ibm smarter mobility presentation jens diehlmann

WelcomeThe webinar will begin momentarily

Peter Brown

Publisher

Automotive News

Jens Diehlmann

Partner – IBM Global Business Services

IBM

Daniel Delos

Partner – Strategy & Transformation

IBM

© 2011 IBM Corporation

Captive Finance: The core enabler of the next automotive growth model

Jens Diehlmann & Daniel Delos

May 24th, 2011

IBM Global Business Services

Let‘s build a smarter planet



Who is Jens Diehlmann?

Jens Diehlmann is a Partner at IBM Global Business Services in Germany leading the Captive Automotive Banking Team. In addition, he is a leading Subject Matter Expert and is globally responsible for the IBM‘s Consulting Business across all captive finance companies.

Mr. Diehlmann has over 15 years of experience in Banking &

Financial Services and has worked for over 10 years as a

Strategy Consultant for captive finance companies.

During his career, he advised clients on Business and

Operations Strategy, Leasing & Finance and Bank set-up.

Mr. Diehlmann is a co-author of the book “Automotive

Management – Navigating the next decade of auto industry

transformation“ which was released in June 2010.



Who is Dan Delos?

Daniel Delos is an IBM Strategy & Transformation Partner with

IBM Global Business Services leading the Innovation & Growth

services area within the Industrial sector, managing the IBM

relationship with multiple Automotive clients and heading the

Americas Captive Finance competency.

Mr. Delos is responsible for thought leadership, offering

development and staff productivity across the Business

Strategy, Technical Strategy and Market & Customer

Management Strategy domains. This practice area leverages

IBM assets, services and Smarter Planet offerings to help

companies transform in the areas of M&A, Shared Services,

Market Entry Strategies, Sales Transformation, Service

Transformation, Captive Finance, Marketing Analytics and

Smarter Commerce.



Agenda

1 Key Market Trends and Issues Challenging Captive Finance Executives

2 Key Findings of IBM‗s 2010 Global Advance Mobility Study

3 Navigating through the Complexity of Advanced Mobility



Captive finance organizations are manufacturer-affiliated financial services providers offering original and derivative financial solutions

Tasks:

Acting as OEM‘s sustainable growth

driver and sales support to:

- stabilize corporate results

- promote vehicle sales

- increase customer loyalty

Product/service portfolio is directly

or indirectly related to vehicles:

- leasing and loan for passenger cars

and commercial vehicles

- wholesale finance

Unique role and strength:

Serving as OEM‘s

point of sale integrator

Profile of

captive finance companies

Captive finance companies Non-captive finance companies

Source: Automotive Management – Navigating the next decade of auto industry transformation, December 2010



In mature markets, captive finance companies are increasingly advancing towards the automotive banking approach

Diverse approaches for captive finance companies to pursue business

Source: Diehlmann / Häcker: Automotive Management – Navigating the next decade of auto industry transformation, December 2010



Status quo for automotive finance

After the economic downturn in 2008 and 2009, the entire car industry has bounced back at full speed.

Booming car sales in China have positively influenced the results of global manufacturers.

The entire industry has had a peak year with 61.7 million car sales in 2010 which is about to continue to 20111).

Leasing and Financing is growing in emerging markets where a growing middle class is gaining more prosperity and thus, demanding more services.

Captive Finance organizations follow their manufacturer in growth marketsto establish own operations.

More and more focus is placed on innovative mobility concepts as stricter CO2 emission regulations force manufacturers to develop new business models and consumers to rethink their mobility demand.

Electric vehicles are gaining ground and most OEMs have models on the market or to be launched soon. However, it will still take some time until this trend will take off.

The entire automotive industry and its financing business has survived the economic crisis well and has established itself again as one of the strongest and profitable industries at all.

1) German Association of the Automotive Industry (VAD), January 2011



After the economic downturn, new challenges are awaiting captive finance companies

Residual value

management and

increasing used car

inventory

Stagnating

car sales in

mature markets

Booming

car sales in growth

and emerging markets

Blind spots

in meeting today‘s

consumers ever-

evolving needs

Rising

operating costs

due to decentralized

and outdated IT

infrastructure

Sophisticated

consumers are

increasingly

demanding new

mobility and

ownership models



Battlegrounds in the passenger car market is further shifting away from Triad markets

Sales and production of passenger cars by region, 2000 – 20251) (m units)

1) 2025 Figures are estimations

2) BRI countries include Brazil, Russia, India, China

3) Triad markets are North America, Western Europe and Japan

Sales

86

59

44

3

21

32

11 15

5 9 86

2000 2010 2025

80

5344

3

2231

6

11 14 11

1411

2000 2010 2025

Other (2.8)

BRI 2) (12.4)

