Chrysler

A GPS maker shifts gears

March 8, 2012: 5:00 AM ET

With its core business in decline, wireless tech company Garmin tries to move into the dashboard.

By Erik Rhey, contributor

FORTUNE -- Remember KITT, the loquacious in-car computer on the television show Knight Rider? David Hasselhoff's digital friend has nothing on a new generation of dashboard "command centers," which combine smartphone docking stations with navigation systems once dominated by standalone GPS (global positioning system) products.

In response to this competition, Garmin (GRMN), the biggest maker of personal navigation devices, is, well, changing gears. The company, based in Olathe, Kans., is partnering aggressively with automakers to embed GPS systems in dashboards instead of relying on device sales, which have declined sharply as consumers increasingly use their smartphones for directions and maps. In fact, publicly traded Garmin's in-dash sales are helping sustain its auto division, which saw year-over-year sales climb 4% in the fourth quarter, boosting the company's 2011 revenue to $2.7 billion.

Garmin's biggest in-dash contract is with Chrysler, which is using Garmin GPS hardware and interface in certain Uconnect dashboard systems for several Jeep, Dodge, and Chrysler models. The tech company is also working with Honda and Toyota (TM) on dashboard systems for the Asian market.

Despite the rise of smartphones, many of which have built-in GPS's, Garmin executives maintain that there's still a need for dedicated navigation systems. Indeed, most phones aren't optimized for use when driving; it is dangerous to steer and hold a phone to look at its display, and GPS apps can also crash if multiple apps are running. "People who are on the road a lot want a reliable signal, a big display, and generally a dedicated personal navigation device," says company spokesman Ted Gartner.

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To build the navigation in Uconnect, Garmin turned to one of its other business units, which makes guidance and avionics systems for airplanes, marine vessels, rental cars, and other fleet vehicles. Clint Steiner, director of the Garmin division that sells to automakers, says the company spent six years developing a consumer in-dash system (known internally as the Everest Project). Its aim was to bring the "glass cockpit" experience it was providing to airplanes and ships to everyday drivers.

Garmin isn't ignoring the iPhone phenomenon. In fact, it has teamed up with computer maker Asus to build a Garmin-branded smartphone of its own (with built-in GPS, of course). Its technology for Uconnect can synchronize with a user's smartphone to stream music, make calls via Bluetooth, send voice-to-text messages, and more.

And Garmin has its own app available for the iPhone and devices that run on Google's Android operating system. StreetPilot onDemand lets drivers do everything from check for traffic jams to look up their destinations on Wikipedia -- and that's something KITT definitely couldn't do.

This article is from the March 19, 2012 issue of Fortune.

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