Car Smart

About 10 years ago, no one had heard of "telematics." Now it’s an entire industry, giving owners remote access to their automobiles. CEO Steve Millstein and ATX Group are leading the way.

LOST AND FOUND: ATX Group CEO Steve Millstein helps drivers find their way—and much more— with the help of telematics.

Direction is something steve millstein has never needed. Or perhaps more accurately, it’s something he’s never followed. Funny, then, that he’s made a career out of giving directions to others. Though these days, as Millstein himself will tell you—and at great length, to be sure—giving directions isn’t the half of it.

It was a winding and zigzagged course that led Millstein to his roomy corner office in the Irving headquarters of ATX Group, the second largest telematics provider in the world. Telematics is a catchall term for the two-way, wireless sending and receiving of information between drivers (and manufacturers) and their cars. It was a new concept to Millstein in 1996, when a serendipitous job assignment landed an untapped “mobile securities” market in his lap. Intrigued by the possibilities of the technology, Millstein took the idea, at that point nothing more than monitoring car alarms and airbags, and developed it into the first company of its kind, providing vehicular safety, security, and convenience services (like navigation assistance) to a subscriber base that has reached nearly a million drivers in the United States and Europe.

But getting from point A to point B wasn’t as easy for Millstein as he has made it for his wayward customers today. Now, armed with groundbreaking technology and primed for exponential growth, the man who put telematics on the map is leading his company into even further uncharted territory.

They say those that can’t do, teach. In this case, those who wander, guide.

Steve Millstein started 1991 unemployed. He wasn’t fired or laid off. He was simply uninspired. At age 39, after 12 years and six different positions working for the Southwestern Bell Corporation, Millstein came home and delivered the news to his wife that he had quit.

››  THE TAKEAWAY

1. Passion trumps prospects.

2. Successful first-movers will find their marketplace crowded soon enough.

3. Happy employees don’t mind the occasional 20-hour workday.

“I remember my wife saying, ‘You just did what?’” he says. “I just one day decided, nah, I don’t want to do this anymore.” And, adding insult to injury: “We had three little kids and a mortgage, and it was December, right around Christmastime.”

If it was a tough time for his family, who made ends meet by borrowing money from relatives and cutting out extra expenses, it was an especially tough time for a quintessential Type A personality like Millstein, who had worked multiple jobs since he was 13 years old. “I like working,” he says. “I like making a difference.”

Millstein was raised in a working-class family in an affluent Kansas neighborhood. “[My parents] worked their butts off,” he says. “They made sure we had everything we needed, though not necessarily everything we wanted. My first car was a Volkswagen Beetle—my colleagues at school were in brand-new BMWs. But then again, their dad was Henry Block of H&R Block.”

After graduating from Kansas University, Millstein worked to put himself through law school at Washburn University in Topeka. Having quickly decided private practice wasn’t his bag, he fell into a position as the head of legislation for the governor of Kansas at only 26 years old. But Millstein grew tired of politics within a few years and went to work for SBC in 1980. He started off doing sales. Then, during the breakup of the Bell system, he was sent to Washington D.C. temporarily to lobby Capital Hill. After that, he tried his hand at finance and finally marketing, which he headed up for SBC’s wireless division. Nothing stuck.

“Even when I paint a room in our house, I’ll wake up six times in the middle of the night, flip on the light, and go, ‘This is good, this is good,’” he explains. In other words: “I like to create things. And that’s real difficult to do in a large organization.”

Feeling his restlessness and frustration mounting, Millstein, as he puts it, “retired.” When Millstein looks back on his decision, he recalls the advice he’s since given his children, now ages 22, 21, and 18: “Just have the passion. If you have a passion for what you do, you’ll do a great job. If you don’t, find another job and keep changing until you find one that you really love.”

