Ford expands employee PC offer

In February 2000, Ford Motor and start-up PeoplePC announced a program to provide more than 365,000 Ford employees worldwide with a name-brand personal computer and Internet access for a subsidized fee of $5 per month. Since then, the high-tech sector took a dive and naysayers jumped on their soapboxes.

By the time PeoplePC went public on Aug. 16, 2000, the Nasdaq decline was well under way. The Internet service provider closed its first day of trading below its initial offering price of $10, and the ride was all downhill from there. Its shares have been below $1 for most of the year.

Fords response to the companys fallout with investors? Add 25,000 dealer employees to the contract. PeoplePCs response? Focus on the bottom line and sign deals for another 370,000 new systems.

"The high-tech slowdown hasnt affected the programs implementation," says Kathleen Vokes, legal issues public affairs manager at Ford. "Our pilot distribution program is under way in Europe, and employees are as excited about the program there as they have been in North America."

Steve Paschen, director of the Model E initiative at Ford, says the program may be up to about 400,000 computers worldwide. "Numbers go up and down. We acquired Land Rover, then spun off another division," he says. The program is designed strictly for employees and their households, but he says it is a big topic of conversation during recruiting.

Giant projects depend on strong partners, and PeoplePC contacted all the major PC vendors before signing Hewlett-Packard as its partner. John Benardino, business development manager at HP, fought to overcome the fact that HP had never sold to PeoplePC before the Ford contract.

"We have the largest volume in this space, from PCs to printer to handhelds," Benardino says. But HP did not price itself out of a profit. "I dont think this should be viewed any differently from any other channel."

Fords program calls for employees to pay only $5 per month for the PC and Internet access through PeoplePC. Upgraded system components, such as larger monitors or more spacious hard drives, are paid for in the initial payment, keeping the monthly charge at the $5 level.

Employees see a customized Ford page when they log on, and PeoplePC customizes front ends for client companies as small as 500 users. Most other PeoplePC corporate customers also subsidize part or all of the monthly fee. Delta Air Lines, the largest PeoplePC corporate client before Ford, charges employees $12 per month.

Signing employees for global corporations means building infrastructure in areas of the world that may lag the U.S. in terms of Internet service providers and computer system support. Wayne Gattinella, PeoplePCs chief marketing officer, admits that going global was a big step. "The Ford project made us go faster than we planned to go," he says. "Were starting in markets with the enterprise deal first, building the infrastructure to support that, then plan to bring in new clients and consumers."

HPs Benardino believes his companys global expertise provided a huge advantage. "HP has global infrastructure and lots of connections," he says.

Ford started the overseas rollout in Britain, then Canada, then completed the Philippines rollout last year. Excitement for the program precedes installation teams, Paschen says. "Were welcomed like visiting royalty."

Domestic employees have been leading the way, and Paschen credits the United Auto Workers for being a partner from the beginning. "They held events at each facility so employees could bring their families, and kept them open for all shifts," he says.

Do these projects still have a place in a sliding stock market? Preston Dodd, senior analyst at Jupiter Media Metrix, believes so. "These projects are a huge boon for employee morale and retention, and a boon for the employer as well," he says. Companies may also be able to save money, because "there are lots of costs and large budgets set aside for internal messaging, including hours to print, post, etc., and these PC programs are a very efficient way to get information to employees," he says. "This is a better way to get everyone in the organization on board and able to communicate."

Dodd acknowledges some bad news for these projects, particularly when Intel changed its employee program earlier this year and dropped the project for managers. "One can speculate that managers have other access options with company-provided laptops, and are on a social-economic level that should allow them flexibility," he notes.

For the quarter ended March 31, PeoplePC beat analysts expectations by reporting a loss of $30.4 million, or 28 cents per share, on revenue of $37.3 million. In the same quarter a year earlier, it posted a loss of $25.6 million, or 29 cents per share, on revenue of $7.9 million.

Paschen says the economic downturn doesnt change the reasons Ford decided to get involved in the program in the first place.

"We believe in our heart the value and payback will come to Ford as those involved become better employees and better contributors to the community," he says.