Triad 3) (0.4)

Source: Roland Berger

Production

Other (2.8)

BRI 2) (12.8)

Triad 3) (0.2)

57 69 114 57 69 114

China (6.8)China (6.7)

(CAGR %)(CAGR %)



IBM is the only global consulting company with a team dedicated and spezialized in captive finance

IBM‟s global

automotive banking and mobility engagements

The IBM Automotive Banking team has

discussed and worked globally with CEOs

to identify and develop new mobility

business models

IBM has developed an in-depth

understanding in supporting clients along

the automotive value chain in mature and

growth markets

IBM acts as strategic relationship partner

and incubator for materializing new mobility

concepts in the context of its Smarter

Planet Campaign

Cooperations with diverse stakeholders of the globally extended automotive ecosystem allows

IBM‗s Automotive Banking Team to make valuable contributions to advance sustainable road

mobility.



The IBM Automotive Banking services portfolio is well-equipped to support captive finance executives in paving the future avenue to growth

Automotive

Banking

Captive Finance Strategy

New business opportunities

Business model innovation

Business transformation outsourcing

Target operating model

New Intelligence

Residual value & used car management

Captive finance performance analysis

Data management & business analytics

Operating Model &

Process Optimization

Process optimization & harmonization

Shared service centers

Information Technology

Target IT architecture

Document management

Auto finance software vendor selection

Application management

Market Entry

Strategy development & implementation

Feasibility study

Reference process maps for business

operations and system evaluation

New Mobility Services

New mobility concepts

Smarter transportation

Financing options for alternative

vehicles

Automotive Banking



This is changing the entire way products are sourced, manufactured and distributed—and making business more complex than ever.

Customerexpectations of service, price and delivery is soaring.

Customers now have unlimited access to information and can instantly share it with the world

Social networking and mobile commerce have dramatically changed the dynamic between buyer and seller.

We have entered the age of the empowered customer

155 millionNumber of tweets sent via Twitter each day

75%Percentage of people who believe companies don’t tell the truth in advertisements

$93 billionAmount in sales missed due to out of stock inventory



Power has shifted to the customer — compressing margins and changing paradigms

Understand and

anticipate

customer

behavior and

needs based on

customer

insights across

all channels

Adapt sourcing and

procurement based

on customer

demand and

optimize supplier

interactions across

extended value

chains

Market, sell and

fulfill the right

product and service

at the right price,

time and place

Service

customers

flawlessly,

predict and

drive customer

loyalty

In this new era, businesses need to:



Smarter Commerce focuses on three dimensions centered around the customer

Customer

You need an approach that

allows you to more effectively

connect, collaborate, conduct

commerce and create a

differentiated customer

experience

In today‘s world of instant

business, you need deep

insights, in real-time that you

can turn into immediate action

Customer InsightIn turn, you must re-think how

your customers define

value, and the changes you

must make to your value

chain so you can deliver

exactly what your customers

want - profitably

Customer Value Strategy

Customer & Partner Engagement

…increasing the value companies generate

for their customers and partners in a

rapidly changing digital world



IBM Confidential

Businesses are rapidly adopting Social Media to ―be in touch‖ with their customers, but customers often engage for different reasons

Source: From Social Media to Social CRM, IBM Institute for Business Value Analysis, 2011. n=339

Key reasons cited for engaging in social

media relationship with a business

Percentage of Companies with a Profile or

Presence on a Type of Social Site

Company

Customer

Avoid being perceived as ―out

of touch‖

Attract top employees

Missed sales opportunity

Competition being more

successful in reaching

customers

Promotions, coupons, savings

or some other form of benefit

Positive brand association

Lifestyle choice and simplicity

Vs.



Capabilities Framework Evaluation

Realization Roadmap

Establish The Vision

Channel Assessment

IBM has developed a Smarter Commerce Multi-Channel Business Value Assessment to help clients answer the following question…

―Are your Marketing and Sales organizations effectively and efficiently delivering the right products, services and experiences to the right customers across preferred channels?‖

Sales & Channel Process OptimizationEvaluation of the current state of sales execution effectiveness and efficiency through cost-to-serve model.

Customer / Account SegmentationIdentification of key areas of marketing and sales opportunities through the assessment of customer behaviors, products and channel preferences.

Customer Experience AssessmentEvaluation of the cross-channel user experiences using proven cross-industry practices and innovations. Evaluation of your digital presence including web, mobile and social leveraging our assessment tool that features an extensive

database of online capabilities and leading practices.

Marketing Process OptimizationAnalysis of current marketing operational capabilities, including analytics, campaign effectiveness management and channel capabilities.



