DETROIT - Ford Motor Co. wants to ride the coattails of high-flying Internet stocks.
Ford plans to take public units of its new e-commerce group, capitalizing on the phenomenal market value of Internet stocks.
The two most likely candidates are AutoXchange, a Web-based parts-purchasing network, and Telematics, which operates Ford's in-vehicle communications.
Ford also will use the stock offerings to recruit and retain e-business experts, a new breed of employee not enamored of staid Rust Belt industries.
HIGH STOCK PRICES
Ford will begin the spinoffs within 18 months, although a move could come sooner, said Jim Gouin, CFO of Ford ConsumerConnect, the company's global e-business organization. Ford created the unit in November 1999.
'The concept is that e-businesses are trading at huge (price-earnings) multiples,' Gouin said. 'Why not buy a Ford stock that has all of this e-business captured in it?'
The stock values of Internet stocks are sky high. For example, the total value of Yahoo! Inc.'s common stock is $92 billion, while General Motors' stock is worth $53 billion. Yahoo!'s 1999 revenues were $589 million; GM's were $154 billion.
Two Ford e-ventures, AutoXchange and Telematics, are the most ripe for initial public offerings, said Brian Kelley, president of ConsumerConnect, which oversees five e-commerce groups. In addition, other ventures under discussion but not yet announced may be IPO candidates, he said.
In November, Ford formed AutoXchange, a joint venture with Oracle Corp., the world's largest database company. AutoXchange is creating an online network that will communicate with thousands of global suppliers. The joint venture will charge suppliers fees based on the size of their transaction.
Because Ford spends about $80 billion annually with suppliers, fees could exceed $1 billion within 18 months and $5 billion within five years, Oracle President Ray Lane said in November. Ford wants other manufacturers to use AutoXchange.
'We are in discussions with virtually all of the major automakers,' Kelley said last week. He would not disclose details.
Despite the fee, suppliers will save, he said. 'If a supplier pays $5,000 to the new entity, they will still double or triple that in savings,' Kelley said, citing efficiencies in inventory and processing efficiencies.
In November, General Motors also created a cyberspace market for suppliers and dealers called TradeXchange.
There is likely to be room for only four Web-based supplier networks in the total auto industry, said Alice Miles, president of Ford Business to Business, the ConsumerConnect unit overseeing AutoXchange.
Other manufacturers are likely to rely on AutoXchange because they will be able to tap into an existing framework quickly, Gouin said.
Incidentally, GM received options for 4.8 million shares of Commerce One Inc., the small online procurement specialist that created TradeXchange for GM. Those shares last week were worth about $800 million. GM did not say how much it will pay for those shares.
Telematics, ConsumerConnect's in-vehicle communications unit, is the other group Ford is most likely to spin off, Kelley said.
'There is a revenue stream from Telematics,' Kelley said. 'We charge the consumer a small fee each month for the technology.' Telematics refers to in-vehicle technology such as wireless phones, navigation systems, satellite radio and Internet connectivity.
For example, last week Lincoln said some models will have a standard voice-activated communications system in the 2001 model year. Ford expects to roll out the in-vehicle technology to its entire lineup in North America and Europe within two to three years, the company said last week.
Lincoln customers will receive the technology at no charge for six months. Monthly fees will then range from $9.95 to $30, depending on the level of service provided.
The spin-off strategy also will help Ford attract employees accustomed to working in free-wheeling Internet businesses with valuable stock options.
Ford is forming many partnerships with leading Internet companies such as Oracle, Yahoo!, Microsoft and others.
'These companies attract very young, bright, entrepreneurial type of people,' said Robert Rewey, Ford group vice president of consumer services and North America. 'To form a company like AutoXchange and not have high turnover, you almost have to have some way for them to participate in the enterprise. If you don't, they will learn how to do it and be out the door.
'If we are serious about making Ford an e-sensitive business, we have to have different ways of attracting and retaining the very best employees, something very different than the way we hire people for engineering, manufacturing or marketing.