BY THE NUMBERS
ATX and OnStar

HISTORY:
ATX
Founded in 1994 (in San Antonio); Ford Lincoln RESCU—the first service of its kind—launched in 1996
OnStar Founded in 1995,
service launched in 1996

Number of Employees:
ATX 450
OnStar 500

Number of Subscribers:
ATX
800,000
OnStar 4.5 million

Number of car models
available for service:
ATX
21 models; available for most European cars
OnStar 50 of the 2006
models; will be standard across most GM models by 2008

Pricing:
ATX
$200-$250 per year
(After the first year of free service, or first four years for BMW drivers)
OnStar Ranging from $199 per year/$16.95 per month to $799 per year/$69.95 per month.
(GM offers the first year of service free)

The passion, it turns out, was not far away. Barely three months after leaving corporate giant SBC, Millstein went to work for a small communications manufacturing company owned by Centel (now Sprint Nextel) called Acoustics Development Corporation. Three years later, Kansas-based Westar Energy recruited Millstein to lead the corporation’s diversification efforts. After he helped Westar acquire the home security operations of Westinghouse, a small mobile securities concept within the division caught his eye. Certain it could be more than merely “home security on wheels,” Millstein set out to grow the concept. When his venture began offering service in 1996, they were the first in what would become the telematics industry; they wouldn’t be the only ones for long. OnStar was founded in 1995 as a joint venture between General Motors, EDS, and Hughes Electronics Corporation and launched service soon after Millstein did. Other “mom and pops” quickly followed.

In the early days, Millstein and his tech team were no different than those other companies in the burgeoning industry. They focused on the same basic services: accident notification, remote door unlocking, navigation assistance. Safety. Security.

Simple.

But the Little Division That Could soon outgrew its owner, and Millstein spun it off into its own entity. They quickly launched a telematics partnership with Ford, and in 1999, were bought by a 5-year-old commercial telematics company out of San Antonio called ATX. Together, the newly formed ATX Group set up shop in Irving. Despite some growing pains and the occasional setback (for instance, when Ford, their first—and at the time, only—client pulled the plug early on their joint Lincoln RESCU program), the company stayed the course. Major players signed on—big names and fancier brands like Mercedes-Benz, Jaguar, BMW, Rolls-Royce, and Maybach—and operations eventually expanded internationally with an office in Dusseldorf, Germany, a move Millstein made at the request of BMW executives who wanted ATX’s quality service not just Stateside, but overseas.

Things aren’t so simple anymore.

It’s a particularly busy January morning when Steve Millstein sits for an interview. His bags are already packed. This evening, he’ll hop on a plane headed for the Detroit Auto Show. Then it’s off to Las Vegas for the Consumer Electronics Show next week, followed by business stops in Japan and Korea, Geneva and Germany. Dressed in a green, plaid, Izod button-down and brown corduroy pants, Millstein exudes a casual friendliness. But the 54-year-old’s informal attitude gives way to an excitable, energetic spirit. He speaks in long, sometimes off-topic passages fired off at a rapid pace in a low, raspy voice. Shut your eyes, and Millstein could pass for Alec Baldwin.

His hectic itinerary is a busy start to what promises to be a very busy year for ATX. Millstein can’t hide his excitement as he describes the latest innovations happening right here in this building, home to not only their operational headquarters, but a 24-hour call center and, across the street, an R&D facility. As he explains, giving directions and unlocking your doors is all well and good, but that’s the past. He’s a future-tense kind of guy.

“We knew when we started the business that people would come to us for safety and security,” he says, “but our hypothesis was they would stay if we could give them daily interaction—if we could become meaningful to the way people do business, the way they operate their lives on a daily basis. So we have been working on, over the past few years, the ability to become more relevant to our customers.”

The customers he speaks of are actually two different groups: car drivers and original equipment manufacturers. The trick is capturing the attention of both, proving the value of what ATX has to offer from the buyer’s perspective, but also the seller’s incentive too. Millstein believes vehicle relationship management could be the rabbit in the hat.

