Work-subsidized home computers a frill ?: ; Many companies balk at programs meant to improve employee skills, boost loyalty

CHICAGO - When Ford Motor Co. started offering employees a homecomputer, printer and Internet access for $5 per month, many workerssuspected a ploy to get them to work at home as well as at theoffice.

Instead, more than a year after the program was introduced,employees at Ford's South Side Chicago plant use their company-subsidized computers to swap jokes via e-mail. One worker with a CDburner linked to his PC collects CDs from other plant employees tomake music mixes.

"We have our own Napster going at work now," joked plant employeeDoug Matlock, referring to the online music trading service.

Ford, Delta Airlines and about a dozen other companies whichstarted computer subsidy programs last year believe that havingemployees play around with their home computers will result in amore technologically literate work force, boost employee loyalty andeventually drive down costs by shifting paper-heavy processes likebenefits enrollment online.

The programs have been extremely popular among eligible workers,particularly those at Ford.

But the benefit has not been widely adopted at other companiesamid growing skepticism about whether it represents a costly frill.Many firms question whether the feel-good subsidy would ever enhancebottom-line results, especially since the number of households withInternet access continues to grow without a nudge from employers.

"It's like a lot of the e-business and Internet craze," said MikeChristie, a human resources consultant for Hewitt Associates inLincolnshire, Ill. "There was an initial splash ... [but now] we'reback to reality."

This is not to say that companies' interest in a wired work forcehas disappeared as quickly as dot-com start-ups.

Instead of paying for a portion of a worker's home computer, morecompanies are now lining up other deals for employees. Many firmswork out arrangements with PC makers to extend corporate discountsto employees' home computer purchases.

Others pay for home computers, then deduct the expense frompaychecks over the next two to three years. The employee gets whatamounts to an interest-free loan, while the employer doesn't take abottom-line hit.

General Motors and DaimlerChrysler responded to Ford's program byoffering employees $3-a-month Internet access through AmericaOnline, but the automakers declined to say if they are subsidizingthe arrangement.

"It seems like a lot of companies still want to do [computersubsidies], but there's a lot of pressure from the boards about 'Isthis a good use of our money?'" said Eileen Block, a businessdevelopment manager for Dell Computer Corp.

Corporate coffers weren't sealed so tightly when Ford and Deltaannounced their programs in February 2000, before the Internetbubble burst and the economy soured.

Under the three-year programs, Ford workers pay $5 per month andDelta employees $12 each month for a basic desktop model that theykeep when the payments are completed. Internet access is included,and workers have the option to pay more for faster computers,laptops and other upgrades.

Employees have snapped up the machines.

At Ford, 165,000 of 188,000 eligible workers in the United Statesand Philippines - or 88 percent - bought computers through theprogram.

Delta, which offered a lower subsidy, saw a corresponding drop inparticipation - 72 percent of 76,400 eligible employees gotcomputers.

Delivery, income tax, Internet connection issues

Rolling out the programs has proven more difficult than thecompanies anticipated, particularly outside the United States,because of delivery, income tax and Internet connection issues inindividual countries.

Ford, which initially hoped to ship computers to allparticipating employees by February, recently suspended the programuntil it can work out a distribution plan for its 150,000 employeesabroad who haven't yet been able to buy a computer. The companyexpects to resume the program later this year.

"It has been a complex rollout," said Ron Iori, Ford's directorof global operations. "We've run into a lot of hurdles."

What Ford and other companies have gotten out of the subsidyprograms is unclear. Neither Ford nor Delta has studied the economicbenefits of the program, though both say anecdotal evidence pointsto a better informed work force that is more comfortable withcomputers.

"I don't think he'd ever used [a computer] before"

An incident Matlock witnessed last year at the Ford plant at126th Street and Torrence Avenue underscored why companies wanttheir employees more comfortable with computers.

The plant's medical center had recently replaced its sign-insheet with a computer, but the machine baffled a worker. Wheninstructed to use the mouse to enter his name and Social Securitynumber, he picked up the mouse and held it against the monitor.

Matlock and others had to fight off their laughter.

"I don't think he'd ever used [a computer] before," said Matlock,a general utility worker who fills in at various posts in the plant.

After Ford introduced its computer subsidy program, new softwareapplications and Internet experiences became regular topics ofdiscussion among Matlock's lunch group. Employees now preview Ford'snew vehicles online, read car buyer's comments on chat boards, andget e-mail updates from Ford executives about the Firestone tirerecall.

"There are more and more people that seem to be getting good useof it," Matlock said.

American Airlines program to cost $15 million

Ford and Delta declined to say how much they have spent on theprograms, although American Airlines, which offered employees abasic computer for $12 a month, said it expects the three-yearprogram will cost the company $15 million annually.

These companies hope having their workers tooling around onlineand trying various software packages will eventually pay off.

Many firms are starting to push employees to make benefitschanges and file expense reports online. They are also makingvarious forms available on the company's in-house network to cutdown on distribution and printing costs.

Delta currently lets employees, who can fly for free, checkonline how many seats are available on particular flights instead ofcalling in for updates. The company also expects to move itsschedule bidding process online.

"The economics are still pretty promising," said Roger Kay, apersonal computer analyst for research firm IDC.

"You can get employees to do certain functions in a much lower-cost way."

Idea of companies paying isn't gaining momentum

Yet the idea of companies digging into their own budgets to getemployees online isn't gaining momentum.

This is clear in the current troubles at PeoplePC Inc., a SanFrancisco start-up that won contracts to get Ford and Deltaemployees online.

PeoplePC initially thought it would make money after it soldcomputers, steering the buyers to a group of online retailers, whichwould share profits from those sales. Now PeoplePC is trying to alsomake money with the initial computer sale.

Although the company is among the few survivors pushing abusiness model for free or near-free computers, PeoplePC has yet toturn a profit. The company posted a $36.2 million loss during thefirst quarter, and its stock, which is in danger of being delisted,closed at 14 cents Tuesday, down from its 52-week high of $10.37.

While PeoplePC sells computers from a variety of manufacturers,it must now contend with a price war underway between Dell, Gatewayand other computer makers.

The company also must convince employers that they need to createincentives to get workers online, although the number of people withhome Internet access continues rising without such assistance.

Number of households with Internet access jumps

According to the U.S. Commerce Department, the number of Americanhouseholds with Internet access jumped 58 percent between December1998 and August 2000, from 26.2 percent to 41.5 percent.

PeoplePC said it works with 15 clients worldwide, but about halfof those companies just negotiate discounts for their employees andmarket the deals internally.

Without a subsidy, the number of workers who take offers declinessignificantly.

Last fall, Pittsburgh-based health insurer Highmark Blue CrossBlue Shield started offering employees a basic computer and Internetservice for $21.95 per month. About 10 percent of the company's8,000 employees took advantage of the offer, which Highmark did notsubsidize.

Moving beyond employee-only computer programs, PeoplePC is tryingto persuade long-distance companies, health insurers, credit cardissuers and other firms to pitch computer deals to their customersin hopes of building stronger ties with them.

Highmark extended its employee deal to the insurer's nearly 3million members, but only 1,400 people - less than 1 in 2,000members - took the offer.