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Driving toward change: the new role of IT and the

CIO in the automotive industry

An industry perspective from HP

“The global automotive industry is discovering

Information Technology as a strategic business
asset. The focus of IT management is moving
from all-out cost reduction to improvement in
IT’s value and support for business growth and
customer experience. The emphasis of the
current agenda is to make the IT organization
more efficient, innovative, and more focused
on delivery of value. HP has worked with a
number of automotive IT organizations and
CIOs in moving their organization to a new
level of performance.”
—Dr. John Wargin
Director, HP Automotive Europe
Hewlett-Packard Company

Manufacturing and Distribution Industry Solutions

Executive summary HP has advised senior leaders in the automotive industry
on applying IT to improve business operations in design,
Information Technology (IT) has never been more critical
manufacturing, sales, and administration. The ideas
to the automotive industry than it is today. As the industry
and perspectives in this white paper represent the latest
embarks on its second century, automotive executives
thinking gleaned from HP’s history and its work with the
increasingly view IT as a key contributor to their business
automotive industry and clients, HP’s industry-leading
success—no longer just an obligatory cost of doing
knowledge of emerging technologies and solutions, and
its application and potential to transform IT to better
This paper examines the steps that automotive original enhance business value.
equipment manufacturers (OEMs) and suppliers are taking
to not only reduce IT costs and increase productivity, but Race for success: the dynamic global
also to leverage IT so that it delivers real business value
to the enterprise. HP considers structures and practices—
automotive industry
such as consolidation and standardization—that are Current market trends are creating tremendous competitive
typical today, and HP provides examples of recent challenges for OEMs and suppliers. In the existing auto-
automotive industry best practices. motive market—that is, in the U.S., Western Europe, and
Japan—demand for new and used cars is stagnant, and
As part of this new thinking, many chief information officers margins in the traditional new car business have dropped
(CIOs) are transforming their organizations to deliver to a mere 3% to 5%. As a result of these trends, many
more business value and impact. As a result, their own manufacturers are underutilizing their operational assets
role in the organization is changing rapidly. The second and factories.
part of the paper discusses the evolving role of the auto-
motive CIO from technologist to strategist, and the impact Globalization—the intensification of presence in
these trends, structures, and practices will have on CIO international growth markets, such as China, create an
responsibilities, the automotive IT organization, and international shift of production, which exponentially
Management of Change (MOC). increases investment complexity. Market consolidation is
shrinking the OEM and supplier landscape as the number
As a part of this analysis, HP will also propose a flexible of mega-suppliers grows. Regulatory burdens are stressing
framework that can help you move an automotive IT some companies; for example, there is a new block
organization competitively and successfully into the future. exemption that opens up the after-sales market with updated
rules regarding new car sales and service. As required
HP is a key supplier of information technology and services
by some governments, OEMs and suppliers must provide
to the global automotive industry—a position HP has
data on vehicle safety performance, quality, and lifecycle
proudly held for more than 30 years. Most major OEMs
and Tier 1 and Tier 2 suppliers use HP technology and
services to develop, produce, and market their vehicles.

Cost reduction and optimization—HP works with a large European
OEM to create on-demand business models. Within this company,
storage capacities are paid for based on actual usage. When storage
requirements peak during prototype testing or new product introductions,
scalability is available—and when the peak is over, there is no longer the
capital expenditure for technology that is not being used to capacity.
This efficiency increases flexibility, helps ensure availability, and lowers
overall costs.

Changing customer demand and innovation—complicated Shifting gears: innovative IT practices

by things such as increasing the amount of electronic
and software content in cars—provide new challenges for automotive
while increasing warranty payments and tarnishing In the typical automotive OEM, more than 65% of IT
customer quality perceptions. As OEMs embrace their budgets are spent on maintenance and operation of
core competencies and outsource non-core competencies, current systems and applications. In contrast, less than
there is a growing “vehicle value” shift to suppliers as 35% is allocated to the development and rollout of
they become more responsible for complete systems and new technologies or innovation. This statistic raises a
modules. Finally, there is an increased need for better critical question: how can OEMs reduce their current
collaboration in downstream operations with dealers and IT spending—or increase the effectiveness of existing
the after-sales market. technology—to optimize business processes and increase
competitive advantage? In an era when industry
To address these challenges and remain competitive, standards, low-cost offshore programming labor, and new
OEMs must increasingly leverage IT to create value for technologies combine to support innovative approaches,
the business by: HP sees four areas in which OEMs and suppliers are
• Counteracting margin pressure and reducing costs leveraging IT to create real business value:
along the automotive value chain • Consolidation and standardization of the global IT
• Optimizing current business processes and creating operations and landscape
greater business value • IT-enabled integration between suppliers and OEMs
• Intensifying supplier and dealer collaboration, optimizing • IT-enabled collaboration between dealers and OEMs
the integration, and sharing visibility of upstream and
downstream business processes with these key • Outsourcing of non-core IT operations including mixing
stakeholders near and off-shore resources

