THE HANSEN REPORT ON AUTOMOTIVE ELECTRONICS. A Business and Technology Newsletter

VOL. 17, NO. 7◆◆ PORTSMOUTH, NH USA SEPTEMBER 2004 BMW Sticks with iDrive; Ford Hosts Convergence 2004 Audi’s MMI a Success “Audi, Mercedes and Porsche all use a officially denouncing iDrive as a failure system similar to the BMW iDrive,” de- from both a technical and functional We recently spoke with Dr. Gerhard clared Alfred Broede, product spokesman standpoint.” Schmidt, vice president in charge of re- at BMW in Germany. “There is no other The harsh negativity about iDrive goes search and advanced engineering at Ford way to control the many systems of the well beyond the press. When I visited our and the chairman of Convergence 2004, car.” Without multifunction interface sys- local BMW dealer in Portsmouth, New about the conference and about electron- tems—consisting of multifunction Hampshire this summer, the salesman I ics at Ford. Scheduled for October 18 – 20 switches and a display or a touch screen— spoke with was quick to tell me that his at Detroit’s Cobo Hall, Convergence is fully-featured vehicles would require too customers “hate” iDrive. “It’s awful. It is the largest and most influential confer- many small buttons, knobs and labels to impossible during new car delivery to ence on automotive electronics. It is at- fit within easy reach of the driver. They teach customers in one sitting how to use tended by a large number of the industry’s would be small and difficult to see and it. If BMW made iDrive a delete option, movers and shakers from carmakers and difficult to operate safely. “It would look 99% would have it deleted,” he said. Not suppliers around the world. Eighty-five like a fighter jet,” said Mr. Broede. at all intuitive, iDrive is difficult to use papers will be presented during the Audi’s critically acclaimed multifunc- even by the computer literate. conference’s 15 technical sessions. To tion MMI (Multi Media Interface) is stan- However, BMW is not about to make register for Convergence, please visit dard on the 2004 Audi A8 L and an iDrive, which is standard on 5, 6 and 7 www.convergence2004.org. option on the new A6, which was series vehicles, a delete option on those This year Ford has chosen “Vehicle launched in the spring of 2004 in Europe models. “Once people have driven it for a Electronics to Digital Mobility: The Next and will be coming to the U.S. this fall. long time, most appreciate it. If we Generation of Convergence” as the con- Audi will probably extend the availability changed it again, we would get a lot of ference theme. Digital mobility refers to of MMI throughout the Audi line. By criticism,” said Michael Pfunder, in charge the next stage of automotive electronics, 2008 or 2009 Volkswagen will also likely of E/E interior and cockpit systems engi- where control systems and features are adopt MMI in upscale vehicles, but with a neering at BMW. “Customers would ask, connected to each other via data commu- different design look and different graph- ‘Why would you change the thing I al- nications networks, making them interde- ics to fit the VW brand. ready know?’” On the BMW 1 series in- pendent and complementary, where troduced in Europe earlier this year, software and digital data are the essential iDrive iDrive is only packaged with the naviga- ingredients. It’s hard to find an electronics feature tion system option. Given where the industry is headed, more widely criticized than iDrive, According to Mr. Pfunder, appreciation electronics architecture is particularly im- BMW’s multifunction switch-and-display for iDrive varies by country. “For example, portant, and two noteworthy sessions on user interface that gives BMW drivers ac- Japanese drivers are used to very complex systems architecture have been developed. cess to hundreds of vehicle functions, set- systems. There is no criticism whatsoever On Tuesday morning, October 19, Peter tings and adjustments. Since BMW first from Japan, or from Germany. In America Thoma, member of the management introduced iDrive in November 2001, in the response has been mixed,” he said. board of Elmos Semiconductor, chairs a the then all-new 7 series in Europe, the The iDrive human-machine-interface session on physical structures of systems U.S. press has been entirely negative. The includes steering-wheel switches, a multi- architectures. Dick Brass, vice president of Wall Street Journal recently referred to the function display, and a multifunction con- Microsoft’s Automotive Business Unit, 7 series version as the “dreaded iDrive ... trol knob, which can be turned, pressed, leads a session that will focus on software, [that] drives people crazy.” The second- and in the 7 series slid to eight different scheduled for Tuesday afternoon. generation iDrive released on the 2004 5 positions. Dr. Schmidt came to Ford in 2001from series was found by Consumer Reports BMW, where he was senior vice president magazine in April 2004 to be “tedious to Defending iDrive of vehicle integration. Before that, Dr. use.” On July 8, 2004, car-buying expert The newer iDrive, standard on the Schmidt spent ten years as senior vice Karl Brauer at the consumer website BMW 5 and 6 series, controls fewer func- Turn to Convergence, page 8 edmunds.com, wrote: “As it stands I am Turn to iDrive, page 8 Autobytel-Japan.com Surveys Japanese Consumers on Car Electronics

