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Latest CEO of troubled online car parts marketplace Covisint sees signs of turnaround

Detroit. Covisint, the struggling online marketplace for car suppliers and manufacturers, isn't on its death bed and has started its recovery. That's the implied message of Bob Paul, who in June was named Covisint's fourth CEO since its launch three years ago.

Although its three original backers -- Ford Motor Co. General Motors and DaimlerChrysler -- stopped funding the company in March 2002, Paul predicts the company will make a profit in 2003. The company has reduced its costs by cutting staff and scaling back its range of products. It also has high hopes for a new messaging service that will allow suppliers to exchange electronic documents.

"In May we made a profit for the first time. We also made a profit in June," Paul said. He rejected rumors that the end is near. "That is rubbish. Those rumors exist since our founding. On the contrary, I expect that in 2003 we will make a profit for the first time. Our situation was never as good as it is now."

The revenue goal for 2003 is $58 million to $60 million, up from $51 million, Paul said.

At the height of the dot-com boom, Detroit's Big Three had high hopes for the e-commerce potential of Covisint, but their expectations are now lower.

In January 2002 a top GM purchasing official announced that by the end of 2002 the joint platform would handle all $85 billion of its purchasing requirements. His successor Lothar Hesse, the head of IT and Supply Power at the GM-Fiat-purchasing joint venture, said that currently approximately 20 percent of purchases are made through Covisint.

"We are happy with the offers at Covisint. However, we are not planning to make all our purchases through online auctions," Hesse said, adding that auctions are a "useful alternative." DaimlerChrysler, another founding member, did not comment on the subject.

Although a third of Covisint's $51 million in earnings last year came from Europe, the company has fallen to approximately 40 employees in the region. Worldwide the company, which employed 400 in June 2002, is now down to 220 staff. Its Frankfurt branch, which had 16 employees in December 2002, is now down to 12 people.

The former Europe boss, Lars Olrik, left the company two months ago, together with marketing director Camilla Levinsen. So far no successor for Olrik has been appointed.

"The control of Covisint has been centralized during the past six to 12 months. To give an example: we now only have one finance department worldwide," said a Covisint spokesperson based in Southfield, Michigan.

In June the largest electronic marketplace for the automotive industry reached 100,000 registered users. "That is a very important mark," said Paul. However, he would not disclose how many of those companies were actually doing business with Covisint. Last December it was only 5,000 out of 12,000 registered companies.

Since its founding Covisint has held more than 4,500 online auctions worldwide. Last year there were 2,200 auctions, up a quarter from the year before.

Paul is enthusiastic about the potential of an "innovative messaging system" which will be in use from December. For financial reasons Covisint has pulled out of several other product lines.

Despite all the upbeat predictions, the company is not on track to reach ex-Covisint-CEO Kevin English's target of floating on the stock market by the end of 2003. Paul said a flotation would become realistic "in one or two years time at the earliest."

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