Competitive intelligence

Detroit Auto Show: Prime spying territory

January 15, 2014: 12:33 PM ET

For just a few days a year, designers, engineers, and executives at the world's leading automakers get to act like spies, openly gathering competitive intelligence.

By Vickie Elmer

A BMW press exhibit at the 2014 North American International Auto Show in Detroit

A BMW press exhibit at the 2014 North American International Auto Show in Detroit

FORTUNE -- When Mercedes-Benz executives unveiled the automaker's newest luxury cars in Detroit this week, hundreds of journalists and bloggers snapped photos and recorded quotes and details. So did dozens of competitors keen on absorbing the style and substance of Mercedes' new models.

Some waited quietly near the perimeter of the crowded Mercedes stand as Daimler Chief Executive Dieter Zetsche introduced the new C-Class cars. Others sidled up to television crews and media from Germany, Japan, and the U.S. A group of four Kia engineers waltzed right up to the C-class vehicles after the press preview, took photos, and left en masse.

For a few days a year, anyone can be a spy. These part-time sleuths are designers, engineers, and executives at the world's leading automakers. They gather competitive intelligence the way many people pick apples -- once a year, and gingerly.

"We do it for business, and we do it for fun," said one BMW product manager who asked not to be named, adding "it would be spying if it weren't out in the open."

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Execs and designers use industry events like the Detroit Auto Show or the Consumer Electronics Show in Las Vegas as well as hundreds of other trade shows to find out what's new and notable from their rivals.

Some discretely tuck their name badges inside their jackets and come and go quietly. Others strut in like they belong in rival territory, and even climb inside while competitors are still answering questions from the press.

"They want to get a good feeling of what their competitors are doing," said Tara Kuhnen, who works for auto supplier ZF.

Checking out competitors' models and prototypes is commonplace at auto shows across the world, agrees Sarwant Singh, senior partner with Frost & Sullivan, a research and consulting company based in London. He once saw Martin Winterkorn, the CEO of Volkswagen, with a small entourage at the Frankfurt Auto Show, opening doors and measuring details of his competition's models. He was telling his chief technology officer what he was finding, Singh recalled.

"He's pretty open" about carrying his micrometer and measuring tape and climbing into a competitor's car, said Tony Cervone, executive vice president of communications for Volkswagen. "He wants to know the tactile feel of cars" and brings along production engineers and other staffers. The visits are useful as a "competitive review" so VW can evaluate its cars' position in the marketplace, Cervone said. "What do we need to do to beat out the competition?"

Many of the senior people are looking at tiny details such as finish or interior dashboard designs. "It's the little pieces that surprise you," said Cervone, who previously worked for General Motors (GM). He recalls former GM vice chairman Robert Lutz combing through an Audi years ago and marveling at the precision of the body's metalwork.

Top executives, of course, travel with an entourage, so it's noticeable when they visit a competitor's cars. Designers can swoop in solo.

At the Detroit auto show this week, these part-time spies made good use of their iPhones to photograph new models. A few had higher-quality cameras to document trunks, dashboards, front grills, and new touchscreen displays. Some slipped tiny notebooks into their suit jackets.

"We don't really look at it as spying. It's research," said Greg Schroeder, an analyst with the Center for Automotive Research in Ann Arbor, Mich. The biggest day to size up the competition is Wednesday, the industry's day to preview vehicles. Engineers are "almost crawling under the cars" to see what has improved, Schroeder said.

The North American International Auto Show gives out 30,000 credentials to auto staffers, sponsors, and special guests, so they may outnumber media and bloggers six to one in the days before the event opens to the public.

Before the new models debut, automakers may wrap them in fabric and mask features to keep them from competitor's eyes. Wired reported that Ford (F) employs a full-time camouflage specialist to protect its new vehicles.

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To be sure, corporate espionage can cross the line. An engineering consultant faces conspiracy charges for allegedly stealing trade secrets from DuPont Co. (DD) and selling them to a Chinese company for $29 million. Illegal spying and theft of trade secrets costs U.S. companies $13 billion a year, according to the FBI. But that's not likely to take place at trade shows, where new products are on open display.

At the Consumer Electronics Show, companies typically only show products they expect to sell to consumers within six months. If they bring early-stage models of some wearable technology, they will stash those proprietary items in private hotel suites nearby and invite only select customers, said Angela McIntyre, a research director at Gartner.

The public display of competitors' advances certainly offers business benefits. At the Mercedes-Benz press briefing on Monday, two groups of Volkswagen staffers listened intently. After the event, two Ford managers elbowed their way through the crowd to get a quick close up. Representatives of Honda (HMC), Audi, Porsche, Subaru, Toyota (TM), Volvo, and Kia also were spotted in the crowd. 

Those who want a more thorough look at competitors' vehicles can call on Midway Group, which supplies high-end vehicles like Ferraris and Mercedes to other automakers to study for a few days or months. Some buy competitors' cars outright, and some lease them. "We deliver it to them, their technical centers," said David Smith Jr., a Midway vice president who was visiting automakers at the Detroit show.

General Motors has a competitive benchmarking team that uses 3-D scanning to search for the good and bad in competitors' cars. They literally tear apart a vehicle to see what led to another automaker's recall or how components were manufactured and improved.

That kind of advanced sleuthing requires full-time work, not a few days' wandering around an auto show.

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