Besides our operating business, IBM is aggressively investing in further developing intellectual property and shaping the development of future-oriented mobility services

Intellectual propertyNew mobility concepts Strategy and education

“Advancing

Mobility

Study 2010”

„Global CEO Strategy Workshops

for new mobility solutions““Electric taxis in

China‟s mega-cities”

“Project Edison”

European research project for the

set-up of intelligent e-vehicle

infrastructure

“Automotive Management”

Navigating the

next decade of

automotive

Industry

transformation

“Truck 2020

Study 2009”

IBM

IBM

„CEO Study 2010“

E-Mobility and the impact on

Captive Finance Companies

Thesis



Agenda


2 Key Findings of IBM„s 2010 Global Advance Mobility Study




123 executive interviews

18 countries

Others (outside of OEM) include: academia,

government, service integrators, venture capitalists,

mobility consultants and fleet operators

Interviews by Industry Segment

27%OEMs

17%Captive

Finance

10%Suppliers

5%EV Mfg

3%Car Share

7%Energy

12%Others

7%Government

3%Ind. Groups

10%Telematics

Traditional Auto InfluencersNew Mobility

Together with IBM Institute for Business Value (IBV), the Automotive Banking Team launched a global study on future-oriented mobility by looking outside the traditional automotive value chain



The most important findings can be summarized as follows:

Rethinking mobilityTransforming how people move about is among the most complex

struggles for cities, businesses and citizens. The economic, social and

environmental concerns of mobility are forcing new ideas on providers.

Auto companies make

vehicles

Although automotive companies will need to develop mobility solutions,

they cannot lose sight of the need to develop technology-packed,

intelligent vehicles at competitive prices.

Thinking outside the

vehicle

New packages need to be developed for all major customer segments

that establish automakers‘ stake in providing mobility solutions.

Automakers have assets that can be leveraged to protect their interests.

Partners, competitors

and alliances

Who are partners and who are competitors? More often these will be

the same. The partners needed to assemble innovative solutions will

also be positioning themselves to control customers and their wallet.

Finance becomes the

new core

Mobility solutions require that finance companies become the core

enabler to simplifying the way that consumers want to move. The

integrating feature across partnerships will be homogenous transactions.



Automakers will have to reinvent their business models to cater to a new market segment of consumers who are not tied to individual vehicles

Not an attractive

business model

More than 50%

About 25%

How many consumers would be willing to give

up their personal vehicles? provided sufficient subscription mobility services exist

14%

50%

0%

Very few 36%

Source: Advance Mobility Global Interviews (n=42), IBV Analysis,

“The most important step is to enable consumers to move from ownership of vehicles to selling a subscription to them as needed”

–European Auto OEM

It is expected that future customers will

demanding more flexible mobility solutions

Subscription mobility could provide that

flexibility:

–Consumer may give up vehicles altogether

–They could choose to have less vehicles as

they pursue an ownership model based on

their everyday needs



People across age groups are finding it difficult to own a car and choosing to drive less for a number of reasons, with ‗Millennials‘ topping the list

55 years or older

18-34 years old

35-44 years old

45-54 years old

Somewhat AgreeStrongly Agree

In the past year, I have

consciously reduced

how much I drive, and

instead took alternative

transportation

With access to social

networking sites, I

choose to spend time

online with friends

instead of driving to

meet them

I want to protect the

environment, so I drive

less.

45%

40%

24%

31%

54%

46%

18%

34%

45%

39%

42%

37%

Source: Zipcar Millenials Survey (n=1025), 2010

Alternative Transportation defined as carpooling, public transportation or bicycle

In today‘s economy, it

can be difficult to own

a car because of the

high cost of gas,

parking and

maintenance

80%

71%

68%

76%

35% 16% 23% 16%



For automakers to exploit new business opportunities, they have to think outside the vehicle in order to cater consumers who are moving away from owning a car to using mobility solutions

Vehicles Cashless PackagingMulti-modal Transportation

Service Integration

Daily vehicles

Subscription vehicles

Insurance

Tolls

Parking

Electricity

Security

Connectivity

Other in-vehicle

purchases

Solutions beyond the vehicle such as

location-based services or event services

Optimization and guidance across modes

Integrated cashless process

“Auto companies often view mobility through the lens of just the vehicle, not the consumer"

–US Automotive OEM



The alliances to enable mobility solutions must start between the OEMs and their finance companies

“Financial services do not drive change but have to be ready when

Brand Partners require them”– European Captive Finance

“We’ve spoken to several finance companies, but have neglected to

consider our own ”– US Automotive OEM

OEM View Captive Finance View

…Automotive finance companies should be

natural partners for enabling mobility solutions

“There is no clear decision-making structure in the company that brings us together”

– European Captive Finance Executive

Many OEMs are seeking partners to pilot

new ideas, but have not approached their

own finance companies

Captive finance companies are waiting

to take direction from the OEM and

don‘t feel in a position to lead



The changing environment will require enhancements in the existing customer interaction to leverage the benefits

How will the future mobility consumer

change the ownership model?