Autobytel-Japan.com recently surveyed To those who own navigation systems: To those who answered yes in the above users of its website about their car elec- What kind of navigation system do you question: What kind of navigation system tronics purchases. 6,618 e-mail subscribers have? would you like to buy? responded to the survey, most of them 30- DVD 53.9% HDD 64.4% to 40-year-old businessmen, frequent users CD 29.8% DVD 31.6% of the Internet, who live in a metropoli- HDD 15.6% CD 1.9% tan area. Half the respondents had a navi- Others 0.7% Others 2.1% gation system in their car already, and of those who didn’t have navigation, 75.8% Carmaker or aftermarket navigation sys- To those who don’t own navigation sys- said they would like to purchase a system. tem? tems: Can you go to the destination with- The survey also indicated that hard disk Carmakers 41.7% out getting lost? drive navigation is making inroads in the Aftermarket 55.0% Never lost with map 57.2% market and is generating interest among Others 3.3% and road signs consumers, although DVD-based systems Sometimes lost with map 30.0% remain far more common today. Naviga- What makes you dissatisfied with the and road signs tion users cited high costs and dated infor- navigation systems? (Plural answers are Never lost with road signs 7.0% mation as reasons for dissatisfaction with accepted.) without maps their current systems. Expensive 55.2% Often lost with map and 5.0% We’ve listed the survey questions and Old map information 53.2% road signs responses provided by Autobytel-Japan, a Route guidance error 41.9% Others 0.8% joint venture of Autobytel Inc. (Irvine, Troublesome data update 38.3% California), i-cf, Itochu, Trans Cosmos Difficulty to operate 16.0% Would you detour or change the route if and GE Capital. Too many functions 7.4% you are informed of the traffic jam? Others 6.9% Yes 69.3% What do you have in your vehicle? No 4.8% (Plural answers are accepted.) Would you like to replace your current It depends 25.4% CD player 68.9% system with a new one? Navigation system 50.6% Not for a while 58.9% Autobytel launched its first research and car- Radar detector 38.5% If the price comes down 27.8% buying site in 1995. According to the company, MD player 31.2% to reasonable range it was the most visited site of its kind in 2003 TV 29.3% When the next-generation 7.8% and generates over a billion dollars a month in ETC 19.2% model is introduced vehicle sales. Theft prevention 18.3% Others 3.2% No devices 10.7% As soon as possible 2.3% THE HANSEN REPORT ON DVD player 8.1% AUTOMOTIVE ELECTRONICS To those who don’t own navigation sys- Video deck 2.4% © 2004 Paul Hansen Associates, 150 tems: Would you like to purchase a navi- Others 1.5% Pinehurst Rd., Portsmouth, NH 03801, gation system? Vehicle-distance 0.4% USA. Telephone: 603-431-5859. Fax: 603- Yes 75.8% detect/control system 431-5791. E-mail: [email protected]. No 24.2% All rights reserved. Materials may not be reproduced in any form without written per- mission. The Hansen Report on Automotive Automotive Semiconductor Market Share by Supplier Electronics is published 10 times a year, Total Market Calendar Year 2003: $15.21 billion monthly; July/August and December/Janu- ary are combined issues. The annual sub- Freescale, 10% scription rate is $717 (North America), $747 STMicroelectronics, 8% (elsewhere). Back issues are available for Others, 38% $50 each; see our online index at www.hansenreport.com. Paul Hansen Asso- Infineon, 8% ciates is a strategy and market research Renesas, 7% firm consulting to the electronics industry. Texas Instruments, 3% Publisher/Editor Paul Hansen Fujitsu, 4% NEC, 6% Managing Editor/ Brianne Wolfe Toshiba, 5% Robert Bosch, 6% Circulation Manager Philips Semiconductors, 5% Data: Gartner Dataquest ISSN 1040-1105

