Big Three Automakers Join Forces Online

FRAMINGHAM (02/28/2000) - In an unprecedented move, the world's three largest automakers - General Motors Corp., Ford Motor Co. and DaimlerChrysler AG - last week unveiled plans to join forces on a common Internet automotive trade exchange.

The three carmakers will share equal equity stakes in the as-yet-unnamed new venture, officials said. The new exchange will operate as a separate company and from a new URL. It will offer procurement transactions for the Big Three automakers, other automotive manufacturers, and their extensive supply chains.

Officials estimate that annual transactions of $240 billion among the Big Three and their suppliers, plus $500 billion among the suppliers and other companies, could take place over the exchange once it's operational.

Over the past few months, GM and Ford volleyed announcements back and forth regarding their respective trade exchanges. Earlier this month, Ford launched its auto-xchange.com with Oracle Corp. and Cisco Systems Inc. In January, GM and technology partner Commerce One Inc. opened TradeXchange for auctions and online sales. Daimler-Chrysler kept dormant while searching for a technology partner.

While short on the details, upper management or name of the firm, officials said the new company would seek an initial public offering. Harold Cutner, group vice president of worldwide purchasing at GM, said an IPO would "provide confidence in the supply base" and "help drive waste and cost out of new system."

Analyst Bruce Temkin of Forrester Research Inc. in Cambridge, Mass., applauded the move. "The industry is better served by a neutral market place, than by competing collections of parochially controlled market places," he said. "The value comes from fluidity across the supply chain, but if each supplier is forced to participate in multiple exchanges, they loose that fluidity."

Forrester Research Inc. in Cambridge, Mass., predicts business-to-business Web auction sales will expand to $52 billion in 2002 from $8.7 billion in 1998.

GM officials said automakers in which it owns an equity stake would participate in the new exchange, including Saab in Linkoping, Sweden, Fuji Heavy Industries Ltd. in Tokyo, Isuzu Motors Ltd. in Tokyo and Suzuki Motor Corp. in Hamamatsu, Japan. Ford partner Mazda Motor Corp. in Hiroshima will also participate.

Analyst Bruce Bond at Gartner Group Inc. in Stamford, Conn., said the new deal creates big winners and losers. "Clearly, the suppliers win here because they have a single environment to connect to and one set of integration work to do, instead of what could have been three," he said. But software vendors SAP AG and Ariba Inc. both lose out as each plans to build automotive trade exchanges.

Because the new exchanges level the playing fields among competing automakers, Bond added that technology infrastructure and the ability to share design plans online will become a key differentiator between auto manufacturers and their closest suppliers in a few years.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

More about AribaCiscoCommerce OneDaimlerChryslerFord MotorForrester ResearchGartnerGartnerHolden- General MotorsIsuzu MotorsMazda AustraliaOracleSaabSAP AustraliaXchange

Show Comments
[]