Covisint is emerging as the industry's dominant online trade exchange, but it's not the only one.
A group of eight Tier 1 suppliers, known as S8 - Dana Corp., Delphi Automotive Systems Corp., Eaton Corp., Robert Bosch Corp., Tenneco Automotive, Timken Co., TRW Inc. and Valeo Inc. - recently concluded studies on business-to-business Internet technologies.
The studies were widely expected to lead to collaboration on future projects, including the possibility of a Covisint alternative. But each member will pursue its own approach to e-business.
Meanwhile, Covisint has cleared regulatory hurdles in the United States and Europe and in October sponsored the first live component auctions for ArvinMeritor Inc. and Delphi.
But Covisint has not convinced everyone of its advantages. The prospect of a European competitor to Covisint is being kept alive by Volkswagen. Although keeping a relatively low profile, VW is developing its own exchange, the Electronic Supplier Link.
VW's initiative is in partnership with U.S. software companies i2 Technologies, Ariba and IBM. The Web exchange is young and has not attracted other automakers despite VW's assertion that it is open to everybody.
BMW, also linked with Ariba, is pursuing its own business-to-business Commerce Platform, although it excludes auction capabilities for production parts.
TECCOM HAS SUPPORT
Although Covisint looks dominant in the supplier market, it is likely to face fierce competition from Internet aftermarket exchanges.
One is the recently formed TecCom, a European online procurement exchange for the aftermarket backed by 21 suppliers including Bosch, Valeo, Delphi, Magneti Marelli S.p.A., Continental Teves and ZF Friedrichshafen AG.
TecCom is aimed at streamlining business processes in a notoriously fragmented sector. It would allow suppliers, distributors and repairers to manage orders and deliveries online, in addition to managing inventories and invoices.
Despite the significance of VW's independent strategy announced in April, the company has played down its potential role as a focal point for a European competitor to Covisint. The ESL operation has involved more than 100 individuals from six companies, including Ariba, i2 Technologies, IBM, gedas consult GmbH, A.T. Kearney and VW.
Development work has proceeded in a low-key atmosphere. But alliance partners already have created VW's business-to-business marketplace strategy and rollout plan. Along with the first business release of the software, they have designed a new business-to-business Web infrastructure based on IBM's WebSphere standards, and integrated i2 and Ariba applications with VW's legacy systems.
Despite the lack of publicity about ESL, VW purchasing boss Francisco Javier Garcia Sanz gave details of the program at the Formel Q supplier awards in Sardinia, Italy, in mid-October.
Sanz believes VW's exchange platform is the logical extension of its procurement strategy.
'With total group procurement volumes of some $43.8 billion distributed principally across three regions and nine different brands, we represent a powerful market potential in our own right,' Sanz said.
ESL is through the pilot stage and like Covisint, already is holding online auctions with a goal of completing 100 auctions by year end. Sanz said suppliers are being asked to make bids online, and extra procurement and logistics features will be added. Full rollout for ESL is scheduled for the beginning of 2001.
'Our expectations for this online marketplace are high but thoroughly realistic.' Sanz said. 'By making our procurement processes substantially leaner and faster, we intend to shorten throughput times by up to 70 percent and cut costs by up to 60 percent.'
VW and BMW AG's decision to pursue their own networks means that just one major European carmaker - PSA/Peugeot-Citroen SA - has yet to make its Internet procurement strategy clear. Renault has joined Covisint with Ford Motor Co., General Motors and DaimlerChrysler, and Fiat has aligned itself with Covisint through its link with GM.
PSA Chairman Jean-Martin Folz said in September that the company will participate in marketplaces but has yet to define its strategy.
This could mean joining Covisint, but collaboration with VW's ESL cannot be ruled out.
In the meantime, PSA will launch a supplier portal early next year, designed to function as an information exchange for parts prices, quality control and logistics. The portal also will provide an electronic data exchange interface between suppliers and PSA's Ingenum engineering platform. But a major decision on global parts purchasing on the Internet remains.
The decision by the S8 group of suppliers to end their joint studies on business-to-business initiatives suggests the chance of a supplier-initiated e-marketplace to rival Covisint is slim.
Some suppliers continue to criticize the massive power that Covisint will wield. But many acknowledge that, in the supplier arena, Covisint offers a compelling package in terms of procurement, supply-chain management and product development.
But the S8 group says its time was not wasted. Kevin Moyer, vice president and director of e-business at Dana, believes that through the S8 collaborative exploration, all participants gained a better understanding of new technology and how to use it most effectively.
'Each company will use this knowledge to enhance its own technical capabilities and to complement the endeavors of its customers,' he said.
For some suppliers, joining Covisint will not be the end of their e-business strategy. In early November, BorgWarner announced its intention to join Covisint while also forming partnerships to maximize the effectiveness of its e-business strategy.
These partnerships will include working closely with Cisco Corp., International Internet Consulting Corp. and GE Information Systems.
Jack Kalina, BorgWarner Automotive Inc.'s chief information officer, said: 'Joining Covisint is one of several steps we are taking to leverage potentially valuable forms of information technology across our organization.'
Other suppliers still prefer a route independent of Covisint and other collaborative e-marketplace options.
Magneti Marelli recently signed an agreement with FreeMarkets Inc.
The U.S. company will provide the Italian supplier's powertrain systems operation with access to its business-to-business e-marketplace for a selected number of components. This will enable Magneti Marelli to take advantage of the opportunities that online buying can offer.
'It is important for us to start to test new ways of purchasing goods and services,' said Umberto Basilari, Magneti Marelli purchasing vice president.
FreeMarkets has worked with other auto suppliers, including Visteon, Eaton, Navistar International and Delphi.
Covisint looks unlikely to have a number of competing Web procurement networks in the auto industry.
Many industry observers worried that the creation of too many business-to-business trade portals would undermine their ability to function efficiently.
Predictably, Covisint's members are pleased. Several of them had expressed concern about possible rival exchanges, especially those initiated by suppliers themselves.
Peter Weiss, one of the temporary CEOs of Covisint, says even the idea of an online exchange linked to the aftermarket is unnecessary. Weiss believes Covisint could be used to streamline aftermarket distribution.