Ibm Smarter Mobility Presentation Jens Diehlmann

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Peter Brown
Publisher
Automotive News

Jens Diehlmann
Partner – IBM Global Business Services
IBM

Daniel Delos
Partner – Strategy & Transformation
IBM

IBM Global Business Services

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

Jens Diehlmann & Daniel Delos
Let‘s build a smarter planet
May 24th, 2011

© 2011 IBM Corporation


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

Profile of
captive finance companies

 Tasks:
Acting as OEM‘s sustainable growth Captive finance companies Non-captive finance companies
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

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 markets
to 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

Stagnating
car sales in
mature markets
Residual value
management and Booming
increasing used car car sales in growth
inventory and emerging markets

Rising Sophisticated
operating costs consumers are
due to decentralized increasingly
and outdated IT demanding new
infrastructure mobility and
Blind spots
in meeting today‘s ownership models
consumers ever-
evolving needs



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)

Sales Production

57 69 114 57 69 114 (CAGR %)
(CAGR %)
5 8
11 11 Other (2.8) 9 Other (2.8)
14 6
3 11
6 15 China (6.7)
3 11 14
China (6.8)
21
22
31 BRI 2) (12.4) 32 BRI 2) (12.8)

86
80

59
53
44 Triad 3) (0.4) 44 Triad 3) (0.2)

2000 2010 2025 2000 2010 2025

1) 2025 Figures are estimations Source: Roland Berger
2) BRI countries include Brazil, Russia, India, China
3) Triad markets are North America, Western Europe and Japan


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

IBM‟s global  The IBM Automotive Banking team has
automotive banking and mobility engagements 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. © 2011 IBM Corporation


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

Captive Finance Strategy

 New business opportunities
Operating Model &  Business model innovation
Market Entry
Process Optimization  Business transformation outsourcing
 Target operating model  Strategy development & implementation
 Process optimization & harmonization
 Feasibility study
 Shared service centers
 Reference process maps for business
operations and system evaluation

Information Technology Automotive Banking
New Intelligence
 Target IT architecture Automotive
 Document management  Residual value & used car management
Banking
 Auto finance software vendor selection New Mobility Services  Captive finance performance analysis
 Application management  Data management & business analytics
 New mobility concepts
 Smarter transportation
 Financing options for alternative
vehicles



We have entered the age of the empowered customer

Customers now have Social networking and Customer This is changing
unlimited access to mobile commerce expectations of the entire way
information and can have dramatically service, price and products are sourced,
instantly share it with changed the dynamic delivery is soaring. manufactured and
the world between buyer and distributed—and
seller. making business
more complex
than ever.

155 million 75% $93 billion
Number of tweets sent Percentage of people who Amount in sales missed due
via Twitter each day believe companies don’t tell to out of stock inventory
the truth in advertisements


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

In this new era, businesses need to:

Understand and Adapt sourcing and Market, sell and Service
anticipate procurement based customers
fulfill the right
customer on customer flawlessly,
product and service predict and
behavior and demand and
at the right price, drive customer
needs based on optimize supplier
time and place loyalty
customer interactions across
insights across extended value
all channels chains



Smarter Commerce focuses on three dimensions centered around
the customer
Customer Value Strategy
Customer Insight
In turn, you must re-think how
your customers define
In today‘s world of instant
value, and the changes you
business, you need deep must make to your value
insights, in real-time that you chain so you can deliver
can turn into immediate action exactly what your customers
want - profitably

Customer & Partner Engagement Customer

You need an approach that
allows you to more effectively
connect, collaborate, conduct …increasing the value companies generate
commerce and create a for their customers and partners in a
differentiated customer rapidly changing digital world
experience



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

Percentage of Companies with a Profile or Key reasons cited for engaging in social
Presence on a Type of Social Site media relationship with a business

Company  Avoid being perceived as ―out
of touch‖
 Attract top employees
 Missed sales opportunity
 Competition being more
successful in reaching
customers
Vs.

Customer  Promotions, coupons, savings
or some other form of benefit
 Positive brand association
 Lifestyle choice and simplicity

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


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?‖

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

Marketing Process Optimization
Analysis of current marketing operational capabilities, including analytics,
campaign effectiveness management and channel capabilities.
Establish
Sales & Channel Process Optimization Realization The Vision
Evaluation of the current state of sales execution effectiveness and Roadmap
efficiency through cost-to-serve model.

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



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

New mobility concepts Intellectual property Strategy and education

“Electric taxis in „Global CEO Strategy Workshops
China‟s mega-cities” for new mobility solutions“
“Advancing
Mobility
Study 2010”

IBM
E-Mobility and the impact on “Automotive Management”
Captive Finance Companies Navigating the
“Project Edison” next decade of
European research project for the automotive
Thesis
set-up of intelligent e-vehicle Industry
transformation
infrastructure

„CEO Study 2010“
“Truck 2020
IBM Study 2009”



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



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

Interviews by Industry Segment

3%
7% Ind. Groups
Government
27%
12% OEMs
Others

7%
Energy
3%
Car Share
5% 17%
EV Mfg Captive
10% Finance
 123 executive interviews Telematics 10%
 18 countries Suppliers
 Others (outside of OEM) include: academia,
government, service integrators, venture capitalists,
mobility consultants and fleet operators Traditional Auto New Mobility Influencers



The most important findings can be summarized as follows:

Transforming how people move about is among the most complex
Rethinking mobility struggles for cities, businesses and citizens. The economic, social and
environmental concerns of mobility are forcing new ideas on providers.

Although automotive companies will need to develop mobility solutions,
Auto companies make
they cannot lose sight of the need to develop technology-packed,
vehicles intelligent vehicles at competitive prices.

