Supplier joins "big three" automakers' online marketplace
Despite concerns about the government inquiry into the online purchasing exchange launched by the automakers, at least one supplier is joining the venture.
Auto supply company Meritor said today it plans to participate in the planned business-to-business marketplace, dubbed Covisint, becoming the first major supplier to do so publicly. The Troy, Mich.-based company will also become a member of the Covisint Customer Advisory Council, which, among other things, is charged with getting other suppliers to also jump on board.
Ford, General Motors and DaimlerChrysler unveiled the online partnership in February, touting it as the largest Internet business ever created. The exchange would create a single automotive-parts exchange for the companies' thousands of suppliers and dealers.
Meritor's move is the first in what Covisint executives said will be a string of other partnerships established with suppliers in the coming weeks.
Alice Miles, president of Ford's business-to-business ConsumerConnect division and a member of the executive team heading the exchange, said the automakers have put together a preliminary supplier compensation package and given it to 40 key suppliers for review and feedback. Although still in its early stages, the proposal outlines the way supply companies using the exchange to sell products will transact on the site.
"We're asking these suppliers to participate and influence the preparation of the new exchange," Miles said. "We expect to have suppliers roll out their decisions on the proposal by early June."
Such business-to-business exchanges typically deal in nuts and bolts--literally--and other industrial and commercial items. The arrangements match buyers with sellers for commodities such as paper and chemicals. Companies participating in online exchanges say they hope to decrease the cost of doing business drastically through volume buying, thereby increasing profits.
Officially named Covisint earlier this week, the new company has been working to get suppliers involved in the venture amid = news.cnet.com="" news="" 0-1007-200-1810522.html="">concerns by some suppliers that an ongoing review by the Federal Trade Commission could end up snarling their companies in legal problems in the future.
In fact, Meritor said in a statement it will participate in the exchange pending all governmental and legal approvals of the new venture.
"There are still barriers out there that need to be resolved" to get more suppliers involved, said Laurie Orlove, an analyst at Forrester Research. "Clearly the government involvement is one, but also ease of connection to the exchange and what do the suppliers get out of it. If there are any ambiguities on any of these issues, I can see suppliers staying on the sideline."
However, analysts said the move by Meritor is good for Covisint because it shows that despite some of the reservations in the supplier community, a major auto supply company has signed up to take part in the exchange. It also shows that the ongoing push by the automakers to get their suppliers on board by working out the compensation details is having an impact.
"The big three automakers have been pressing suppliers to get involved because suppliers have to be involved in order for an exchange to survive," said Tom Harwick, an analyst with Giga Information Group. "Suppliers can't exist without the big three, and the big three can't build their car without the components" built by the suppliers, Harwick said.