|
Big Three get B2B OK
|
 |
September 11, 2000: 2:34 p.m. ET
FTC praises online purchasing, clearing competitors to join efforts
|
NEW YORK (CNNfn) - Federal antitrust regulators have given a green light to an online purchasing joint venture among the Big Three automakers, opening the door for similar efforts in other industries.
The joint venture, known as Covisint, faced an investigation by the Federal Trade Commission, which was seen as setting a precedent for industry-wide B2B online purchasing cooperatives now being set up. The German antitrust authority Bundeskartellamt is looking at the joint venture as well, but officials with the automakers said they are hopeful that review will be completed soon.
The company could start handing online transactions between automakers and their suppliers within 30 days after the German approval, said Alice Miles, the lead contact with Covisint for Ford Motor Co., one of the venture's founding partners.
On Monday, the FTC issued a statement saying it was ending the investigation, and saying these kinds of ventures hold great promise, although it said it reserves the right to examine the effort as it gets up and running.
"B2B electronic marketplaces offer great promise as means through which significant cost savings can be achieved, business processes can be more efficiently organized and competition may be enhanced," said the statement from Robert Pitofsky, the chairman of the FTC.
Covisint is a joint venture among leading automaker General Motors Corp. (GM: Research, Estimates), No. 2 Ford (F: Research, Estimates) and German-American automaker DaimlerChrysler AG (DCX: Research, Estimates).
A staff member at FTC had said earlier the agency wanted to examine the information that would be shared to make sure it isn't used in price fixing or putting undue pressure on suppliers to lower prices. The automakers have insisted that bidding would be done confidentially, and that the greatest savings would come from better inventory management and efficiency, not from squeezing suppliers' prices and profit margins.
 Besides helping the automakers, the approval could be a boost to their technology partners, Commerce One Inc. (CMRC: Research, Estimates) and Oracle Corp. (ORCL: Research, Estimates). Commerce One could get a particular bump because it has won the contract for some of the other industries where competitors are joining to form these kinds of joint ventures.
An FTC staffer, who spoke on the condition she not be identified, said that the decision Monday was specific to Covisint, although she did not deny it was good news for the joint ventures in industries such as oil, aerospace and retail, where similar joint ventures between competitors are in the planning stages.
"The commission has no interest in squelching it (the online B2B marketplace)," she said. "Having said that, every one of these will be judged on its own merits."
The automakers said they were pleased by Monday's announcement.
"We believe this represents a major milestone," said Miles during a telephone press conference Monday afternoon.
The approval could help spur Covisint to select a chief executive. Miles said the potential candidates are down to a "short list" made up of executives from outside the auto industry.
GM and Ford initially announced plans last fall for competing online purchasing ventures. They announced plans in January to join their efforts at the same time they brought in DaimlerChrysler as a partner. French automaker Renault SA and its Japanese partner, Nissan Motor Co., are also participating in the effort.
Covisint will be a stand-alone company with its own management. The automakers expect to eventually divest some of their equity interest in the venture into a publicly traded company.
Covisint is expected to handle as much as $1 trillion of annual purchases made by automakers and auto parts suppliers, positioning it to become one of the largest e-commerce companies soon after it begins operations. The Big Three have purchases of about $240 billion annually, while Renault and Nissan add about $60 billion to the mix. Their 30,000 suppliers have purchases the exchange hopes to handle worth about twice as much as the automakers themselves, and Miles said Covisint is still hoping to attract other major automakers, such as Toyota, to start using the service.
If the major automakers are able to use the efficiencies of the Internet to cut only a few percentage points of costs from the purchasing process, as anticipated, it will mean billions in annual savings for each. Miles said it was too soon to estimate what percentage savings might be achieved, though.
Miles also could not give an estimate as to how much in purchase are likely to go through the exchange in its first year, or how much in fees the companies using the exchange will pay to handle their purchases.
"It won't be 100 percent," she said of the estimated business volumes in the first year. "It's a migration over time, and it varies product by product. But we're now taking a look at how do we approach the (automakers) in a way to migrate their buying as quickly as possible."
Miles also would not say when the joint venture might be break even, although she said, "We will not be dependent upon the founding partners." An initial public offering for Covisint is still possible as soon as next year, she said.
Shares of GM gained $1.35 $75.56 in trading Monday, while Ford shares slipped 31 cents to $26. Shares of DaimlerChrysler closed up 0.60 euro to 58.20 euros in Frankfurt trading Monday, as its American depositary receipts edged down 25 cents to $50.
Commerce One shares gained $4.56 to $75.94 in trading Monday, and a number of other leading B2B stocks gained. But Oracle lost $2.25 cents $85.31. 
|
|
|
|
|
 |
|
