As the world's major automakers speed into the world of electronic marketplaces, they may not realize that critical elements of these ventures are still idling in the parking lot.
The thousands of suppliers expected to do business on the huge trading exchanges being set up by the likes of Commerce One, Ariba, IBM and Oracle may find themselves fighting for attention from the automakers and, in some cases, struggling just to participate.
The reason: In their desire to quickly launch business-to-business exchanges, the automakers are in danger of overlooking key elements, and that could hamper their success.
"They're putting this together on the fly, and anytime you do that, you're going to run into problems," said Jim Hall, an analyst at Detroit-based consultancy Auto Pacific Inc. "The question the suppliers have to answer is, How badly do I want to be a supplier to these guys? Maybe they're not all ready to do all of this online."
Last week, Volkswagen AG became the latest to join the online B2B race, partnering with Ariba, i2 Technologies Inc. and IBM. The German automaker is snubbing an invitation to join a similar venture announced in February by Ford Motor, General Motors and DaimlerChrysler.
The VW and Big 3 projects are due to go live by year's end, but neither group has fully articulated the work to integrate the systems. More important, some big global suppliers in the auto industry have yet to embrace even the concept of the exchanges from logistical and technical perspectives.
"At this point, not much has happened, and we're in the same boat as everyone else: just waiting for things to get going," said Jim Woodward, vice president and director of e-business at Dana Corp., a Toledo, Ohio, supplier of axles, brakes and engine components. "We have a lot of important customers, and we'd like to be able to supply them all, but obviously we have to take care of ourselves, too."
VW plans to lure suppliers that aren't already allied with the Big 3, which may mean reduced business for some companies. In fact, some suppliers, especially indirect suppliers selling to large distributors, fear that if they choose to do business on one exchange, they might be excluded from the other by technical barriers.
"We don't want to be shut out of either one," said an executive for one supplier who requested anonymity. "We'd like to do business with multiple exchanges, but I don't know if that's possible."
Officials at IBM, which will be doing the systems integration work for the VW exchange, said the most challenging part of the project will be bringing VW's wishes in line with what's technologically feasible.
"This is an extremely complex process, and a misstep would be very expensive," said Walt Davison, marketing executive for the automotive industry at IBM, in Armonk, N.Y. "VW has its own priorities, and we'll have to balance those with what we can do. Any time you're introducing new technology, you have to step carefully."
Beyond the technical challenges, the automakers must convince their suppliers and partners that buying and selling through the online marketplace is in their best interests.
"We have had plenty of feedback from suppliers who may not be able to [buy and sell] online," said an official at Detroit-based GM who asked not to be named. "They'll have to go out and deal with the realities of the marketplace at that point."
Those realities may go a long way toward determining how well large vertical exchanges succeed, and not just in the auto industry.
"[The automakers] aren't doing this because they love the suppliers," said AutoPacific's Hall. "They want to make money."
Gearing up for B2B
Automakers involved in trading exchanges
| COMPANY | PARTNER |
| DaimlerChrysler | Oracle, Commerce One |
| Ford | Oracle |
| General Motors | Commerce One |
| Volkswagen | Ariba, i2, IBM |
| BMW | Ariba |