Page 2, September 2004 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com Electronics Features in New MY 2005 Vehicles Many 2005 model year vehicles have are also widely available. Even the Kia GM’s new minivans, the Saturn Relay, been delivered to showrooms already, and Spectra, an entry-level compact, uses EBD Buick Terazza and Chevrolet Uplander as more will be introduced later this month and offers optional traction control. well as the all-new Buick LaCrosse sedan. at the Paris auto show. We looked at a Side airbags or side curtain airbags are Navigation has not yet taken off in the sampling of new or redesigned 2005 mod- widely available in the sample we looked States. According to Yano Research Insti- els—sedans, compacts, minivans and at—standard in the high-end vehicles, op- tute (Tokyo, Japan) the U. S. market SUVs—to see which electronic features tional in most others. Driver and front reached just 400,000 units in 2004. are becoming more mainstream. passenger side airbags are standard in the While more high tech features such as 2005 Hyundai Tucson and Kia Spectra. New Features lane departure warning and night vision Electronic stability control was a stan- The 2005 Infiniti FX crossover brings continue to emerge on upscale vehicles, dard feature on 73 different vehicles in lane departure warning to the U.S. market sophisticated electronics features and North America in the 2004 model year, for the first time. The camera-based sys- functions are trickling down from high- according to the Electronic Stability Coa- tem, developed by Valeo and Iteris, tracks end luxury models to more high volume lition, and carmakers are bringing the fea- lane markings and uses the vehicle’s speed vehicles, especially safety features. Four- ture to more high volume vehicle lines. to determine if the vehicle is leaving the wheel ABS (antilock braking system) is For example, GM’s version of ESC, lane unintentionally. The camera signal standard on 14 of the 18 new 2005 models Stabilitrak, first introduced in the and vehicle speed are sent to the system’s we looked at and optional on the remain- Cadillac, was also available in the MY microprocessor, which calculates both the der. Traction control and electronic brake 2004 Buick, Oldsmobile and Pontiac se- distance between the vehicle and the lane force distribution (EBD), which balances dans, as well as GM’s large SUVs. For MY marking and the lateral velocity to the brake forces between the front and rear, 2005 the Stabilitrak option is expanded to lane marking. It is deactivated by the turn signal. Nissan intro- M*odel 4y-WheelABSElectronicStabilitS*ideAirbags*N*avigation/TelematicsOther Control* duced lane departure 2D005AcuraRL(Sedan)Wtithtractioncontrol,EBVsehicleStabilityAssisFlront;rearheadbagNavigation,OnStar,optionaSteeringwheelcontrols,Bluetoothwarning on the Cima trafficinfoviaXMRadiohands-freephonein Japan in 2001. PSA 2D005AudiA6(Sedan)Wmithtractioncontrol,EBErlectronicStabilityPrograFnrontandreaO;ptionalnavigatioMMImultifunctioncontrol;ACCPeugeot Citroën will adaptiveheadlights;keylessgooffer an optional lane 2l005AudiA3(Compact)WmithtractioncontroErlectronicStabilityPrograFnront,optionalforreaOsptionalnavigatioSensorsactivatelowbeam and/orwipers;electromechanicaldeparture warning sys- powersteeringtem on the 2005 C4 2l005BMW1(Compact)WlithtractioncontroDnynamicStabilityControFsrontplussidecurtaiOptionalnavigationincludeBrakeforcedisplay;optionalcoupe, which will be iDrivecontrollerBluetoothphonelinkandParkshown at the upcom- DistanceControl ing Paris motor show. 2S005BuickLaCrosse(Sedan)Optional;StandardonCXOnptionalStabilitrakonCXSOrptionalsidecurtaiOdnStaOptionalfactoryremotestartan model steeringwheelcontrolsHonda hopes its In- 2l005CadillacSTS(Sedan)WkithtractioncontroSntabilitraFnrontplussidecurtaiO,nStar;optionalnavigatioOptionalACCwithHUDtelligent Night Vision Intellibeam,factoryremotestartSystem, due this fall in 2005ChevroletUplanderTTractioncontroloptionalOeptionalStabilitrakonLFront;optionalonbasO;nStarDriverinfocenter;rearseatDVDJapan on the Honda (Minivan) model optionalPhatNoise40GBHDD digitalaudioplayerLegend (Acura RL), 2005ChryslerTown&CountryStandardexceptonbaseNyotavailableOnptionalforfrontonlOhptionalnavigatioOptionalUConnectBluetootwill help reduce acci- (Minivan)model phonelinkdents involving pedes- 2005DodgeMagnumOptionalonSE,SXT;std.ElectronicStabilityProgramOnptionalsidecurtainOhptionalnavigatioOptionalUConnectBluetoottrians. The system uses (CrossoverSUV)onRTstd.onRT,optionalonSE, phonelinkonRTmodel SXT two infrared cameras 2005FordFiveHundredTeractioncontroloptionalNrotavailablOeptionalfrontandreaNdotavailablOptionalelectronicallycontrolleto detect the position (Sedan) AWDand movement of 2005HondaOdysseyWtithtractioncontrolVnehicleStabilityAssisFnrontplussidecurtaiODptionalnavigatioOptionalrearseatDVheat-emitting objects, (Minivan) as well as to provide an 2005HyundaiTucsonOptional,withtractionNlotavailableFeront;sidecurtainoptionaNeotavailablElectronicInteractiveTorquenhanced view of the (CompactSUV)control Management 2005JeepGrandCherokeeWyithtractioncontrolOptionalElectronicStabilitOoptionalsidecurtainOrptionalnavigationradiRainsensingwipers;optionalrearoad ahead on a head- (SUV)Program seatDVD,parkassistup display. If the sys- 2D005KiaSpectra(Compact)OeptionalonXTmodel;EBNnotavailablFerontplussidecurtaiNotavailabl tem determines a pedestrian is in the 2e005MercedesCLS(Sedan)Withtractioncontrol,BrakE;lectronicStabilityProgramFrontplussidecurtainO,ptionalnavigationOptionalACC,parkassist Assist,SensotronicBrakerearbagsoptionaladaptiveheadlights,keylessgovehicle’s path, the im- Control age is framed on the 2l005SaturnRelay(Minivan)TkractioncontroloptionaOdptionalStabilitraOptionalseatmounteOynStarRearseatDVD;optionalfactorHUD and an audible bags remotestartalarm sounds. ◆ 2D005SciontC(Compact)WeithEBNeotavailablNeotavailablNotavailabl

