Putting a price on supplier innovation

Automotive Industries,  August, 2003  by Lindsay Brooke

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The term "best kept secret" is often just another way of saying a product isn't selling in the marketplace. Frequently, this "best kept secret" label is merely code for a technology that is either not performing as advertised or hasn't received suitable marketing But in the case of Quadrasteer, the 4-wheel steering system codeveloped by General Motors and Delphi Corp., the "best-kept secret" label may be appropriate, but not for the aforementioned reasons.

Through May, sales of 2003 model trucks equipped with the Quadrasteer option were surprisingly weak, running in the sub-15,000 unit range, reports a GM spokesman. That's peanuts considering CSM forecasts sales of the four vehicles offering the optional system (GMC Sierra and Yukon XL, Chevrolet Silverado and Suburban) to eclipse 960,000 units this year. The prospect of a meager 0.02 percent take rate for this system after two years in the marketplace has disappointed both the OEM and supplier sides of the program.

The industry is watching Quadrasteer's fortunes, in what has become a lesson in how OEM packaging and pricing strategies can impact new supplier technologies. With increasing pressure on already slim profit margins, suppliers must carefully weigh their investment in new products. Delphi's chassis systems competitors, along with Ford, DaimlerChrysler, Nissan and Toyota, are waiting to gauge the effectiveness of GM's plan to kick-start sales of its sputtering 4WS system.

These companies realize Quadrasteer could be a minor game-changer within the full-size truck segment. Integrating an electronically-controlled steering axle on the rear of the vehicle allows greatly improved maneuvering in tight parking situations. It also adds a comforting sense of stability during trailer towing. Quadrasteer is the answer to the prayers of owners of large, long-wheelbase pickups and SUVs who are daunted each time they try to parallel park or tow the boat in a crosswind. By comparison, the early 4WS systems offered briefly by Honda and Mazda on a few sedans and coupes in the 1980s were answers to questions no one asked.

The sales upside of 4WS is significant, even within the stable volumes in full-size trucks forecast by CSM. For suppliers, Quadrasteer represents a "Level 1" product on the sourcing totem pole. (By comparison Level 4 is a commodity.) It delivers high value to the OEM by providing the vehicle owner with tangible safety and convenience benefits--attributes the driver can feel and therefore believe in. Quadrasteer is also a relatively high technology product, its control software is able to precisely coordinate front/rear steering with the capability to eventually link with various Delphi chassis-stability systems.

Whether it's 4WS, or automated manual gearboxes, or the instant-heat cabin heater that's standard in the new Porsche Cayenne, such notable technologies (see chart) are competitive assets for suppliers positioning themselves outside the low-ball commodity fray. Level 1 products typically create a strong "must have" pull from the OEM. It is this high level of desirability that supports a far better profit scenario for both the supplier and automaker.

With performance that lives up to its billing, Quadrasteer has been backed by solid marketing support befitting a new feature technology. To its credit GM has spent mil lions advertising the system since its 2002 debut on the GMC Sierra. The TV spots are particularly engaging, showing Quadrasteer-equipped trucks squeezing in and out of various tight spots and towing situations. Curiously, the trucks themselves have not been given special badging of any sort to stir the buzz on the street. The presence of the 4WS system will only occur to sharp-eyed enthusiasts who might notice the rear steering hardware as they pull up behind one of the trucks, it's remarkable how 32 valves in a V-8 engine are still worthy of their own badge on some decklids, while the Quadrasteer trucks are forced into Stealth-like anonymity.

However, it's not an option that customers will naturally check off simply on the basis of its name alone. Quadrasteer is not a "no brainer" feature like the second sliding door on minivans. Customers must spend time behind the wheel test-driving the 4WS system before most will realize they need it. Unfortunately this puts the fate of a sophisticated though user-friendly system in the hands of GMC and Chevrolet dealers. The onus of conducting those test drives and educating the customer falls on salespeople who, hopefully, have read the Quadrasteer section of the owner's manual.

Torpedoed by Price

On the strength of GM's GMT800 truck sales alone, Quadrasteer ought to be at least a triple, if not a home run, in the marketplace. But it can barely get on base because of a poorly devised packaging and pricing strategy. Its crushing retail price of $4,500 for the stand alone option has impeded the popularity of this technology more than any other single factor. Quadrasteer works great--but is it worth more than the Duramax turbo-diesel option? Few truck buyers seem to think so. Those who already cope with towing trailers and maneuvering in tight confines without 4WS will not spend $4,500 to have an easier drive with it.