J.Fowler:PartI:Wall St. Jour./GM/Ford/AT&T/Newbridge Networks:
interactive.wsj.com
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ December 3, 1999ÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ How GM, Ford Think the Internet
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Can Make Splash in Their Factories
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ By GREGORY L. WHITEÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Staff Reporter of THE WALL STREET JOURNAL
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Forget Amazon.com and eBay. It's General Motors Corp.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ and Ford Motor Co. that are leading the charge to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ transform Internet commerce from a blip on the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ economic radar into the heartbeat of capitalism.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Sure, GM and Ford are icons of the Old Economy,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ weighed down with New Economy no-nos like
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ unionized labor, big factories and huge networks of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ tributary suppliers. But that's precisely why the nation's
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ two biggest auto makers have become e-commerce's
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ most potent players.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Within hours of each other
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ last month, GM and Ford
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ rocked Silicon Valley by
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ unveiling plans to set up
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ massive rival online
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ bazaars for all the goods
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ and services they buy --
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ everything from paper clips
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ to stamping presses to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ contract manufacturing. "By
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the end of 2001, we're
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ going to expect all of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ General Motors' purchases
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ to go through this site, and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ we would expect all of our suppliers to be as actively
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ engaged," said Harold Kutner, GM's purchasing chief.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Both auto makers hope to save billions by replacing an
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ elaborate network of personal contacts and triplicate
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ forms with a global electronic forum where deals can be
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ done almost instantly. And both want their suppliers to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ use the Web sites to make their own purchases or sell
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ excess inventory. A company that provides suspension
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ parts to GM, for example, might use GM's virtual
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ marketplace to get a more favorable price on steel by
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ piggybacking on the auto maker's enormous purchasing
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ power.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Window on Performance
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Mr. Kutner says GM can't dictate the prices suppliers
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ charge to other customers on its Web site, but he expects
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ them to be lower. He says his company will interpret
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ slow sales figures on its site as a sign that a supplier's
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ prices aren't competitive. If that's true, he says, "we may
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ be looking for a replacement supplier."
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ At a minimum, replacing some of their purchasing
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ bureaucracy with online links would allow the auto
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ makers to reduce the roughly $100 it now costs to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ process each of the hundreds of thousands of purchase
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ orders they issue each year.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ At GM, the supplier initiative is rooted in expanding the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ global purchasing system it has used in recent years to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ wrest discounts from its vendors. To Ford, the Web
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ represents a critical part of Chief Executive Jacques
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Nasser's quest to make the company more responsive to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ consumers by delivering information about what car
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ buyers want to each link in the supply chain.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Economic Side Effects
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ In the world of e-commerce, the GM and Ford ventures
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ are the shots heard round the world. GM spends about
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ $87 billion a year, working with about 30,000 suppliers.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Ford's purchases are only slightly smaller. Only the U.S.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ government is a bigger buyer, industry executives say.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ By dragging their vast networks of suppliers online, the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ auto makers will be plugging in a big chunk of the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ nation's economy. That could help catapult e-commerce
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ from a roughly $200 billion-a-year business to at least
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ $1 trillion annually in just two or three years, says
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ market researcher Dataquest.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ GM's Mr. Kutner estimates that his company's site alone
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ could be handling sales of as much as $500 billion
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ within a few years. In the world of Internet commerce --
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ where billion-dollar figures typically apply to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ stock-market valuations, not sales volume -- that's a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ staggering figure.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Not everyone in Detroit is as sanguine. DaimlerChrysler
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ AG says it is skeptical of how well the new ventures
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ will work; it thus far has limited its online purchasing to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ a system that allows dealers to benefit from the discounts
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the car maker receives from some suppliers.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ The sheer size of the new online marketplaces will be a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ rigorous test for the young technologies that support
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ them. In fact, some of the software GM and Ford will
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ need still is being written. Moreover, there is no
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ guarantee that suppliers will be able to adapt their own
