STRASBOURG, France - Automakers and suppliers have delved into online auctions this year but have been tight-lipped about releasing figures on how much, if anything, they have saved.
Ford Motor Co. broke the silence last week during the Automotive News Europe e-Business Conference here. The automaker, which has done 65 online auctions so far this year, has saved about 19 percent, or $38 million, on sales of more than $200 million in online auctions, said Andy Eggleston, vice president of Ford of Europe's Consumer Connect Europe.
'So far, penetration has been very, very slight,' he said.
Ford's annual purchasing totals $91 billion. About $13.5 billion of that is production and nonproduction commodity items, Eggleston said. If Ford auctions the entire $13.5 billion in commodities, a 20 percent savings could be $2.7 billion, he said.
'We have saved on things like gear knobs for Ford, leather seat covers for Land Rover and flange nuts for Volvo,' Eggleston said. 'There are significant savings for us to make just by changing the way we do business.'
Ford had been doing auctions on its auto-xchange, but now that Covisint is online, it will shift auctions to this partnership with General Motors, DaimlerChrysler, Renault SA and Nissan.
'These are people we competed with bloodily for almost 100 years,' Eggleston said. 'All of a sudden we're sitting around a table discussing how we might realize gains for each other by working together and sharing the cost of developing this infrastructure.'
The growth of online auctions will be exponential, he predicted.
'The fact is it spreads very quickly like a rash all over the globe,' Eggleston said. 'It will be many hundreds next year and thousands after that.'
The lowest bidder does not always land the contract - other criteria are involved, he said.
E-business may be a boon to smaller suppliers, Eggleston said: 'Some of the smaller suppliers with good niche products will be able to get access to a much greater global marketplace that would help them to grow and survive, whereas before they may not have done that.'