2005ToyotaHighlanderHybridWlithEBDVdehicleStabilityControOptionalfrontbagsanOrptionalnavigationHybridSynergyDrive;optionalrea*Standard feature un- (SUV) sidecurtainseatDVDless otherwise noted. The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com September 2004, Page 3 The Company Profile... ATX Group

Thumbnail Sketch ATX Sales by Year ATX Sales and Employees in $ Thousands by Region Headquarters: 8550 Freeport Parkway, 70,000 Irving, Texas 75063 USA; telephone 972- 1999 to 2003 Annual Total 2003 Sales: $49.4 Million 753-6200; www.atxg.com Growth Rate: 116.6% Elsewhere Product: Telematics services 49,403* North (mostly 2003 Data: America, 31,614 Germany), Sales: $49.4 million, including Vodafone 86.7% 13.3% Passo sales since July 2003 14,151 Net Margin: 3.1% 1,210 3,456 Free Cash Flow: $15.6 million R&D: $1.3 million Total Employees March 31, 2004: 358 1999 2000 2001 2002 2003 2004 Customers: Mercedes-Benz and BMW (est.) drivers accounted for 97.9% of net revenues Europe, 75 North in 2003. Net Profit (Loss) in $ Thousands America, Subscribers as of March 31, 2004: 283 535,500, two-thirds of whom are paying 1999 (26.1) Subscriber Renewal Rate: About 70% 2000 (35.5) Owners*: Entrepreneur James Leininger of 2001 (24.0) San Antonio, Texas, owns 51.6%; Vodafone 2002 (6.9) ATX Employees by Job Function Deutschland GmbH owns 23.2%. 2003 1.5 Shareholders’ Deficit**: $111.1 million Total Employees March 31, 2004: 358 Employees**: 358 *Includes partial year revenues from the BMW services business of Vodafone Passo GmbH, Finance, legal, adminis- Sales Per Employee: About $139,163 which ATX purchased on July 31, 2003. tration, 37 *Fully diluted basis, as of August 23, 2004 Response center Sales and **As of March 31, 2004 Ninety-eight percent of ATX’s revenue operators, 180 marketing, 31 is earned by providing call center-based ATX Background telematics services to Mercedes and ATX Group, an independent provider BMW. ATX provides consumer services Tech support of telematics services primarily to including emergency medical and break- and integra- tion, 110 Mercedes and BMW, was founded in 1994 down assistance, automatic collision noti- in San Antonio, Texas. The company ini- fication, navigation and real-time traffic tially provided call center services and in- information. With $49.4 million in sales ATX entered the European telematics vehicle hardware for On-Guard Tracker, in 2003 and 535,500 subscribers as of service provider market with its July 2003 an early vehicle tracking service offered March 31, 2004, ATX is the world’s sec- acquisition of Vodafone Passo GmbH, an through the automotive aftermarket and ond largest telematics service provider, affiliate of Vodafone Group. U.K.-based to commercial fleet managers. In 1999, after GM’s OnStar unit in North Vodafone bought Mannesmann AG in ATX acquired Protection One Mobile America, which boasts 2.5 million sub- 2000 and combined the Vodafone Passo Services for $29.5 million and since then scribers. About two-thirds of ATX’s sub- telematics business with the telematics has focused exclusively on providing scribers are paying customers, the rest are business Mannesmann Autocom. After telematics services and systems integra- in their first year of service, which is free that, Vodafone made a $40 million invest- tion for automotive OEMs. Telematics for both BMW and Mercedes new vehicle ment in ATX, roughly 20% of equity. can be broadly defined as data communi- buyers. According to ATX, 70% of sub- When ATX bought Vodafone Passo in cations to and from a vehicle. Protection scribers renew each year. ATX defines 2003, ATX assumed responsibility for One Mobile Services had worked with renewals as the number of paying sub- BMW Assist customers in Germany and Ford Motor Co. and Motorola to develop scribers divided by the average number of the U.K. as well as an online services and the Lincoln RESCU system, the first in- subscribers in that year. a call center in Düsseldorf, Germany. vehicle emergency response system, In development are services targeted to That business is now ATX Europe GmbH. launched in 1996. RESCU integrated OEMs and dealers including connecting The remaining business operations of GPS location technology with hands-free drivers to their preferred dealer or to the Vodafone Passo, a fleet business and a cell phone communications to provide nearest dealer in an emergency and pro- traffic information service, were shut 24-hour driver assistance through live op- viding OEMs with remote access to diag- down soon after the acquisition. erators at a call center. nostics and vehicle performance data.

