As Covisint names its board of directors, it is clear that interior suppliers have, quite fittingly, become insiders. Three of the five directors from suppliers represent seat makers: Magna International Inc., Johnson Controls Inc. and Lear Corp. Their selection highlights the arrival of interior suppliers to the front ranks of suppliers. And it is a sign that Covisint expects them to be key players.
Covisint is the online trading exchange created by DaimlerChrysler AG, General Motors and Ford Motor Co. Temporarily based in the U.S. city of Southfield, Michigan, the fledgling company filled 12 of its 17 board seats in January. (A complete list of directors is on Page 45.) Directors from interiors companies are:
James Keyes, chairman of Johnson Controls Inc.
James Vandenberghe, vice chairman of Lear Corp.
Don Walker, CEO of Magna International Inc.
The appointments come as General Motors is taking steps to allow seat makers to design complete interiors for cars and trucks. Covisint needs the most powerful suppliers on its board. Though it was created by Detroit's Big 3 automakers, the exchange is meant to be independent. But its lineage has raised fears that the company will favor automakers, particularly in online parts auctions.
'I think that when the smaller suppliers see these kinds of people elevated to board positions, it should be clear to the supply community that we're very serious about being independent,' says Covisint spokesman Dan Jankowski. 'These men are strong leaders in their own right. They will represent the concerns of suppliers. They'll be advocates for them. The other suppliers should rest assured that they will do that.'
But a spokesman for smaller suppliers has doubts. Neil DeKoker, managing director of the Original Equipment Suppliers Association, says his group has requested one of the five remaining board seats. Having Lear, Magna and Johnson Controls on the board lends influence to Covisint, he admits. The large interior makers 'have a very large buy from a number of suppliers.' They will help to establish Covisint as a market in which suppliers must participate.
But DeKoker believes Covisint must demonstrate that it will not be biased in favor of big suppliers. Smaller vendors see large suppliers such as Lear, Magna and others as customers rather than peers. And that causes tension between the two groups.
'There's a feeling by some of the smaller suppliers that (big suppliers) don't represent their interests,' DeKoker says. 'They say, 'These are the people I'm struggling with every day.' '
Jankowski counters that Covisint offers benefits beyond parts auctions. Supply-chain management and data sharing will help smaller suppliers manage inventories, he says. In pre-Internet days, small suppliers often were slow to learn about automakers' production plans. So when automakers shut down assembly lines, suppliers were stuck with excess inventory.
But it seems clear that the big interior suppliers may benefit most from Covisint's supply-chain management. That's because a vehicle interior involves thousands of parts, dozens of colors and a variety of materials. These require interior suppliers to manage numerous smaller suppliers and coordinate design and production.
The price of failure is high. The interior is the main area that customers consider when they form opinions about vehicle quality.
The influence of Magna, Lear and Johnson Controls on Covisint will be amplified by General Motors' new policy on interiors. By the end of March, the automaker plans to put a single supplier in charge of the interior for each new vehicle. The chief supplier will oversee design and development, and it will manage other suppliers. Eventually, this strategy will apply to all GM vehicles around the world, supplier sources say.
General Motors will continue to manage key aspects of interior design. The automaker retains control over purchasing, and the suppliers will use GM engineers and designers assigned to the vehicle interior program.
The automaker's move is a bold departure from the limited role automakers gave interior suppliers in the past. The strategy has been implemented gradually over the past four years. Last year, GM awarded Lear a contract to install the complete interior in luxury versions of its full-sized vans. That was a small-volume program that was well suited for such an experiment.
Next, General Motors asked Johnson Controls to integrate the interiors of the Pontiac Grand Prix and Buick Regal. Those mid-sized sedans are due in 2003 and 2004. Johnson Controls will supply the complete interiors except for seats.
General Motors spokesman David Barnas says the three interiors companies were quick to participate in Covisint. That helped them gain a central role in the exchange. 'They are three of the industry's leading suppliers in terms of developing new technologies and new ways of doing business,' he says. 'It makes all the sense in the world that they're on the board of Covisint.'
Writer Robert Sherefkin contributed to this article.
E-mail Managing Editor Dave Guilford at [email protected]