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Covisint still looking for a home, CEO

Board members and those close to the online auto marketplace concede that their CEO search has been more difficult and lengthy than originally expected.

DETROIT--It's billed as the world's largest Internet company, a corporate marriage between the cash-rich Old Economy and the cutting-edge New Economy, with a guaranteed billion-dollar revenue stream and a market capitalization that could eventually exceed $10 billion.

So why can't Covisint find a chief executive officer?

Board members and those close to Covisint, an online marketplace for collaboration and trade in the auto industry, conceded this week to CNET that their CEO search has been more difficult and lengthy than they originally expected. They cite reasons ranging from a far-reaching antitrust investigation to a bitterly cold Michigan winter that has scared off potential recruits.

"We've got a crack team working on it, but it's not a split-second decision," said Gary Dilts, who is in charge of e-commerce initiatives for DaimlerChrysler and involved in the Covisint management search. "It's hard to find...a change agent--a big thinker with the ability to manage a huge project."

The search has been particularly difficult because a sweeping investigation by the Federal Trade Commission gave Covisint an undeserving black eye, executives said this week during a media preview of the 2001 North American International Auto Show.

In March, even before the exchange had an official name, the FTC began to question whether the venture would lead to antitrust violations. Industry analysts and at least one member of Congress debated whether the FTC should meddle in the venture, which critics said could result in price collusion among the world's leading automakers and a withering of profit margins at smaller suppliers.

The FTC categorically cleared Covisint in September after a six-month investigation, as did the Bundeskartellamt, Germany's antitrust regulatory agency. But the red tape helped in forcing Covisint to delay the launch of its first auction services from May to October--and it also may have scared off some top talent.

"There is no other start-up that has gone though an FTC search," Brian Kelley, a Covisint board member who also heads e-commerce initiatives for Ford Motor, said Monday. "We've seen a lot of very good candidates but haven't found the right one."

Covisint is the latest in a spate of initiatives by automakers to harness the power of the Internet. General Motors, Ford, DaimlerChrysler, Renault and Nissan, along with technology partners Commerce One and Oracle, provided all of the start-up funds for Covisint.

Executives hope to take the company public sometime in 2001, or possibly as late as 2002 if the market for initial public offerings doesn't improve soon. Covisint could fetch a market capitalization exceeding $10 billion by 2005, according to advisers at Morgan Stanley Dean Witter.

While finding a chief executive has proved difficult, executives at GM, Ford and DaimlerChrysler say they have received a flood of requests from workers seeking to defect to Covisint. Most employees at Covisint started as loaners from the Big Three, Oracle or Commerce One, but the company is making them official Covisint employees as it launches its own payroll system.

Unlike the automakerssee special report: Head-on collision, which skew compensation toward salary and bonuses, Covisint has been aggressive about giving pre-IPO stock options and other at-risk forms of compensation.

Despite interest from Big Three rank-and-file workers, top talent has been harder to recruit. So far, one of Covisint's most high-profile hires has been Jacqui Dedo, who joined the company on Dec. 18 as head of its sales division.

Covisint is looking for a CEO who embodies four main qualities, Kelley said. The candidate mustn't necessarily hail from the auto industry but must be:

? Sensitive to the enormous complexities of the auto industry, which has product cycle times in some cases spanning more than four years and workers ranging from factory-floor assemblers to sophisticated financiers.

? Technologically savvy and deeply knowledgeable about the infrastructure of online exchanges and other e-commerce ventures.

? A charismatic leader who can shape the start-up's culture and sell the venture to Wall Street, skeptical suppliers, technology companies and other automakers.

? A talent magnet who can attract other senior-level executives, has all of the above characteristics and can create an executive team--almost from scratch.

No executive would put an approximate date on when the company will announce a CEO, whom they had originally hoped to find by November. But executives emphasized that they are highly motivated to find a leader.

"There is no doubt that the sooner we have a CEO the better off we will be," Kelley said. "The board members have had to be more involved without a CEO running the company, and I'd personally like to have someone else doing a lot of the work."

Although executives said Auto industry speeds up onlinethat the lack of a CEO has not crippled the company's lower-level recruitment, the delay certainly hinders decisions on several major fronts.

The largest question is where the company's permanent headquarters will be. It's currently housed in a temporary facility in Southfield, Mich., but board members have said that the CEO will ultimately decide whether to keep it in Michigan or move it to a technology hub such as the Silicon Valley, Seattle, Boston, or Austin, Texas.

Mark Hogan, who heads e-commerce operations for GM but is not directly involved in the CEO search, joked that the unusually cold and snowy winter in the Midwest may have scared off Internet-savvy candidates living in warmer climates.

"The harsh winter may have some influence if you're in California," Hogan said with a shrug.