Page 4, September 2004 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com The Company Profile Continued

resulting from operations less cash from Audi (A4, A6, A8, Quattro), Isuzu (As- Distinctions Claimed by ATX investing activities. cender), Subaru (Outback), and ◆ Teamed with Ford and Motorola to Ninety-nine percent of ATX’s 2003 Volkswagen (Golf, Jetta, Passat, New introduce RESCU, the first in-vehicle revenues came from subscription fees paid Beetle, Touareg and Phaeton), plus telematics system in North America, by consumers. ATX expects revenues to Toyota through the Lexus Link branding in 1996. grow at the rate or 18% to 22% per year of OnStar. That leaves a small number of ◆ World’s second-largest telematics over the next three or four years. First car lines as potential customers. Never- service provider quarter ATX revenues totaled $17.4 mil- theless, over the next several years ATX ◆ World’s largest telematics service lion, $18.6 million in the second quarter. expects to get most of its sales from North provider not owned by a carmaker While the number of telematics subscrib- America. ers has grown at the rate of 35% per year While the market in North America is since January 1, 2001, ATX does not ex- considerably larger (because of OnStar) Major Competitors of ATX pect to maintain that growth for long. and more monolithic, Steve Millstein is North America: keen to expand ATX’s market in Europe, OnStar, Cross Country Group Focus on North America and Europe especially in Germany, France, the U.K., Europe: ATX serves two regional markets, Italy and Spain. So far, ATX has signifi- T-Mobile Traffic, Wireless Car, TargaSys, Western Europe and North America, pri- cant business only in Germany, where it OnStar, IMA marily the United States. Prior to the ac- serves BMW Europe. If ATX is successful quisitions of Vodafone Passo, substantially providing telematics services to BMW all of ATX’s revenues came from the outside of Germany, it can offer other The Business of Telematics United States, but in 2003, Europe ac- carmakers services in those countries as The ATX business of supplying counted for 13.3% of sales for the year well, where ATX and their customers telematics services to paying subscribers, and 24.3% of sales in the first quarter of could benefit from economies of scale. and eventually to carmakers and dealers, 2004. ATX Europe established new response requires a car equipped with a telematics In North America, there are few OEMs center facilities in Italy in September platform that can keep track of the that ATX can court for new business. 2004. As part of the acquisition, Vodafone vehicle’s location—based on GPS satellite General Motors has demonstrated 100% agreed not to render traffic telematics ser- transmissions—and communicate that commitment to its OnStar division, and vices or products to OEMs in Europe until data to a central office each time data or Chrysler has no telematics product that August 1, 2005. ATX serves Mercedes voice communication is established be- requires an outside telematics service pro- customers in North America, but it does tween the vehicle and central office. That vider. Since Ford shut down development not have Mercedes business in Europe. platform embedded in the vehicle typi- of its in-house telematics service, Mercedes in Europe is served by ATX cally costs between $200 to $250, accord- Wingcast, in June 2002, it has shown no competitor T-Mobile Traffic. ing to ATX. interest in providing telematics services to In December 2003, ATX signed an According to ATX’s S-1 financial Ford brand customers. A number of po- agreement to supply consumer telematics statement to the SEC: “ATX bills sub- tential North American OEM customers services to Peugeot in certain European scribers for the gross amount due under are already hooked up with OnStar, countries. Peugeot has not yet announced the service contract on behalf of the namely, Honda (Acura RL, CL and TL), continued on following page OEM. ATX retains the portion of the fee related to the wholesale services it per- ATX Customers forms for the OEM, and remits the re- mainder to the OEM, which is used in Customer Product Status part by the OEM to pay (communica- Mercedes-Benz TeleAid is standard on all Contract with M-B USA expires tions) carrier costs associated with deliver- USA and Canada models except C class 1st quarter 2007; written agreement ing the services. ATX recognizes as net with M-B Canada has expired and revenue the amount received from the the parties are negotiating to renew. OEM in connection with the services pro- BMW USA, Canada BMW Assist is standard Contract for the U.S. expires 4th vided.” and Europe on 5, 6 and 7 series; quarter 2005. Contract for Canada ATX has been free cash flow positive optional on other models expires 1st quarter 2005. Contract since September 2001. 