The essence of the idea isn’t new. In fact, the basics of it have long been in place with ATX’s past telematics offerings. Using a car’s processor, ATX can extract pertinent information from the vehicle and act as needed. It’s how they can open your doors when you lock the keys inside or alert emergency personnel when your airbags have deployed.

But vehicle relationship management (vRM) takes that idea a step further. Now, ATX will pull detailed data from the car and send it to dealers and manufacturers, who will have the chance to learn more about the life and performance of their vehicles than they’ve ever known in the past.  “They’re drinking water with a fire hose,” Millstein says. “We’re able to give [carmakers] more data than they have the ability to do something with, because they’ve never had this much information before.”

Thanks to vRM, should a problem occur with a car, dealers can remotely diagnose the problem and let the driver know both the urgency of the situation and how much it will cost to fix. (And, in three to five years, Millstein predicts, dealerships will be able to repair the problem remotely, the same way computer updates are downloaded over the air.) Not only that, but manufacturers can also track part performance and quickly identify faulty equipment, allowing them to make improvements to future models and save money on preventable warranty claims, which on average add up to $500 per year per vehicle.

“If an engine controller goes bad in a car in North America today,” Millstein explains, “before [carmakers] get critical knowledge from enough people—critical mass that have taken the car back into the dealerships—they have been building cars for 16 weeks. That’s four months of cars that are going to have warranty claims. With vRM, we can know in negative time.”

No doubt individual drivers benefit from vRM technology. But the real fun for them comes with DIVA—short for Driver Interactive Vehicle Applications—a brand-new offering being shopped to manufacturers that will allow car owners to communicate directly with their vehicles using a phone, PDA, or computer. The goal, Millstein says, is to make the driving experience comfortable and convenient. Like the air in your car cabin to be exactly 72 degrees when you slide into your bucket seats? Want your radio automatically tuned to NPR on weekdays but rock ’n’ roll come Saturday? Leaving town and wondering if your kids sneak the wheels out for a spin? DIVA makes it all possible, allowing for the ultimate personalization of your vehicle with a simple phone call or a visit to the manufacturer website. And by decontenting the car, ATX reduces the manufacturing costs for the car companies. (Rather than carmakers having to build expensive upgrade parts like seat-warmers, those components will now be handled by telematics.)

The information vRM provides and the brand interaction afforded by DIVA will be so valuable to carmakers, Millstein predicts, that the market will move away from the subscription model it has maintained through today. While BMW has upped GM’s standard of one year of free services to four, eventually Millstein expects all manufacturers—not just the luxury brands—to provide the services free for the life of the car.

“Why should that be the exclusive purview of wealthy people?” he asks. After all, everyone is entitled to a little luxury—whether they drive a Beemer or a Beetle.

From an outsider’s perspective, there is one obvious thorn in Steve Millstein’s side: General Motors OnStar. Currently, ATX has around 800,000 subscribers, though continued growth and deals with two as-yet-undisclosed, mass-market manufacturers should make that number triple to 2.4 million by 2011. (They’re no stranger to this kind of rapid growth—having gone from losing $35 million in 2000 to making $25 million merely five years later. Today, revenue figures are closer to $70 or $80 million.) Even with such rosy projections, however, ATX won’t come close to the 4.5 million subscribers OnStar has already signed, not to mention the 4 million potential new customers OnStar could recruit every year, having reached the 2007 deadline set by GM to install the service in every new vehicle. But Millstein is confident their slower-but-steady saturation of the market will lead to big things down the line.

“OnStar is owned by General Motors, so while they’re in the market, and they’re someone that we watch in terms of new products and applications, we no longer go head to head against them,” he says. “They have limited themselves just to the GM brand. We really want to get our fair share of new automotive companies, show them the value of telematics, and then once you have them and they get that understanding of the value that it can bring to them, then the growth happens.”