• Continuously improving the management and response The following sections describe each area.
of design, planning, development, manufacturing, and
Consolidation and standardization of the global IT
service phases of their vehicle offerings
operations and landscape
• Better integrating of in-vehicle IT systems and The automotive industry has traditionally used
applications with corporate IT applications and heterogeneous IT landscapes. In addition to a variety of
infrastructure. proprietary applications, OEMs employ a wide variety of
What steps are OEMs taking to use IT to optimize their operating systems, databases, and hardware. In addition,
business processes? How are they creating innovative mergers and acquisitions driven by industry consolidation
new ways to leverage IT for business and competitive have increased the complexity of the IT landscape for
advantage? these companies.

To free up money for new projects and innovation, OEMs This consolidation and standardization initiative, which
must reduce IT operating costs. Strategies include: achieved return on investment (ROI) in just eight months,
• Developing and implementing a global IT consolidation and others like it have helped HP create best practices
strategy that are shared with automotive customers.

• Consolidating dispersed data centers into three or four Problem #1: A leading premium car OEM in Europe
global centers experienced continuously rising complexity and
• Accurately planning and executing well-crafted operational costs.
outsourcing strategies HP Solution: HP worked with this OEM to identify a faster,
As a large and experienced manufacturer, HP has more cost-effective approach to system and process
planned and executed widespread consolidation and integration in their SAP environment. HP helped the company
standardization initiatives. One project in the HP Imaging consolidate 4,500+ users with different SAP releases and
and Printing Group reduced more than a dozen applica- other applications into one harmonized environment.
tions, database services, and integrated processes into Results: The company maximized ROI and minimized
one uniform system that is now adaptable and easy to total cost of ownership; reduced response time by 20%;
manage and modify. By simplifying the IT infrastructure, reduced maintenance costs by 15%; and, at no additional
HP reduced complexity, improved security, and enhanced investment cost, increased the number of users by 1,000.
the manageability of the environment. For example,
standardization of a single-instance data and common Problem #2: A large OEM had a diverse printing, faxing,
processes enhanced decision making and responsiveness and scanning landscape of 15,000+ devices from 12
all along the supply chain. The consolidation and different vendors.
standardization process delivered value through:
HP Solution: HP worked with the company to simplify and
• Costs savings, including increased capacity in a smaller standardize the entire business ecosystem by delivering
environment, reduced labor costs, and fewer test and the latest technology and printers for specific applications
development systems throughout the global organization (including: the manu-
• Increased service and support at a lower cost through facturing floor, sales and marketing, and administration).
consolidated desk support
Results: The company achieved more than $10 million in
• A 35% decrease in operational costs, achieved by annual savings, improved user satisfaction, and created a
maximizing the utility of every IT asset higher level of quality and support for the business.

Cost optimization in virtual crash testing—HP has supported two
global OEMs in the implementation of virtual crash tests, thus reducing
the number of actual vehicles needed for crash tests by more than 70%
and decreasing time-to-market of new models by more than six months.
HP works with these organizations to standardize its PLM platform,
allowing an improvement in the global collaboration efforts between
the different design centers whether they are in the United States, China,
Korea, Germany, or other locations. These systems are being extended to
Tier 1 suppliers, thereby enabling common access and the faster interchange
of designs.

