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Covisint to sell auction business

The struggling online marketplace for suppliers and manufacturers in the automotive industry wants to concentrate on its supplier portals and data messaging services.

Covisint, a struggling online marketplace for the auto industry, announced on Wednesday plans to sell its auction services business.

Southfield, Mich.-based Covisint, a former high-flying company formed by a coalition of major automakers, plans to divest the auction services business as it focuses on its supplier portals and data messaging services. FreeMarkets, an online business-to-business services company based in Pittsburgh, is the buyer; terms of the deal were not disclosed.

"The sale of our auction services to FreeMarkets is a logical and evolutionary step as we continue to focus our strategy on the Automotive Industry Operating System and delivering supplier management portals and data messaging services," said Bob Paul, Covisint chief executive, in a statement.

Covisint, formed by DaimlerChrysler, Ford, General Motors, Renault and Nissan in 2000, has faced challenging times creating a virtual marketplace and auction house for suppliers and manufacturers in the automotive industry.

Creating the technology to operate such a marketplace turned out to be more difficult than expected, while suppliers remained hesitant to compete for business online.

Covisint has undergone a stream of new CEOs in the past three years, with Paul serving as the company's fourth. He took over in June 2003, after the previous CEO had served for just a month.

Under the agreement, Covisint will transfer its customer contracts for auction services to FreeMarkets. FreeMarkets, in turn, will use its own sourcing technology and services to serve the automakers under a long-term agreement. It will hire selected employees of Covisint's auction services business.

"FreeMarkets has built a strong presence in the automotive industry over the years," said Dave McCormick, FreeMarkets chief executive, in a statement. "Our acquisition of Covisint auction services will further strengthen and expand this position."

The transaction is expected to close in early January.