Dot-coms vs. Detroit

Imagine a rainbow-colored rope stretching 2,500 miles between Detroit and San Francisco with a pot of gold dangling on each end.

On the California side there's the potential for more gold than the dusty '49ers who invaded the Golden Bear State 150 years ago could possibly imagine - the chance to strike it rich without ever swinging a pick ax or panning a stream.

On the Michigan side there's security, stability and a chance to become moderately, if not excessively, wealthy. Its pot also contains huge resources and a solid infrastructure.

Both sides are tugging on the symbolic rope to gather the best Internet, or dot-com, talent available. No one is keeping score, and Detroit's automakers aren't trumpeting their losses to dot-coms as they wrestle with ways to keep and attract "New Economy" types to their old economy empires.

In the early going, two-way traffic suggests that the dot-coms have an edge. But with a spate of outright failures, sell-outs and bankruptcies surfacing in recent months in dot-com territory, high-flying gamblers out to get rich quick may be having second thoughts.

The dot-coms' chief allure has been the much-hyped IPO, or initial public offering. The idea is to get in on the ground floor with stacks of options that aren't worth much until the shares are publicly traded.

With the U.S. oozing cash and venture capital firms eagerly plunking it into fledgling dot-coms aiming to share in potentially huge gains when public trading begins, many dot-coms literally looked golden. Most begin trading on the NASDAQ market, but the NASDAQ has taken a hit of late, skidding nearly 7% so far this year amid rising interest rates and growing concerns that the euphoric nine-year-old economic boom might be ending.

In short, money is becoming more expensive and a tad more scarce, clearly a downer for the high-flying dot-coms, many of which are losing their luster. Some clearly won't survive. Experts generally agree that 75 out of 100 dot-coms will fold. Others bump that ratio up to nine in 10, and one close observer predicts that "25,000 of the 30,000 out there won't be around a year from now."

To be sure, the Internet that spawned the dot-com surge isn't going away and, in fact, it is destined to create more chaos, upheaval - and opportunities - in old economy companies.

It's already having a profound impact on U.S. automakers in everything from their B2B (business-to-business) initiatives, such as global purchasing and sales, to B2C (business-to-consumer) operations, such as on-board communications systems and dealer transactions.

That's why they need technical talent - the same kinds of entrepreneurial and creative people attracted to the dot-coms, and vice versa. Locked into traditional compensation packages and organizational structures, automakers are closely examining numerous alternatives, some of which may soon be revealed, as enticements.

WAW interviewed a broad spectrum of folks on both sides of the dot-com talent war, including those who are departing the auto industry, those who are arriving and those who are doing the hiring. There's also retired General Motors Corp. Vice President Roy Roberts, who in March launched his own dot-com to promote business for minority firms.

While DaimlerChrysler Corp. and Ford Motor Co. share the challenge of recruiting Internet types and retaining their in-house stars, their activities have been less apparent than at GM, where a spate of comings and goings has surfaced in recent months.

Karen Francis looked like she was marked for big things at GM. Only 38, she already had risen to general manager of Oldsmobile Div. after only four years with the No.1 automaker.

With a solid marketing background at several companies, including Procter & Gamble, Ms. Francis was recruited by GM board member John Smale, a former P&G chairman. She spent nearly three years at Chevrolet, then moved up to the Olds job in January 1999.

On April 25, she announced she was resigning to take a job in San Francisco as chief marketing officer and a managing director of Internet Capital Group (ICI), a five-year-old B2B outfit based in Wayne, PA, which provides support for a network of dot-coms, operating much like a holding company. When they are ready, ICI helps take them public.

Ms. Francis says she didn't leave GM because of Oldsmobile's ongoing sales slide, nor because she wasn't offered a higher job, as some have speculated. And it wasn't because the ICI job would take her back to San Francisco, where she had worked for 31/2 years (1989-'92).

"I got a call from a headhunter in early March, and my curiosity was aroused," she tells WAW. "I listened, and it sounded interesting. I had breakfast with the founder and CEO (Walter Buckley) in Detroit, and we talked about what was going on out there - the technical revolution.

"There was no deep-seated reason for leaving; I'm not running away from anything. I love GM and Olds. B2B is the way companies are going to be operating, and ICI is a leading B2B company. So it gives me a chance to get in on something at the beginning. I've read analysts and investment bankers' reports (on ICI), and they have a real chance at changing the way business is done."

GM's experience with Ms. Francis clearly demonstrates the risk of hiring "high-pots" (high potential personnel) and giving them wide exposure. Before accepting the ICI deal, she says "20 other jobs were floated in front of me" since Jan. 1. Why? "Because a lot of emerging companies may have great technology and smart founders, but now they want management skills to go to the next level."