2003 produced for Europe expired; new contract in $15.6 million in free cash flow and, said negotiation. Steve Millstein, ATX president and CEO, Maybach USA and TeleAid standard Contract for U.S. and Canada “We’re expecting anywhere from $10 mil- Canada expires 1st quarter 2007. lion to $15 million in free cash flow for Rolls-Royce USA Telematics standard Contract for U.S. and Canada 2004. ATX defines free cash flow as cash and Canada expires 3rd quarter 2007. The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com September 2004, Page 5 ATX Group the details of the service or when it will ATX Services to Carmakers begin. ATX is having discussions with an- other French carmaker about supplying ◆ Services currently delivered: telematics services and expects to have an Dealer connect: Automatically connects vehicle owner to preferred or nearest dealer. agreement in place within 90 days. Diagnostic data services: Provides OEMs with real-time, vehicle-specific distribution of error codes. Benefits include improvements to vehicle design, quicker trend and recall OEM Services analysis, inventory management, supply chain management, improved customer satisfaction Not content to base its future entirely through immediate roadside diagnostics. Dealers benefit from increased repair revenue, more on the consumer services market, ATX efficient service scheduling, parts inventory management and customer satisfaction. has been developing a number of OEM Performance data: OEMs get aggregated performance data for vehicle functions such as services including remote diagnostics, engine RPMs, oil temperature, tire pressure, water temperature, oil pressure, compression, speech operated owners manual and off- vacuum emissions and more. board navigation. ATX hopes the new Off-board navigation: Provides cost effective route guidance using call center-based OEM services, targeted at both carmakers servers. and dealers, will begin to kick in with ◆ In pilot testing, available for deployment today: sales in perhaps five years. OEM services Voice-activated owner’s manual: Uses hands-free voice recognition to answer consumer accounted for just one percent of ATX questions. sales in 2003. Consumer surveys/feedback: OEMs and dealers can get immediate feedback from OEM services that benefit the car consumers using interactive voice response technology. owner and help deliver improved repair ◆ Available today: services can improve brand loyalty. Col- In-vehicle marketing: Market services to consumers using text messaging with response lected diagnostics data about the perfor- choices. OEMs receive captured response information. mance of new models can also help engineers fix problems early, well before that do require a trip to the dealer. That drivers can access using voice commands. they become expensive recalls. could help dealers. “Today, only one in “This carmaker was being inundated with “Carmakers are still collecting data the four people bring their vehicle back to the calls to its customer care center from driv- same way they were doing it 50 years ago,” dealer after the warranty period has ex- ers wanting to understand how to operate said Mr. Millstein. “That isn’t going to pired,” according to Mr. Millstein. some of the electronics features in their work much longer in today’s competitive A North American transplant car- new vehicles,” explained Mr. Millstein. environment.” ATX sees promise in keep- maker (not Mercedes or BMW) is pres- “Instead of spending $25 per call using ing track of the vehicle’s mileage and the ently “scoping out” a project with ATX live operators, they will spend only 50 vehicle’s battery, so the dealer can pre- that will look at the feasibility of various cents using this speech automated emptively notify the customer to have the OE services, Mr. Millstein said. “As part telematics approach.” battery checked. Despite ATX’s readiness of a three-year program, they have asked to collect vehicle data on behalf of us to come up with a suite of applications Speech Recognition carmakers and dealers, vehicles haven’t based on existing [vehicle] hardware that ATX has been developing speech rec- been designed to provide access to a lot of can improve their warranty costs, improve ognition systems to improve the experi- data. That would require significant archi- dealer economics and improve customer ence that drivers have with the response tectural changes to the vehicle, changes service,” he explained. “That’s due at the center. Rather than embedding the recog- that would take years to implement. end of the year. Phase two asks what are nition system in the vehicle, ATX be- ATX believes that because it already the things we can do that the [vehicle] lieves that speech recognition systems provides consumer services to Mercedes hardware can’t?” ATX will not be paid for should reside in the response center serv- and BMW vehicle owners, it can make a the project. ers, which have plenty of computing strong business case to expand into OEM ATX thinks it will have an advantage power and enough memory to store all the services. “They have already made the over OnStar when it comes to collecting vocabulary needed. Another advantage of investment in telematics; it’s already [em- and distributing diagnostic and other data centrally located speech recognition is bedded] in their vehicles,” said Mr. on behalf of carmakers. “Given that that with the help of human program- Millstein. For example, ATX believes that OnStar is owned by General Motors, you mers, they can adapt to the way people carmakers could save money on warranty have to wonder if Honda’s data would fall actually speak. Over time they get better costs if consumers could be reassured by a into the hands of GM,” cautioned Gary and better. call center that a problem they are experi- Wallace, vice president for corporate rela- ATX currently employs speech recog- encing is not serious and that a trip to the tions. “That would never happen if ATX nition to automate the routing of calls dealer isn’t necessary right away. On the was collecting the data.” from the vehicle. In the Mercedes system, other side of the coin, the call center ATX is in final testing with Mercedes drivers can be routed to traffic informa- could advise customers of real problems of a spoken-audio owners manual, which tion, a concierge, to their dealer, and