IT-enabled integration between suppliers and OEMs Problem #1: A high-volume, global OEM needed to monitor
Within the automotive industry, the global supply chain the performance of its suppliers down to the Tier 3 and Tier
environment is fragmented and complex; most supply 4 levels.
chain partners share no common IT systems or file
HP Solution: HP created a performance monitoring portal
standards. However, as responsibility for vehicle value
that helped the OEM alleviate delivery commitment prob-
shifts to suppliers, the contact points between suppliers
lems by increased visibility and performance tracking
and OEMs become more important than ever and the
across the entire supply chain network. The portal also
need for integration and collaboration grows. Business-
helped the company consolidate orders into higher
as-usual is no longer an option.
volume, lower-priced contracts—creating a “win-win”
To maintain a competitive advantage, companies must situation both for the suppliers and the OEM.
create an environment that coordinates and shares
Results: Collaboration initiatives often deliver a major
information between suppliers and OEMs. Increased
business impact that can translate into a 2% to 4% reduction
standardization and integration of IT systems up and
in parts procurement costs. They can also enhance product
down the value chain are needed to support effective
quality and increase the speed of production ramp-ups for
visibility and collaboration.
new models.
HP had a similar need of approximately 10,000 business
partners and suppliers within its global network. Over the IT-enabled collaboration between dealers and OEMs
years, a complex array of separate access points had Today there are no clear-cut standardized interfaces
evolved, each with different interfaces, which produced to dealers. As a result, this fragmented distribution
complexity and drove IT costs up. HP created one consoli- channel—which is growing in complexity because of the
dated Web-based access system for all stakeholders and increasing number of non-franchise/multibrand dealers—
business partners, which reduced expenses, eliminated lacks the integration and information sharing that could
the confusion created by redundant systems, improved increase the bottom line for both OEMs and dealers.
overall security, dramatically reduced implementation time Such capabilities could also help enhance and maintain
for new services, and provided a better experience for HP the customer satisfaction that is so important to a
suppliers and partners. Right now HP is leveraging this brand’s success.
approach to an automotive OEM and creating one
access for all PDM applications and databases. The
client estimates a 4% to 6% productivity improvement.

Volume and Complexity of In-Vehicle Software Impacts As the electronics and software content increases in new
the Transformation of the CIO’s Role vehicles, the CIO becomes pivotal ensuring the smooth
Today’s vehicles, especially premium cars, contain and seamless integration of in-vehicle on-board automotive
substantial and ever-more-complex electronics and and service applications with off-board business and
software. Experts estimate that today’s premium cars have corporate IT applications and infrastructure. This is strategic
the equivalent electronic capacity and software of three to for performance diagnostics integration and working
four high-performance personal computers. By 2014, HP with after-sales service systems at dealers and other service
analysis predicts that a single vehicle will use technology locations, all of which affect customer satisfaction and
equivalent to eight to ten PCs. Current options such as brand protection. Another area involves the need for
radar and night vision, which require substantial software robust configuration change management systems to go
and other in-vehicle IT applications, will be supplemented along with these diagnostic and services systems for
by still-developing applications, such as demand- and receiving software updates and management of vehicle
software-based modifications of car performance charac- configurations. HP is at the forefront of working with
teristics, remote configuration management or car-to-car OEMs on aligning systems and developing new
nodal communications. Similarly, hybrid and new propulsion methodologies and frameworks.
systems will require sophisticated software systems for
management and control.

From a sales perspective, extending the customer • Dealer communication systems seamlessly connect dealer
relationship management (CRM) systems to have common OEM enterprise systems (including CRM) to share data
data about customers and the offering of a Web-based, on OEM policies and products, prospect and customer
end-to-end lead management system could help present information feedback, vehicle repair records, and dealer
and customize a vehicle and the vehicle options, as well survey feedback
as promote and generate new interest, opportunities, and • Warranty management solutions streamline processes
sales potentially with higher margins. In this environment, and practices throughout the entire warranty value
HP works with OEMs to implement warehousing systems chain, from manufacturing, parts traceability, and
with real-time data and the ability to analyze information, engineering data to claims and customer services
such as customer trends, pricing levels, and the impact of
specific campaigns, to better manage and allocate invest- Problem #2: An OEM wanted to help customers quickly
ments and specific marketing budgets for maximum profit visualize vehicles based on customer preferences and
margins. considerations—while in the dealer showroom.