Although admitting she might have remained at GM if she had been offered a shot at the top corporate advertising post, GM's undisclosed counter-offer came after she'd already accepted the ICI job. "I wasn't leveraging myself," she says.

Ms. Francis won't reveal her ICI package, but obviously stock awards or options are a major piece of it. ICI has taken three Internet companies public and has 47 in incubation. Her main job will be helping them develop marketing strategies, she says. ICI shares on the NASDAQ have ranged wildly between $7 and $212 over the past year, closing in mid-June at around $34. Among its major investors are Ford, General Electric Co., Dell Computer and Compaq, says Ms. Francis.

Bob Ciccone abruptly left GM in May. He's reluctant to detail the circumstances because he's negotiating his severance. Part of it, however, was that "my job wasn't defined," he confides.

A lead A.T. Kearney Co. consultant in strategizing the formation of e-GM, the corporation's electronic commerce unit that started up last August, Mr. Ciccone joined e-GM full-time last November as its primary contact with Silicon Valley.

Prior to his departure, e-GM President Mark Hogan told WAW that Mr. Ciccone was hired to be a "listening post" in dot-com country - "to establish contact with the new guys as well as established stars. We wanted a fresh set of ideas not nurtured here in the heart of the auto business." Mr. Ciccone worked on e-GM deals with America Online and Net-Zero "and some smaller ones," Mr. Hogan says.

Reached at his home in Danville, CA, near Oakland, Mr. Ciccone says he currently has no job and is taking time off for a trip to Hawaii with his wife and two children. But like Ms. Francis, the 40-year-old says he has a dozen offers "including three that are serious, which I could take tomorrow."

He has some advice for Detroit: "There's a possibility of a two-way flow, but it's not happening yet. A lot of these (younger candidates) don't know much about GM or the auto industry. It's not just a lifestyle issue; it's the business community. Out here, it's knowing people and trusting them. It's a new environment, but (the auto industry) doesn't know their language."

He's convinced there are two primary levels of Internet talent that Detroit should be examining: The "senior level," where relationships "truly matter," as distinct from the "junior level," where the talent war is basically being waged.

Mr. Ciccone's company vehicle at e-GM was a Chevy Silverado pickup. He recently purchased a Saab, remaining in the GM stable.

Although Joel Manby no longer works for GM, he can appreciate Bob Ciccone's taste in automobiles: Until a few months ago he was CEO of Saab Cars USA, now owned by GM. One of the first four people who worked for GM's Saturn Corp. at its formation in 1985, Mr. Manby headed Saturn's largest sales region earlier in the 1990s.

He left last March to become president of Greenlight.com, a Seattle-based new-car buying service that sells vehicles online with selected dealers acting as distribution and maintenance points.

"I was looking at the Internet as the next great possibility to improve the customer experience," he tells WAW, "because you can have a very trusting experience - very transparent, no games being played, just straight information. You can solve the three biggest black boxes: Setting a price, doing a trade-in and the financing."

Greenlight.com has yet to file an IPO, so it has plenty of stock to attract talent, presumably a lure to him as well. "Clearly there's a much bigger upside," he says, but "it's more risky to be with a dot-com, and many people don't like the risk profile. They want more security. For them, an Internet play with a manufacturer might be the solution."

Mr. Manby also says automakers may have to offer compensation packages commonplace in dot-coms. But even if they can't match the potential offered by dot-coms, "I don't think you're going to see an absolute flood out of manufacturing into dot-coms. I think it will be pretty balanced."

Cameron Schmidt is typical of that sort of balance. Mr. Hogan recruited Mr. Schmidt, 33, late last year from IBM Corp. as director of new business development. Currently based in Denver, he's to relocate soon to San Francisco, where he was to work with the now-departed Mr. Ciccone.

Interviewed by WAW prior to Mr. Ciccone's resignation, Mr. Schmidt says he spent three years (1994-'97) helping engineer a turnaround at Samsonite, where he worked on the marketing and sales end. He joined IBM in 1997 and served as a sector marketing leader overseeing business transaction services, including e-commerce.

Mr. Hogan personally hired Mr. Schmidt. "I met him through a personal contact and gauged his interest," says Mr. Hogan. "He was not looking for a job. I told him we were trying to build e-GM, and we had a lot of the same views about where the world was going. I told him he would be coming with the conviction he wouldn't be just a supervisor, but a confidante and mentor."

