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Online auto exchange gears up for fall launch

Despite ongoing antitrust scrutiny by regulators, executives from Covisint say the automotive marketplace will be operational in 60 days.

Despite ongoing antitrust scrutiny by European and U.S. regulators, executives from Covisint--the automotive Internet exchange being formed by five giant automakers--say the venture will be up and running this fall.

Covisint interim co-chief executive Alice Miles, speaking at an automotive conference at the University of Michigan yesterday, said she expects the online exchange to be operational in 60 days, Reuters reported.

Government officials, however, are less optimistic. "As far as the 60 days, I have no idea where that kind of thing has come from," said Howard Shapiro, a spokesman for the Federal Trade Commission. The time frame does not "fall into line with anything the FTC is doing looking at Covisint."

Covisint needs the FTC's stamp of approval before the exchange can launch. "We must wait until regulatory approval comes," said Dan Jankowski, a Covisint spokesman. "We're going ahead with our plans but have to get the green light before we can go forward."

Kevin Prouty, an analyst at AMR Research, said Miles' comments yesterday may have been intended to accelerate the FTC's decision.

Covisint "is most definitely pushing things along to get the government moving and to stay in the limelight," he said. "These types of projects are so long term that they could fade into the background, so they want to keep things peaked and in the news."

Jankowski denied that the company is attempting to speed a decision from regulators on antitrust issues. "We're not trying to push the process along. In fact, we want to make sure they look at Covisint's whole business plan" and give it the go-ahead, Jankowski said. "We think we will be up and running 30 days after there is regulatory approval."

Jankowski said about 25 suppliers have signed on to Covisint, and more are interested in joining. In addition, the company said it is in talks with a number of candidates for the permanent chief executive position.

The online auto exchange, initially set up by General Motors, Ford Motor and DaimlerChrysler, has come under scrutiny by the FTC and the antitrust divisions of the U.S. Department of Justice and the European Commission.

Regulators fear that major auto manufacturers will use the exchange to dictate which pricing models and purchasing practices suppliers must use.

Covisint originally had planned to be operational by June. However, regulatory concerns and personnel shifts have slowed the company's plans. Last month, the FTC requested more information from the automakers backing the exchange. And Alan Turfe, one of three original co-chief executives of Covisint, left last month to become president and chief executive of MetalSpectrum, a metals industry exchange.

Covisint had planned Will B2B's magic last?an initial public offering sometime this year. Now the exchange, which will operate as an independent company, will not launch its IPO until at least the first or second quarter of next year.

AMR's Prouty said it would take a good 60 to 90 days after government approval to get the software completely up and able to handle transactions.

"That will be a critical time for Covisint," he said. "They need to get functionality up right away and need to get customers doing transactions. That is what suppliers are going to look for."

Automakers have downplayed antitrust concerns surrounding the exchange. Covisint executives maintain that the company should not run afoul of antitrust laws because the exchange is open to other manufacturers.

Analysts say the worst-case scenario would be if Ford, GM and DaimlerChrysler executives were to use their collective clout to set a pricing structure for their suppliers, thus fixing prices for the marketplace.

Earlier this week, the European Commission gave the go-ahead for the creation of MyAircraft--an online exchange for the aerospace industry--the first business-to-business Internet marketplace to be approved by the European Union's competition watchdog.