among consumers is now 60%, equivalent to such brands as Microsoft and Sony.

And interest is increasing. Some 30% of new-car buyers surveyed would like OnStar in their next vehicle, Huber says, up from 20% only a year ago. The service's retention rate averages more than 60%.

As GM rolls out OnStar on all its models — the service (the first year's subscription is free) will be standard across the board in the U.S. and Canada in 2007 and is on more than 50 GM models for '06 — the numbers only will get bigger.

Huber says the key to the growth is technology development. OnStar is on its sixth generation of technology, getting ready to launch its seventh generation and already beginning work on its ninth.

That was always the question, Huber says. “Can you have the technology fast enough inside a host vehicle platform with the way electronics moves? But we have six generations in nine years, so that's pretty on par with consumer electronics.”

Huber says OnStar to date has produced about 300 patents.

That technology, extensive call centers and links with rescue workers across the U.S. and Canada, is what may be making it tough for competitors to challenge OnStar's near-monopoly. DaimlerChrysler Corp. is the only other auto maker beginning to offer some of the same services, using independent third-party call-centers.

OnStar supplies its service to Toyota Motor Corp.'s Lexus luxury division, which it offers under the “Lexus Link” brand, and to Honda Motor Co. Ltd.'s Acura division. It also has a deal to provide the service for Volkswagen and Audi vehicles sold in the U.S. and Canada.

But it appears GM now considers the operation such a brand-enhancer that OnStar is offering only a portion of its services to outside customers. And the cost and risk for other auto makers to catch up to OnStar on their own may be too daunting a prospect for most — despite marketing data OnStar says should be pointing them in that direction.