As Mr. Schmidt recalls it, "Mark and other senior management demonstrated a real commitment to e-commerce; they are passionate. He and I hit it off immediately, and two weeks later I joined e-GM."

Why did he choose GM? "Because it was an opportunity to be in on the ground floor in transforming the future of the company," says Mr. Schmidt. "E-GM is basically a start-up with an entrepreneurial spirit that marries the smartest people at GM with outside people. It's not stodgy.

"I'm blown away by the quality of GM's products, and it strikes me they are remaking the old GM. Although we (e-GM) are a separate group, we're attached at the hip with the brand teams. The only way we can move GM faster and more broadly is to work together."

Mr. Schmidt, a 1988 Wharton MBA with a joint degree in liberal arts, says he also was attracted by GM's massive resources compared with dot-coms, which often operate on a shoestring. "GM has tremendous assets - brands and lines of business. The opportunity to take an old economy company and evolve it into a fast, lean innovative new economy company beats going with a startup."

There are some sacrifices, though: Mr. Schmidt shed his Mercedes SLK convertible when he joined e-GM, first settling for a Cadillac Seville STS and now driving a GMC Envoy compact sport/utility vehicle.

Roy Roberts would be pleased to know that: He once headed the Pontiac/GMC Div., retiring as corporate vice president of North American sales, service and marketing earlier this year.

Mr. Roberts, 61, found he really wasn't ready to settle down to full-time retirement at his home on the Troon Country Club course in Scottsdale, AZ. "I've always wanted to own my own company," he says. When he retired, "I was offered six or seven CEO jobs, two at dot-com companies, and (seats on) 12 boards of directors. There were 12 companies that I was considering purchasing or taking an equity stake in, and that number grew to 24."

After mulling over all of the opportunities with his wife for about 10 days, he decided that just playing golf was not his game. "It became clear to me that nobody was addressing the minority markets in a horizontal (purchasing) exchange, which is under-served or unserved. Everybody was putting in vertical exchanges, manufacturer to manufacturer."

As a result, Mr. Roberts, who had been GM's highest ranking black executive, co-founded M-Xchange.com to connect minority suppliers with the automakers and other companies. His partner is Gary Wasserman, who owns Allied Metals in Troy, MI. M-Xchange is based in downtown Detroit, hardly anyone's vision of Silicon Valley.

The new dot-com expects to facilitate minority procurement by Fortune 1,000 companies, provide access and outreach services for corporate purchasers and minority suppliers across a wide range of businesses, says Mr. Roberts.

Set to be up and running next month, M-Xchange plops the veteran GM exec in the frenzied, free-for-all search for talent that fuels dot-com startups.

"It's a totally different world," he exclaims. "Some of the people who gravitate to this business are entrepreneurs - the kind of people who say 'I believe in your plan; I believe I've got a chance to win and I'm willing to come work for you at a little smaller salary, but I want the (stock) options ... because I want to get wealthy.'"

So far, M-Xchange has succeeded in attracting both young people and interest among seasoned executives in the Detroit area, "so we're having no problem getting the talent we need," he says. "But you'd better incentivize everybody so if you hit a home run, everybody wins. That means options, and a lot of them."

It's not everyone's cup of tea, he emphasizes. Some people want to know what their pay will be and the secure structure of a traditional corporation. "You won't find that in some of the startup dot-coms; it's everybody doing everything. The day is over when the vast majority of people sign up with a company for a lifetime."

To compete in the Internet talent pool, old-line outfits like the Big Three must be willing to move fast and accept there'll be turnover, says Mr. Roberts, because that's implicit in the new world of e-commerce.

Mr. Hogan observes that corporate "loyalty is not in the cards anymore. The notion of a job for life and the company as a family was challenged in the '80s and early '90s with downsizing, although that had to happen."

That, coupled with the current overall labor shortage, has made it tougher for traditional companies to attract and retain key people, he says. "We've lost some young people, and we've also hired some experienced people," says Mr. Hogan. "But we've got to move faster. Velocity counts today, so you've got to have some (talent) depth."

Like others at the Big Three, Mr. Hogan realizes that GM needs new ways to reward people attracted to dot-coms by the promise of cyber riches, but he provides no details.

Short of that, as Mr. Schmidt attests, e-GM expounds the idea of making it with a large company with giant resources - one that's in the process of re-inventing itself for the future. That's called inside marketing, a concept quickly catching on among the old-line outfits.

DaimlerChrysler launched its E-Connection Platform in January. It's headed by Vice President Gary Wilts. He thought he'd have a tough time finding talent but now says that hasn't been the case.

"There are Internet people out there who are young, but they have families.