What kind of financing models are

required to meet the challenge of bundling

mobility solutions into attractive consumer

services and enabling its deployment across

partners?

How and to which degree will today‘s vehicle

market structure change in face of

increasing acceptance of new mobility

solutions?

How can access and simplicity be

provided to consumers of new mobility

solutions despite increasing complexity in

enabling mobility?

To what extent will the

new economic environment be different?

To a large/very large extent

To some extent

In our recent CEO study we asked…

Source:2010 Global CEO Study/ Automotive, 2010., Advance Mobility Global Interviews (n=55), IBV Analysis

61% 16%Structurally

different

Sustained change

"In the next 10 years we will have

more change than in the 50 years before"

–European Automotive OEM, 2008

IBM Automotive 2020 Study



Instrumented

Monitoring and maintaining the

integrity of the automotive supply

chain while creating vehicles that

can measure their own health

and sense their surroundings.

Interconnected

Applying sophisticated

devices to connect consumers

and vehicles to a broader

transportation system that

encompasses roadways, energy

sources, governments and more.

Intelligent

Transforming raw data

into critical insight for quickly

and accurately responding to

changes and achieve better

results through prediction

and optimization

a

IBM Advanced Mobility Services

Car sharing eMobilityCar on demand Fleet Management Intermodal travel

Advancing mobility demands new ways of operating and calls for IBM‘s Smarter Planet Solutions

is an integral part of IBM‟s Smarter Planet Strategy



Watson represents out latest groundbreaking innovation in IBM‘s Business Analytics and Optimization solutions

Watson is a computing system

that rivals a human‘s ability to answer

questions posed in natural language,

interpreting meaning and context and

retrieving, analyzing and understanding

vast amounts of information in real-time

Watson represents a culmination of

IBM‘s century-long dedication to research and innovation.

This same investment in research is driving the creation of new

Business Analytics and Optimization capabilities, allowing the

innovations from Watson to be applied to solve business and societal

problems – for example, diagnosing disease, handling online technical support

questions, and parsing vast tracts of legal documents - and to drive progress

across many industries.



Agenda


2 Key Findings of IBM‗s 2010 Global Advance Mobility Study




Fleet Operator Utilities GovernmentOEMs &

Suppliers Insurance Service Provider

As an enabler, IBM is capable of turning the vision of smarter mobility concepts into reality by means of business analytics and optimization

Mobility-as-a ServiceCar on

DemandCar SharingIntermodal

travel

Stakeholder

Pay as you Use

ConciergeServices

IBM Advanced Mobility Service Hub

Core Services In

frastr

uctu

reS

yste

m In

tegra

tion

Backend Systems

User Devices

Road Side Devices

„Always On― Vehicle Connectivity

Value Added Services

Connected Vehicle Marketplace

EV ChargingStations

P

Vehicle Data Collection

3rd Party Data Integration

Data AnalyticsMaster Data Management

B2B Service Management

Device Management

Security & Privacy Mgmt

Remote Diagnostics

EV Services

Fleet MgmtServices

Car Sharing Services

VehicleTracking

ModalityServices

Location based services

Usage based Insurance



OEM„s

app

A 360° view of consumers has increasingly become a precondition in successfully targeting today‘s interconnected consumers

Customer data

management becomes

essential in achieving:

360° customer view

Consumers are globally connected



Today‘s sophisticated consumers demand new mobility solutions which replace or extend the use of their personal vehicle

Parking

Subscription fleetLocation-based

Services

Multi-modal Transport

Event Service

Travel Service

MobilitätMobility



Decision Optimization &

Automation

Recommend the

most appropriate

action to take

People & Business &

Enterprise Data Sources Store new data on

customers, sales, etc.

for continuous

improvement

Business

Analytics and

Optimization

Analyze all forms

of data to provide

insight and

predict the future

Capture

Predict

Act

Sales Data

Customers Surveys

Transactions

Suppliers Web Logs360

°

Attract ―best‖ customers

Target customers:

cross-sell, up-sell, retention

New product releases,

product adoption

Grow customer value

Retain profitable customers

Leverage

the power of

information by

applying business

analytics and

optimization to customer

data management

Blind spots need to be removed for delivering new value and improved lifestyle experience meeting consumers‘ ever-evolving mobility needs and wants



We have only just begun to uncover what is possible on a smarter planet

The main question remains

to be answered:

Who will be the first to

drive and thriveon the new avenue for growth

in a smarter mobility industry


Thank you for your attention

Thank You

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