I visited GM’s Advanced Technology division in Silicon Valley on August 4, the same day the Detroit giant revealed its second-quarter financial results. The numbers were far better than one might have expected, given the automaker’s troubled recent history. GM said it brought in $2.5 billion in net income in the quarter, which was a bit less than it had earned in the previous quarter but nearly double the figure from a year earlier, back when the company was still mostly owned by Uncle Sam. The same day, GM said that its market share, after six years in free fall, has started to tick back upward.
Now, that’s encouraging data—but your mind is probably stuck a few sentences back, saying, “Wait, what? GM has an office in Silicon Valley?” Innovation, after all, isn’t a big part of the brand image at a company where the most iconic and profitable product is still the massive, gas-guzzling Chevy Suburban SUV.
But indeed, GM (NYSE: [[ticker:GM]]) does have such an office—inside a converted HP manufacturing facility in Palo Alto, on the same street with more conventional Silicon Valley players like WePay, mSpot, and Fry’s Electronics. GM doesn’t play up the facility’s existence in the press, and it took me more than a year to score an interview with its managing director, Byron Shaw. But once I’d toured the place and had a chance to quiz Shaw on his mission, I realized I’d picked a pretty appropriate time to visit. The situation at the office was—well, far better than one might have expected, given the automaker’s troubled recent history.
The biggest achievement for the 10-person outpost, which Shaw set up in 2006, is that it has managed to stay open for five years, despite the company’s bankruptcy, and broader turmoil in Detroit and the larger economy. “Surviving through the 2008-2009 downturn was key for us,” says Shaw. “We were able to maintain this operation without any cuts or loss of resources during that time. That was a big thing.”
But GM has a common-sense reason for keeping the Palo Alto office open, and it’s this: When you’re in your car, you’re not just driving anymore—you’re likely in “infotainment” mode, toggling between satellite radio, the GPS navigation system, cell-phone calls, and the like. Which means the components that make a car stand out in the marketplace are no longer made just from steel, rubber, or glass, but also from electronics and software. “The writing is on the wall,” says Shaw. “Look at what a car is today, and look at what it will be in 20 years. If you want to be competitive you have to have the best software and electronics in the industry, and you won’t get there if you don’t participate in Silicon Valley.”
Shaw’s squad doesn’t actually write software or build electronics. Rather, its job is to build relationships with all the people who do—so that when a new idea comes along that might make a future GM car better, the company knows about it.
Take Terminal Mode as an example. One staffer from Shaw’s office represents GM within an informal group of companies called the Car Connectivity Consortium (Honda, LG, Motorola Mobility, Nokia, Samsung, Sony, Toyota, and VW are also members). The consortium is working on a way to make the infotainment system in your car into an extension of your smartphone. The idea is to let you access the content and apps on your phone via the in-vehicle sound system and LCD displays, with all user-interface elements automatically optimized for use while driving. (Sorry, no Doodle Jump allowed.)
Terminal Mode is both a set of Internet-based standards for moving all this data around, and an emerging system for evaluating and certifying new apps to make sure that they don’t exceed driver-distraction guidelines. Shaw says that Silicon Valley is “pretty much ground zero” for the consortium’s negotiations over Terminal Mode. For GM customers, the benefits of the company’s participation will be