Page 6, September 2004 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com The Company Profile Continued other services by speaking the key words “traffic,” “concierge,” “dealer,” or other ATX Services to Vehicle Owners key words. Type of Service Area of Operation ATX is presently demonstrating a rec- Location-based emergency and breakdown assistance North America, Europe ognition system that does what many Automatic collision notification North America, Europe people consider to be the most difficult Stolen vehicle recovery North America automotive speech application—destina- Voice navigation North America tion entry. Like automated telephone di- Destination/points of interest downloads Europe rectory information systems, the ATX Real-time traffic information North America, Europe system involves an operator in the recog- Electronic owner’s manual Pilot testing in North nition process to help clarify the correct America address when the system is unable to do it Concierge North America automatically. Usually operating behind Remote door unlock North America the scene from a computing console, the Connection to customer service representatives North America, Europe operator either does nothing, clicks on to update customer profile, change emergency contact the right word from a list of probable information, billing and other questions words or clicks and types what she hears. Consumer-based website lists available services, North America “The key advantage of the system is that FAQs, access to billing information the driver only has to speak the address one time,” said Thomas Schalk, vice vide services with other carmakers. We 23, 2004 closed at an all-time high of president, voice technology at ATX. “An- want OEMs and we want subscribers.” $32 per share. ◆ other advantage is that the operator’s time ATX is particularly interested in busi- is reduced by a factor of ten, relative to an nesses that serve consumers in Italy, Ger- operator working without speech recogni- many, the U.K., France and Spain. “In Thumbnail Sketch tion.” Once the correct address is entered, North America there are only two provid- the infrastructure-based navigation system ers,” noted Mr. Millstein. “In Germany ATX Europe GmbH (formerly Vodafone delivers the directions by automated alone there are three. The European mar- Passo GmbH) speech. The system will be ready for com- ket is very fragmented with too many sup- Headquarters: Hansaallee 249, D-40549 mercial applications in two to three years. pliers.” Düsseldorf, Germany Had the IPO been completed, Dr. FY 2002* Revenues: €31.3 million ($38.5 IPO Withdrawn Leininger’s and Vodafone Deutschland’s million) On March 9, 2004, ATX announced it positions would have declined from 51.6% FY 2002* Operating Loss: €5.2 million had filed a registration statement with the to 35.9% and from 23.2% 21.7%, respec- ($6.4 million) U.S. Securities and Exchange Commis- tively, due to dilution of value resulting FY 2002 net loss: €5.0 million ($6.2 million) sion in advance of an initial public offer- from the additional 5 million newly issued Calendar 2003 revenues: €7.2 million ing (IPO). On July 7, 2004 the company shares. ($8.9 million) announced that it had commenced mar- ATX had intended to use the IPO Employees: 75 keting of 5 million shares of common funds to repay outstanding principal under Quarterly sales (quarter ending stock (22.6% of the company) at an esti- a line of credit provided by Dr. Leininger, June 30, 2003): €3.3 million ($4.0 million) mated price of $14 to $16 per share. That to make the €6.0 million ($7.4 million) Shareholder Equity as of June 30, 2003, would have valued the company at be- deferred payment obligation incurred in unaudited: €7.5 million ($9.2 million) tween $310 million and $354 million, if the acquisition of Vodafone Passo and use Products: Telematics services and traffic those prices held up in trading. By July 28, the balance for general purposes, includ- information services 2004 the company decided to withdraw its ing business development. Customer: BMW Europe (BMW Assist in IPO, citing adverse market conditions. ATX is not the only company to walk Germany primarily, and also in the U.K.) “The bankers were comfortable, but they away from an IPO because of low valua- had to lower their share price estimates by tions. According to The Wall Street Jour- ATX acquired Vodafone Passo from € about 20%,” explained Steve Millstein. nal, between June 1, 2004 and August 19, Vodafone Group Plc in July 2003 for 18.1 € ATX spent $1.25 million on its attempted 2004, 38 companies withdrew or post- million ($22.3 million), including 12.1 IPO and has no plans to try again. poned their IPOs. Incongruously however, million ($14.9 million) in cash paid on July Even without the IPO and the influx of Navteq, which provides digitized map 31, 2003 and a deferred payment obligation € funds it would have provided, Mr. data to navigation and telematics markets of 6.0 million ($7.4 million) due June 30, Millstein believes there is enough money in Europe and North America, fared much 2006. to make other acquisitions: “We are most better. Navteq was IPO’d on August 6, *Vodafone Passo’s 2002 fiscal year ended interested in making acquisitions to pro- 2004 with a $22 offer price and on August March 31, 2003.

