GM Facing Privacy Grilling Over OnStar GPS

David Kiley
Editor-in-Chief, AOL Autos

GM's OnStar system is stirring up controversy (GM).

Internet cookies, FourSquare, Facebook check-ins, street cameras everywhere and in-car global positioning systems. There are so many ways to track the movements of consumers, some for which they even volunteer. But people may have their limits.

The Internet and media are abuzz with complaints over the redesign of Facebook, which has been done to make it easier for the company to sell the online behavior of members to third parties. But the latest marketer to set off those who are against all this constant monitoring and tracking is General Motors and its satellite-based OnStar system that does everything from unlock your car when the keys are locked inside, to diagnose a mechanical problem, give you directions from a live person or notify first responders if your car goes off the road.

Last week, OnStar made a change to its "Terms and Conditions," that stipulates it can not only track data such as mileage, speed and location of vehicles, but that it can continue to do so even after the vehicle owner has stopped subscribing to the service, and can sell the data to third parties.

GM, which owns and operates OnStar, can do this because most of its cars are fitted with OnStar hardware. GM gives new buyers a trial period to subscribe to OnStar service packages. Then, they hope owners will re-up with subscriptions that start at $18.95 per month. OnStar also offers OnStar retrofit kits for non GM vehicles.

Senator Charles "Chuck" Schumer (D-NY) who often takes up consumer issues, is calling for a full investigation into OnStar's plan. "By tracking drivers even after they've canceled their service, OnStar is attempting one of the most brazen invasions of privacy in recent memory," said Schumer. "I urge OnStar to abandon this policy and for (the Federal Trade Commission) to immediately launch a full investigation to determine whether the company's actions constitute an unfair trade practice."

So far, GM executives are standing pat, saying over the weekend that it apologized for confusion over the move, but that they are planning to stick with it.

Joanne Finnorn, vice president of OnStar Subscriber Services issued a video of herself explaining the changes. Finnorn says that OnStar will not monitor continuous speed and location of vehicles, though such information is in the memory of the car and systems and can be accessed periodically. She also said OnStar does not have the capability to eavesdrop, though there is a voice connectivity between the driver and an OnStar representative when the OnStar button is pushed.

In explaining the new policy, Finnorn said, "OnStar will maintain a two-way connection to their vehicle unless they ask us not to do so [by specifically opting out after a subscription is canceled]." Like many issues that arise over privacy, GM, as with other marketers, have an "opt out" provision that enables consumers to do just that. Privacy hawks, though, want the systems to be opt-in, forcing consumers who don't mind to make the first move.

OnStar is part of the trend toward more so-called "telematics" in cars. The technology makes a vehicle a rolling smart-phone with as much hands-free operation as possible. OnStar was the first to enter into this area, and GM has, by far, the largest number of vehicles on the road with OnStar hardware installed.

The reason OnStar is a subscription base is that the system is hard-wired into the car. Other vehicle manufacturers, such as Ford, have installed systems that work with a consumer's own smart-phones and MP3 players via a bluetooth connection. OnStar is under pressure to make its system look like the better system, and generate more profit from the operation; hence the move to sell more data to third parties.

One of the sticky issues GM will have to grapple with is that GM is still approximately one-third owned by the Federal government. GM management is anxious for the government to sell its stake, dating back GM's 2009 bankruptcy and bailout by the taxpayer. But with GM's stock tanking to well below its 2010 offering price, the taxpayer would take a major hit if the government sold the stock now.

Taking a hard line against Senators that stood up for GM's bailout when the government still own one-third of the company could be more than awkward.

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David Kiley
Editor-in-Chief, AOL Autos

David Kiley has been an award winning journalist covering the auto industry for more than two decades, writing for AOL Autos, BusinessWeek, USA Today and Automobile, Adweek and CNN. He is the author of two books: Getting The Bugs Out: The Rise …, Fall and Comeback of Volkswagen in America (John Wiley & Sons 2001), and Driven: Inside BMW, The Most Admired Car Company in the World (John Wiley, 2004). He has been a frequent analyst on CNN, CNBC, MSNBC, NPR and PBS, commenting on the auto industry. Kiley is also recipient of the Ken Purdy Award, given to one journalist annually by the International Motor Press Association, for excellence in auto industry journalism. Kiley lives in Ann Arbor, MI.