E- business: the new game in town

With the initial formation of Covisint in February 2000, and with other online ventures established over the past couple of years, the automotive industry has thrown its chips into the B2B e-commerce game. The following is an update on how the industry is faring now that its cards are on the table.

What e-business can provide to automotive manufacturers and suppliers has been well stated and has become a sort of mantra: improved product quality, reduced costs, and shortened time-to-market cycles. These gains can be achieved via the Internet's boundless architecture, which permits the free flow of information and ideas in real time among OEMs, suppliers, and dealers. The benefits of e-business are more than just a mere incantation, however, as Internet-based marketplaces, or exchanges, and other virtual technologies are being used more and more for procurement, supply chain management, product development, customer relations, and other business functions-and are proving to be efficacious.

Unlike Electronic Data Interchange (EDI) systems, which are limited to OEM-Tier 1 relationships, business-to-business (B2B) exchanges integrate all players (Table 1). The largest and most recognized automotive trading exchange is Covisint, members of which include DaimlerChrysler AG, Ford Motor Co., General Motors Corp., Nissan Motor Co., and Renault SA as well as technology providers Commerce One and Oracle. Until somewhat recently, several issues regarding the future of Covisint had been up in the air, most notably, when the exchange would be launched. However, this past September Covisint received pre-formation regulatory clearances from both the U.S. Federal Trade Commission and the German Bundeskartellamt. Later that same month, the joint-venture exchange began operations with a “soft launch,” which allowed early supporters of Covisint to use its products without revenue generation for the exchange; in December, Covisint changed from a planning organization to a Delaware limited liability company.