The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com September 2004, Page 7 iDrive... Continued from page 1 tions and operates with just four different solution that looks nearly—perhaps tions), Telephone, Navigation, Informa- slide positions, north, south, east and 90%—like the solution in our 7 series,” tion, Car and Setup. west. With the second generation, a menu said Mr. Broede. Mr. Pfunder added, “It is Getting from the navigation menu to button was introduced so you can quickly the right solution. People don’t copy the radio menu is far less complicated find your way back to the main menu. something that is bad.” with MMI than with iDrive, which BMW engineers also made some software doesn’t provide hard keys for different changes, for example, to make program- MMI parts of the menu. Rather, on iDrive the ming the radio stations easier, and the Volkswagen Group is getting high multifunction knob must be slid to one of graphics were improved. The newer praise for its MMI device. “One of the eight (or four on the newer version) unla- iDrive benefits from a head-up display, finest computing devices ever to roll off beled positions. which puts some information in the the assembly line,” writes pcmag.com. Another advantage of MMI is the way driver’s field of view. “You play with “A ‘just right’ approach to mixing dials, it functions in concert with the slide-out iDrive for a short time and you get it. You buttons and LCD menus,” declares display, which is positioned atop the cen- know what direction you shift the con- edmunds.com. Audi calls MMI “the most ter stack. The display’s graphics mimic the troller to access a certain function,” said innovative command system on the mar- layout of the multifunction switch panel. Mr. Broede. ket,” in advertisements in upscale maga- “When you look at the display screen you While HUDs are part of the 5 and 6 zines. will find a circular design in the center series iDrive, they will not be part of an The MMI control panel is located on that indicates the rotary [knob],” ex- updated iDrive system on the 7 series, the center console between the gearshift plained Volkmar Tanneberger, responsible which will come to market probably in lever and the center armrest. Centered in for the development of functional elec- 2006, when the platform gets updated. the panel is a round aluminum dial con- tronics at Volkswagen Group. “You will BMW is unable to integrate an HUD in trol that can be turned or pushed. Four also see on the display the four soft the current 7 series. The latest iDrive for soft switches surround the dial, one at switches with a description of their cur- the 7 will be the same in principle as the each corner. Below the knob are three rent functionality.” According to Dr. first generation, but it will be more conve- switches: forward, reverse and a “return” Tanneberger, the rotary control itself is nient, more comfortable to use and will key, which functions like the escape key superior to the one used in iDrive. “The operate a little bit faster, according to on a PC. On each side of the panel are knob provides precise haptic feedback BMW. four hard switches, which immediately where each click of the dial yields a corre- iDrive or its ilk will be around for some bring you to specific menus: Radio, CD/ sponding result shown on the display,” he time. “If you look at the spy pictures of TV, Name (address book for storing tele- explained. ◆ the new Mercedes S class, you will see a phone numbers and navigation destina-

Convergence... Continued from page 1 president of powertrain development at takes a more cautious approach to elec- neering organization did develop Roll Sta- BMW. “So powertrain is close to my tronics. “Back-to-basics is about quality bility Control. “Once we figured out that heart,” he said. BMW’s Dieter Bergmann and affordability,” declared Dr. Schmidt. this is really outstanding technology, we has organized the Powertrain session for “We will not compromise quality. Where partnered with Volvo and introduced it Wednesday morning. Six technical pa- it is necessary we introduce [leading edge on the 2003 XC90 sport utility vehicle,” pers will be presented. electronics] but where it is maybe nice to said Dr. Schmidt. “We developed the al- “We have six highly-ranked and very have but not necessary, we go at another gorithms and associated software and qualified keynote speakers,” noted Dr. pace,” he said. implemented the electronics.” Ford Schmidt. Three of those speakers, one “For me electronics is just a tool to worked with Continental Teves on the representing a major supplier and two deliver safe vehicles that don’t damage system, which makes the gyroscopic roll from OEMs are well known to him: Franz the environment,” said Dr. Schmidt. “I stability control sensor. The sensor detects Fehrenbach, CEO of Bosch, Carl-Peter use electronics to make this happen. I when the vehicle begins to roll and sends Forster, chairman of Adam Opel, and don’t want another 90 additional ECUs a signal to the electronic stability control William Clay Ford, chairman of the in our cars just to be number-one in elec- system, adjusting traction and individual board and CEO of Ford. tronics.” Roughly 50% of Dr. Schmidt’s brakes to bring the vehicle under control. organization is devoted to powertrain en- The system is presently available on the Ford Back to Electronics Basics gineering and research. 2004 Lincoln Aviator and Navigator and Unlike Mercedes, BMW and GM, While Ford is careful to avoid unnec- will also be available on the 2005 Ford which often pioneer with leading edge essary electronics complexity, Dr. Explorer, Ford Expedition and Mercury electronics, Ford’s back-to-basics focus Schmidt’s research and advanced engi- Mountaineer. ◆

Page 8, September 2004 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com