Motors & Drives Information

THE name Covisint is a blend of high-minded words - communication, vision and integration - but a much more basic concept, savings, is the driving force behind the new internet market for the motor industry approved this week by US regulators.

Covisint, an electronic marketplace for auto parts and supplies hatched by General Motors, Ford, Daimler-Chrysler, Renault, Nissan and a dozen auto suppliers, is expected to quickly capture up to $3 billion (2.14 billion) in annual sales and wrench cost savings from the $240 billion a year that car plants in Detroit alone spend on materials, parts and supplies.

A recent study by the Automotive Consulting Group based in Ann Arbor, Michigan, estimated that within five years the world motor industry could save $174 billion, or $3000 per car, once new e- business applications such as Covisint are in place at every level of the supply, manufacturing and sales chain.

But the bulk of Covisint's business will not be parts for new vehicles, which are subject to long-term contracts and are not interchangeable, but other essential items.

"The auto makers and major systems suppliers spend more than $100 billion a year on non-product parts, what they call MROs - maintenance, repairs and others," says Dennis Virag, president of the Automotive Consulting Group.

"We are talking about everything from cutting fluids to mops, paper and pencils. The cost savings will come on the MRO and basic materials supply side."

In the new market place, if General Motors needs 100,000 pencils quickly, it could put the bid online and see who responds, or shop among online pencil producers for the best deal.

A pencil maker knowing that GM and Lear and Dana, two big suppliers of parts, are all shopping for pencils at the same time could presumably make a better offer to all three individually.

The Federal Trade Commission took a relatively long time reviewing Covisint, the largest B2B online exchange to seek antitrust approval.

There were concerns that rather than cutting costs through improved efficiency it would give manufacturers the combined muscle to force suppliers to cut prices.

In the end, however, the FTC commissioners, though concerned about possible price squeezing, were swayed by the technology and use of firewalls to protect price information.

The four commissioners unanimously approved the online exchange on Monday.

# posted by Medical Information : 3:58 AM