HP has delivered numerous solutions that support HP Solution: A HP technology platform interfaced with the
collaboration between OEMs and dealers, including: vehicle’s actual bill of material (BOM) provides customers
with extremely realistic, and close to real life, representa-
• Global after-market infrastructure as an end-to-end solution
tions of the vehicle the customer wants to purchase. The
that automates and integrates the development and
system allows customers to try different options, change
global distribution of the technical documentation that
color schemes, and add accessories.
guides maintenance and repairs on all vehicles. This
solution makes it easy for dealers to keep pace with Results: The company’s per-dealer sales volumes rose
evolving industry regulations, technologies, user needs, an average of 5%, and average sales prices increased
and the increasing scale and complexity of the global approximately 10%. This is a great example of product
after-market operation. data collaboration and its integration and use between
• Integrated dealer management systems provide OEM and dealer.
standardized management to increase efficiency and
transparency of information sharing. This solution
supports activities such as reliable after-sales service
and ongoing software upgrades for dealers.

Dealership of the future—The ”dealership of the future” concept
incorporates technologies and applications to improve a customer’s
experience when buying or servicing a vehicle. Customers would be
able to configure their cars and potentially take a virtual “test drive” using
real-time simulation. HP printers allow highly personalized output and the
possibility to follow up on customer interests with mailings or multimedia
presentations. This is just one way that HP brings the full value of its
end-to-end solutions portfolio to the automotive industry.

Outsourcing of non-core IT operations and focus on core In fact, HP is the world leader in outsourced SAP
competencies operations, supporting more than 150 companies around
In the shrinking margins of the automotive landscape, the world. Several large OEMs and Tier 1 suppliers have
companies can no longer engage in processes that do out-tasked their first-level SAP application support to HP,
not represent their areas of highest expertise. With a wide which manages this activity with a mix of on-site and near-
range of specialized companies available to handle niche shore teams. HP understands that automotive companies
or non-core activities, the strategy is compelling. must embrace only outsourcing initiatives that protect their
key industrial relationships. HP has an excellent track record
OEMs and their suppliers should focus on their core
of managing all aspects of outsourcing arrangements,
business processes and outsource other operations.
including relationships; this focus is reflected in HP’s
Outsourcing non-core IT operations can complement a
extremely high customer retention rate, as well as its
cost-containment strategy for operating costs, allowing
integration success with new teams and employees.
OEMs to:
• Lower costs on capital investments and decrease asset In the driver’s seat: the changing role
• Decrease the cost pressure on low-end services
of the CIO
As IT is increasingly used to create value for the
• Reduce operational and administration costs business, the role of the CIO is changing accordingly.
• Increase the predictability of costs and control IT departments are transforming from the traditional
• Enhance the quality and consistency of service role of simply providing technology, such as infrastructure
and application management, to finding new ways to
As one of the largest outsourcing and out-tasking suppliers
enable business and process innovation. In this context,
to the automotive industry, HP has delivered numerous
automotive companies need CIOs to shift their focus
solutions that support OEM outsourcing. For example, one
from providing tactical technology solutions to creating
OEM wanted to decrease IT support costs, and at the
strategic business value.
same time, increase the quality of service offered to its
users. The company contracted with HP to manage and
evolve its global desktop environment over the next five
years, supporting the work of more than 87,000 users
in 26 countries worldwide. The client’s executive team,
including the CFO, understood that an experienced
provider such as HP could deliver desktop management
more effectively and efficiently than in-house resources
and services.

Figure 1. The following chart shows Value-Driven Practices
Responsibility Traditional Practices
how a CIO’s responsibilities are
being transformed and are increas- • Align IT objectives and programs to company objectives and strategies
IT strategy and planning • Define, update, and implement IT strategy
ingly being driven by corporate
• Actively manage IT across the group
strategic business objectives.
IT controlling • Align the IT team with performance objectives • Define metrics derived from overall business objectives
• Control performance objectives and overall IT budget

Corporate IT sourcing • Procure software/hardware • Maximize the mix of sourcing options

• Select, manage, and control IT providers • Establish strategic technology exchanges

IT risk management • Align IT risk management within IT parameters • Align IT risk management with companywide risk management

Business process • Delegate to business • Optimize and design processes through IT

• Lack of process know-how in the IT organization • Define and adjust IT standards and technologies

Strategic IT projects • Plan and manage strategic IT projects • Shift more and more to process officers
• Manage project portfolio • Include governance with business process executives