"They're looking for companies with entrepreneurial flair but also offer some job security," he says. Still, he allows, that his people are a different breed. There are no offices on the fifth floor where E-Connection resides at DC's technology center in Auburn Hills, MI, and no ties. It's not unusual, says Mr. Wilts, to see men walking around with dyed hair and earrings. "There's no structure," he says. "People write on everything, including the floors and walls. We've just got to let them be free."

Kathy Spillane, E-Connection senior manager of human resources, says that the steep downturn in dot-com stock prices has worked to the advantage of the security offered by traditional companies like DC.

"Compensation always comes up (in comparing dot-coms to Rustbelt manufacturers), but what's happened in the stock market has been an indication that the grass is not always greener in dot-com land. Yes, there is a huge upside potential, but that also goes along with the risks. Some people thrive on risks, and some don't, but you have to know that everybody out there is not becoming a millionaire."

Beyond that, DC stresses job challenge and job satisfaction as inducements and is becoming more flexible in accommodating e-whizzes. "The answer," says Ms. Spillane, "is a middle ground - not swinging to the traditional side too far or too far so that you're out there in the Wild West."

DC also trumpets its global scope, but a new strategy aims at providing a chance to participate in some new companies that may be spun off from E-Connection. "That's something we never really had before, and it's attractive to some people," she says. "So there's a lot of opportunity to be on the ground floor in these little startups, and there are a lot of them."

DC is looking at its compensation policies country-by-country to discover "how we can change our options or make them flexible so that our employees can enjoy some of the benefits offered by the outside world," she explains. That includes short-, medium- and long-term incentives.

"You don't want to pay it all up front," so "in that sense, stock options for the dot-coms are not a whole lot different (than) the big companies. They basically work the same way. You have to figure out the objectives of these little (dot-com) companies that you create, and how you create incentive plans to support those objectives."

Ford launched ConsumerConnect, its e-commerce operation, last fall and has managed to snare the talent it needs, says spokeswoman Fara Warner. "We kind of marry two things, particularly in e-commerce," she says. "You have the excitement of a dot-com - getting to work with the Yahoos and Microsofts of the world, but you also have the supportive structure of a very large company.

"There's money there (and) there's support (because) e-commerce is a very important part of what Ford needs to do, and that's been highly attractive to people."

Ms. Warner, who joined Ford herself only a few months ago, says that "We're looking for the newness, the excitement, that you get from someone new to the company."

So far, however, Ford is not publicly discussing alternative compensation policies aimed at competing more directly with the dot-coms.

David E. Cole, director of the University of Michigan's Office for the Study of Automotive Transportation (OSAT), says automakers must adjust to the realities of the marketplace to keep and tempt cyber talent. "The old business model was to hire/retire," he says. "The new one is 'people flow.' You have to realize that people come and go, and that's especially true of young people with hot skills. You've got to reward them; the old human resources policies don't work anymore. There are options, but you've got to move fast. That hasn't been established yet at the big companies, but you've got to be careful not to tick off the existing employees."

How can that work? Mr. Cole suggests that automakers look at putting venture capital into separate companies with their own stock, something akin to what DC is doing. "You can control (the stock in the new company)," he says, "but they can grow (that is, have a shot at something more than the traditional perks and salary). You've got to disconnect from the old stuff. I call it 'separate but connected.'"

And automakers must learn to deal with a different kind of person, he says.

"It's typically difficult to work with a disruptive person, but you need a nest for them," he says. And geography shouldn't be a deterrent, thanks to e-mail, video-conferencing and other communications tools, he adds.

Mr. Cole cites the example of one larger supplier that cut a deal with a hot prospect only if he could live in Arizona, more than 2,000 miles from home base.

"He had them over a barrel, but they wanted him, so they made an exception. That's a tough sell for people who think traditionally."

80: Dot-coms formed, January-April 2000. Their shares fell during first four months some 50% below IPO price, and 90% under Day 1 closing price.

* 2%: Current Silicon Valley unemployment rate.

* 75%: Projected failure rate for dot-com start-ups.

50%: Dot-coms that go bankrupt.

* 25%: Dot-coms that sell out or merge.

* 7%: Decline in NASDAQ, January-June 2000.

$1 billion: 1999 holiday season dot-com advertising in traditional media.

$2 billion: Total 1999 dot-com advertising in traditional media.

* $60 billion: Estimated online shopping, 2001

$3 billion: Estimated 2000 dot-com advertising in traditional media.

* $0: Online shopping, 1994

the Internet, 1994.

* 60 million: Americans online now.

1.3 million: Estimated demand for information technology people between now and 2006.