To be sure, there have been other competitors who’ve tried their hand in the telematics business—hungry start-ups drooling over the technology or larger corporations with related core competencies looking for a quick buck. Most have since fallen by the wayside, many of them victims of a 2002 industry shakeout that Millstein predicted in a 2001 speech at the EyeforAutomatics West conference.

“There was a lot of competition in the early days. They’re pretty much gone,” he says. But Millstein, while an optimist, is not naive. He knows that was just the first round of what is sure to be a long fight for the top. And he’s right: Experts are saying that 2007 could be a breakout year for telematics. At this year’s Consumer Electronics Show in Las Vegas, Ford and Microsoft jointly announced a universally compatible hands-free technology called Sync, which will be made available on even some entry-level 2008 models. Chrysler announced they will partner with Atlanta-based Hughes Telematics to put navigation systems in their vehicles by next year. Even Yahoo has entered the arena, working with a Silicon Valley start-up called Dash to engineer a web search and navigation device set to become available nationwide this fall.

The team at ATX—all 450 employees—are ready to take on all challengers. Millstein continually praises the fierce dedication of his employees, who’ve been known to put in 20-hour days when a project calls for it. Vice President of Corporate Relations Gary Wallace says Millstein has made it a priority to create an environment where employees enjoy working. In addition to an on-site workout room and cafeteria, Millstein rewards workers with generous benefits and yearly bonuses, in addition to perks like free turkeys at Thanksgiving and U.S. Savings Bonds for every baby born to an employee. First-time parents even get a copy of the same “owner’s manual” that Millstein and wife Paula used as new parents. But what makes ATX a great place to work goes beyond bells and whistles, according to Wallace. Having worked alongside Millstein for more than 10 years, he says the CEO’s infectious fervor, endless optimism, and intuitive foresight are what really make the company environment successful, even when the company itself may struggle.

Case in point: Wallace recalls when Millstein first came to him about working for what was then still a division of Westar. “When he approached me, what was to become telematics was nothing more than a line extension within the home security business—essentially, at that point, little more than remotely monitoring car alarms,” Wallace says. “We had one automaker customer—Ford Motor Company—with only about 6,000 very elderly Lincoln Continental customers. One day Steve arrived at my office doorstep and informed me that he had just received a letter from Ford saying that they wanted to terminate their agreement with us. My logical response was to ask him how soon he planned to close the business. My jaw dropped with his response. He said, ‘Actually, I was thinking about expanding the business,’ essentially peeling the business out of home security and make it a separate company.

“I thought he was crazy. He had just lost his first and only customer and now he wanted to make it a standalone business? But, just 15 minutes later, I told him I would go to work for him. Every time we have a major business success or a setback, I think back to that day. It says everything about his leadership. He has the uncanny ability to see a couple of years ahead to where the business is going and then get his employees excited about where we’re headed.”

It seems Millstein has finally found his own way. But, should he ever wander off-course, he knows not to worry.

DRIVE FRIENDLY

ATX’s breakthrough technologies make driving a safer—and more comfortable—experience.

DIVA—or Driver Interactive Vehicle Applications—allows drivers to remotely close their car’s sunroof or roll up their windows if the weather turns bad.

The DIVA-enabled car will be self-monitoring and can alert its driver, for example, when the oil is dirty and requires changing.

Navigation assistance is offered via an in-vehicle device or an ATX call center representative.

Car owners can track gas mileage, RPMs per gear, or set speed and distance limitations on their car using any connected device with DIVA.

With DIVA, drivers can also give their vehicle instructions on when to turn on the HVAC system or radio, and to what degree or station.

When your car’s airbags are deployed, the car’s processor notifies ATX, who can determine the severity of the damage and alert emergency response teams to your exact location.

ATX will unlock your car doors remotely if your keys are lost or locked inside.

Amenities like heated seats will be controlled by DIVA in the future, rather than requiring expensive seat-warmers.

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