Corporate infrastructure • Define standards and architectures • Optimize costs of services through a mix of internal and
and applications • Consolidate the IT landscape across the group external resources

HP has observed that the CIO role is not only focused on HP has participated in various initiatives designed to help
“on-time or on-budget” measurements but increasingly on CIOs more strategically apply IT to the business goals of
issues related to value contributions—such as increasing automotive companies. For example, HP worked with a
ROI, reducing business process time and costs, improving European OEM to create a new budgeting and investment
brand quality, and achieving a competitive advantage. To system that allocates specific IT investments to the costs and
better align business processes with IT enablement, New business plans of specific new car programs. Now this
positions are being created called process officers, or OEM no longer treats particular IT investments—for example
process integration officers, who are responsible for new applications, enhanced technology capabilities, or
specific automotive processes and IT application support. infrastructure improvements—as overhead; instead, these
These process-IT officers report in dual lines to the CIO costs are included in the investment plan for specific new
and the business units. Other observations include: model vehicles. This approach creates a shared ownership
• Corporate strategic objectives often include IT as a critical between business and IT for the risk and success of the
component of the business strategy. These objectives initiative, including process and organizational changes
cascade into specific business- and IT-integrated activities between business process owners, IT senior executives,
and programs. and program directors. This structure helps ensure that IT
investments have a clear and direct link to the business
• Business process management (BPM) and subsequent
strategy, as well as the profitability and success of new
process improvements are being interwoven with new
model vehicles.
IT approaches, processes, and systems.
• Automotive CIOs increasingly share responsibility for These examples reinforce the changing role of the
specific process improvement goals and increasingly automotive CIO. Organizations that recognize the nature
receive the appropriate resources needed to drive of this change before their competitors can use it to
process innovation programs. achieve competitive advantage.

• CIOs are taking ownership in global standardization

initiatives and are engaged in decisions on core

Table 1. HP's IT Transformation Framework: Creating an Adaptive Business and IT Alignment Strategy
Each phase has multiple, pre-defined deliverables and techniques, depending on the engagement type.

Workshop 1 Workshop 2 Workshop 3 Workshop 4 Workshop 5

Vision and Value Develop Breakthroughs Result Consolidation Governance Model Program Management

Long-term vision and value Develop breakthroughs for Result consolidation and Define the governance Establish a program
proposition for the IT the IT organization Management of Change model to ensure alignment management structure

What value does IT bring Help key business owners Identify programs, milestones, Establish a system of Consolidate and approve
internally to your company collaborate with the heads of and the required allocation of governance bodies and investment proposals
and externally to your key business functions, such as resources and funds their charter
customers and partners? development, logistics, sales, Establish standards for
after-sales, and finance Review the current IT organiza- Define the governance business cases and systems
What are the unique skills tional model and define members to measure ROI
and capabilities of your Identify challenging and re-adjustments and changes
organization today? innovative goals that, when that align on delivering Establish and agree on a list Develop methodologies,
executed with appropriate specific business results and of directions and a calendar processes, tools, and templates
What skills will be required senior leadership involvement, breakthroughs that have been of governance meetings to create consistency
for the future? put a company’s processes previously identified Detail governance based on
How can IT increase its on a new performance level the RASCI model*
(sometimes within 6 to 24 Create a communication plan
contribution to the business? to assure changes are properly
months) Identify all processes and
What would be the elements understood by all stakeholders roles according to the RASCI
of a more proactive IT Segment breakthrough targets model and resolve overlaps
by strategy, milestones, owners, Address the aspects of
organization? Management of Change and gaps
and review points
Publish an IT business plan
and update on a regular
* The RASCI model is a tool for identifying roles and responsibilities during an organization's change process.

The HP IT transformation framework: The IT leadership also defines Management of Change

