U.S. automakers not jumping into HD Radio

By From reuters| Apr 29 2007
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Radio broadcasters, facing increased competition from iPods and satellite radio, are pushing a new digital format called HD Radio that has so far failed to win over U.S. carmakers.

Hyundai Corp., BMW AG, and Ford Motor Co.-owned, Britain-based Jaguar plan to offer HD Radio, and other carmakers are also set to announce deals.

Because of the amount of time people spend listening to the radio in their cars, striking such deals will be critical if the technology is going to take off.

But officials from General Motors Corp. and Chrysler Group said they were not rushing to commit to the devices, which would cost the struggling Big Three U.S. automakers as much as an estimated $600 million annually to install.

"We're investigating HD radio and we'll probably make a decision in six months. When you add up the cost, it's a lot of money," said Michael Kane, director of technology strategy for Chrysler, a unit of DaimlerChrysler AG.

Ford was not immediately available for comment.

The radios are estimated to cost about $45 each to install, or each of the three carmakers about $150 million to $200 million annually, automotive industry sources said.

HD Radio promises to deliver better sound quality than traditional analog radio and enables stations to broadcast multiple channels. More than a tenth of the estimated 12,000-plus U.S. radio stations have upgraded to the technology, including many in the country's top 100 markets.

But the nascent industry faces challenges since few people have bought the special receivers to get the signals, and many radio stations are still unwilling to convert to digital.

An executive who oversees satellite radio services for GM said the carmaker had no plans to install HD radios until the devices catch on.

"I don't think there are too many American carmakers jumping on this. It's a fairly expensive proposition to put that technology in a vehicle and there's no certainty around the revenues associated with it," said Rick Lee, executive director of satellite radio services for GM unit OnStar.

"We don't know if there's demand there or not and we're not inclined to test that market," he said.

U.S. radio operators have been pushing HD Radio as the number of listeners in the $20 billion broadcast radio industry has declined and advertising sales have slowed with the advent of various other digital music options.

The industry, led by radio operators such as Clear Channel Communications Inc. and CBS Corp., has pledged to spend $250 million on marketing HD Radio through a group known as the HD Digital Radio Alliance, led by Peter Ferrara.

Ferrara said he was confident the technology would succeed with consumers and Detroit automakers.

"We have 11 automotive manufacturing agreements and 55 car models are sourced and committed. We're under confidentiality (agreements), so we can't disclose them, but they are not GM, Ford and Chrysler. They've made a conscious decision to wait and see," Ferrara said.

"Some car companies are leaders and some are followers," he said, adding that GM has indicated to the alliance that it planned to be a "fast-follower" for HD Radio.

"When they sense there is enough market demand to support putting it in their cars, they'll do it," he said.

Ferrara said GM and others are less inclined to commit since they already have a vested interest in satellite radio.

"If they think HD was a threat to that business or would eclipse it, they would be cautious," he said, though he believed the carmakers would eventually adopt the technology.

"It's just a matter of time."

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