New packages need to be developed for all major customer segments
Thinking outside the
that establish automakers‘ stake in providing mobility solutions.
vehicle Automakers have assets that can be leveraged to protect their interests.

Who are partners and who are competitors? More often these will be
Partners, competitors
the same. The partners needed to assemble innovative solutions will
and alliances also be positioning themselves to control customers and their wallet.

Mobility solutions require that finance companies become the core
Finance becomes the
enabler to simplifying the way that consumers want to move. The
new core 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

How many consumers would be willing to give
up their personal vehicles?
provided sufficient subscription mobility services exist

More than 50% 14% It is expected that future customers will
demanding more flexible mobility solutions
Subscription mobility could provide that
About 25% 50% flexibility:
–Consumer may give up vehicles altogether
–They could choose to have less vehicles as
Very few 36% they pursue an ownership model based on
their everyday needs

Not an attractive
business model 0%

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



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

In today‘s economy, it In the past year, I have With access to social I want to protect the
can be difficult to own consciously reduced networking sites, I environment, so I drive
a car because of the how much I drive, and choose to spend time less.
high cost of gas, instead took alternative online with friends
parking and transportation instead of driving to
maintenance meet them

18-34 years old 35% 80% 16% 45% 23% 54% 16% 45%

35-44 years old 71% 40% 46% 39%

45-54 years old 76% 31% 34% 37%

55 years or older 68% 24% 18% 42%

Strongly Agree Somewhat Agree
Source: Zipcar Millenials Survey (n=1025), 2010
Alternative Transportation defined as carpooling, public transportation or bicycle



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

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

Vehicles Multi-modal Transportation Cashless Packaging

 Insurance  Security
 Tolls  Connectivity
 Parking  Other in-vehicle
 Electricity purchases

Daily Subscription
vehicles vehicles

Service Integration

 Solutions beyond the vehicle such as
location-based services or event services
 Optimization and guidance across modes
 Integrated cashless process



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

OEM View Captive Finance View

“We’ve spoken to several finance “Financial services do not drive
companies, but have neglected to change but have to be ready when
consider our own ” Brand Partners require them”
– US Automotive OEM – European Captive Finance

Many OEMs are seeking partners to pilot Captive finance companies are waiting
new ideas, but have not approached their to take direction from the OEM and
own finance companies don‘t feel in a position to lead

“There is no clear decision-making structure in
the company that brings us together”
– European Captive Finance Executive

…Automotive finance companies should be
natural partners for enabling mobility solutions


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

In our recent CEO study we asked…

To what extent will the
new economic environment be different? How will the future mobility consumer
change the ownership model?
Structurally
61% 16% different
Sustained change How can access and simplicity be
provided to consumers of new mobility
To a large/very large extent solutions despite increasing complexity in
To some extent enabling mobility?

What kind of financing models are
required to meet the challenge of bundling
"In the next 10 years we will have mobility solutions into attractive consumer
services and enabling its deployment across
more change than in the 50 years partners?
before"
–European Automotive OEM, 2008 How and to which degree will today‘s vehicle
IBM Automotive 2020 Study market structure change in face of
increasing acceptance of new mobility
solutions?

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



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

Instrumented Interconnected Intelligent

Monitoring and maintaining the Applying sophisticated Transforming raw data
integrity of the automotive supply devices to connect consumers into critical insight for quickly
chain while creating vehicles that and vehicles to a broader and accurately responding to
can measure their own health transportation system that changes and achieve better
and sense their surroundings. encompasses roadways, energy results through prediction
sources, governments and more. and optimization

Car sharing Car on demand eMobility Fleet Management Intermodal travel

IBM Advanced
Mobility Services 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.



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

OEMs & Insurance Service Fleet Utilities Government
Stakeholder Suppliers Provider Operator

Mobility-as-a Service
Car Sharing Car on Pay as you Intermodal Concierge
Demand Use travel Services

IBM Advanced Mobility Service Hub
Usage based Remote Car Sharing
Value EV Services Services
Insurance Diagnostics
System Integration

Added
Fleet Mgmt Vehicle Modality Location based

Infrastructure
Services Services Tracking Services services Road Side
User Devices
Devices
Vehicle 3rd Party Data Master Data
Data Analytics Management
Core Data Collection Integration
Services B2B Service Device Security &
Management Management Privacy Mgmt
EV Charging
Backend Stations
Systems „Always On― Vehicle Connectivity
Connected Vehicle Marketplace

P



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

Consumers are globally connected

Customer data
management
becomes
essential in achieving:

360° customer view

OEM„s
app



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

Mobilität
Mobility

Multi-modal Transport Parking Travel Service

Location-based
Subscription fleet Services Event Service



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

Predict
Analyze all forms
Recommend the
of data to provide most appropriate
insight and action to take
predict the future Leverage
the power of
Business
Capture Analytics and Act information by
Optimization applying business
Customers Surveys  Attract ―best‖ customers analytics and
Sales Data Transactions  Target customers: optimization to customer
Suppliers cross-sell, up-sell, retention
Web Logs
 New product releases,
data management
360
° product adoption
 Grow customer value
 Retain profitable customers
People & Business &
Enterprise Data Sources Store new data on Decision Optimization &
customers, sales, etc. Automation
for continuous
improvement



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 thrive
on the new avenue for growth
in a smarter mobility industry


Thank you
for your attention


Thank You
This webinar will be available on-demand in a few
days at www.autonews.com/webinars

All registrants will receive an e-mail notification
when it is available

Ibm Smarter Mobility Presentation Jens Diehlmann

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