(MOC) actions that will assist in the support of a successful
navigating the road to the transformation. Such actions include buy-in workshops,
automotive industry’s future a structured communication program, and initiatives
focused on the development of new capabilities and
Every dynamic and globally connected automotive
trainings. Structured MOC activities help ensure higher
company should have a plan that will help it to link
quality implementations.
business processes with IT capabilities and to transform
its IT organizations for greater competitive advantage. The breakthrough objectives and the operational
excellence initiatives have owners in the IT organization
The HP IT Transformation Framework is a blueprint for
and on the business side. The initiatives cascade down
transforming automotive IT organizations to close the gap
through the organization. Progress is tracked through
between business needs and the IT organization’s ability
regular and structured review processes, and the actual
to deliver. Through a series of interactive workshops, IT
financial and operational results are measured and
leaders develop:
• Principles describing IT contributions to business strate-
gies and the OEM’s or supplier’s bottom line These activities create a structured foundation and an “IT
business plan” that help executives create better alignment
• A value proposition stating how IT delivers value to
between business and IT. The plan helps ensure that IT
internal and external customers and stakeholders
programs and investments have a clear impact on
• A set of proposed breakthroughs aimed at achieving business performance.
innovation and first-in-industry innovation to improve or
enhance competitive advantage HP has worked with a number of automotive IT organiza-
tions applying various elements of the HP IT Transformation
• A set of operational initiatives to take IT efficiency to
Framework. Applications include:
higher levels of effectiveness and cost efficiencies
• Working with a European OEM on redefining the role
and contribution of the IT organization, including
governance and implementation of a Balanced Score
Card (BSC) reporting system.

The HP IT transformation framework is designed to create highly visible
leadership around innovation and positive change. The framework maintains
organizational momentum and motivation by:
• Creating and defining communication and dialogue connection points
and methods
• Identifying opportunities to achieve improvements
• Improving knowledge sharing and the re-use of best practices and standards
• Identifying the need for updated team skills and capabilities (which can
help the IT organization provide business value and innovation)
• Minimizing instability and unnecessary disruptions, helping to ensure
that both the transition and transformation are well planned and executed

• Working with a European OEM to define innovative HP’s goal is to help you derive the most benefit from the
breakthroughs in the areas of online ordering, high- knowledge that resides throughout your extended
visibility supply chains, and retail channel integration. enterprise by aligning your business and IT processes.
• Working with a Tier 1 supplier on the reorganization of Every day HP helps forward-looking companies seize
the IT organization, setting up a governance structure, innovative practices and technology to achieve maximum
and the creation of a network of global IT centers business and competitive results. HP is ready to help you
get on the road to change.
In another recent example, a large global OEM asked HP
to help establish a Program Management Office (PMO) About HP’s automotive group
to more effectively manage the stream of IT projects, HP solutions for the automotive industry are focused on
allocations of investments, resources, and associated the integration and collaboration of four key areas of the
MOC activities. The company needed leadership and automotive supply chain environment: from product
coaching for projects within a specific business division to design collaboration and product lifecycle management
increase execution efficiency, improve process capabilities (PLM) to manufacturing and extended supply chain and
and maturity, and create predictable, measurable, and dealer management, sales, warranty, and after-service.
repeatable processes. HP provided project monitoring
and control and became a trusted partner for advice, HP technology, products, and services range from the
communication, and financial management, as well as provision of shop floor PCs and handheld computers
training, delivery, and knowledge transfer across the to integrated global enterprise platforms that can
organization. Today, HP supports six focus area directors include business and application consulting, end-to-end
and 40 project managers, executing more than 75 implementation, and full multivendor support. In addition,
projects annually. More than 90% of the company’s HP delivers superior partnering or outsourcing of non-core
planned deliverables are made on time each year. activities in all forms, from out-tasking to direct business
process outsourcing.

Get on the road to change HP serves most of the major automotive OEMs and suppliers
For every business, being innovative to achieve or and has been working with many of them for more than
maintain competitive advantage is not an option—it is a 30 years. With this history and experience, HP understands
means of survival. In today’s competitive global economic the challenges of the automotive industry and has strong
climate, all organizations must review their internal and alliances, partnerships, global resources, and knowledge
external processes and policies in an effort to maximize that can help companies gain operational excellence and
operational and intellectual assets. Making this change innovation in their market.
requires a partner with the expertise of HP. HP understands
the challenges and difficulties of change—as well as the
associated opportunities—and HP can help your company
convert challenges into true business excellence.

To learn more about HP’s offering, visit
© 2006 Hewlett-Packard Development Company, L.P. All rights reserved. The information contained herein is
subject to change without notice. The only warranties for HP products and services are set forth in the express
warranty statements accompanying such products and services. Nothing herein should be construed as constituting
an additional warranty. HP shall not be liable for technical or editorial errors or omissions contained herein.

4AA0-4639ENW, March 2006