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ systems in time, particularly since most deal with more
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ than one auto maker.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ 'Faster Than We Thought'
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ "This is all moving faster than we thought," says GM
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ President G. Richard Wagoner Jr. It's all the more
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ remarkable given that until about a year ago, he didn't
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ even have a computer in his office.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ For Mr. Wagoner, the decision to embrace the Web
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ came slowly. Several years ago, when he had Mr.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Kutner's job as head of purchasing, an investment banker
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ pitched to him the idea of applying GM's cost-cutting
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ expertise to other businesses. But with the technology to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ make it possible lacking, the idea languished.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Since then, however, the landscape has changed. Last
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Christmas, Mr. Wagoner, who took over as head of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ GM's world-wide auto operations about a year ago,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ watched as the e-commerce phenomenon dazzled the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ media. At home, he was hearing about the Net from his
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ teenage sons.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ When the executive returned to work after the holidays,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ he ordered Chief Information Officer Ralph Szygenda to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ figure out whether GM was doing enough with the new
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ technology. The answer came back quickly: "We had to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ go much, much faster," Mr. Szygenda says.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Mr. Wagoner assigned Mr. Szygenda to lead a task force
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ charged with producing specific recommendations
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ within 90 days. He was also to provide a crash course
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ on the Internet for the Automotive Strategy Board, the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ senior managers who run GM. "We really opened eyes
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ up," he says.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Catching the Fever
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ By spring, the entire strategy board had caught Web
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ fever. Strategy board members had their thick briefing
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ books replaced with presentations delivered via laptop
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ computers. (Mr. Wagoner says one of them didn't know
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ how to open his laptop when he first got it.) GM even
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ decided to introduce e-business performance targets for
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ all its units.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ By early summer, GM was
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ preparing several major Internet
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ initiatives, with Mr. Wagoner, as
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ well as Chairman John F. Smith Jr.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ and Vice Chairman Harry Pearce,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ solidly behind the effort. Their
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ long-term dream was to turn GM into a company that
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ could receive a customer's online order and use the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Internet to have his new car or truck built within a few
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ days, instead of several weeks. It's a vision that derives
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ from Detroit's envy of Dell Computer Corp., whose
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Internet-powered, build-to-order manufacturing has
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ made it the nation's leading personal-computer seller.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ In August, GM created a new unit, e-GM, to inject
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ e-commerce into its business from the consumer end, an
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ effort to be led by Mark Hogan, a veteran of several
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ high-profile, high-risk assignments at the No. 1 auto
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ maker. Mr. Kutner was given the task of putting GM's
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ suppliers online.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Mr. Kutner assigned two lieutenants to determining the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ best way to communicate with suppliers online and in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ real time, so they could react faster to changes in GM's
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ production plans. GM's existing Web site for suppliers
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ was a hodgepodge of reference information and data,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ some of it outdated, and software changes would bring
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the site down for days at a time.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Within just a few weeks, Mr. Kutner's duo realized that
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ linking suppliers online offered far greater possibilities
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ than just improving communications between GM and its
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ subcontractors. They told Mr. Kutner GM should think
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ bigger, creating a virtual marketplace where suppliers
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ could do business with each other. That way, GM could
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ drive down prices across its entire supply chain.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Pitching the Future
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Once Mr. Kutner and his staff had framed the concept,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ however, they had to sell it. At GM, getting approval for
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ major business ventures has traditionally required
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ navigating a maze of boards and committees, a process
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ that could have taken more than a year. But prodded by
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Messrs. Smith and Wagoner, the company's bureaucracy
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ tried to move faster, emulating the ways of the wired
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ world.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Mr. Kutner's two lieutenants set about briefing key
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ members of the strategy panel, cajoling senior GM
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ executives' secretaries into squeezing in appointments.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ They met Ronald Zarrella, GM's influential North
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ American chief, outside his suburban Detroit home at
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ 5:30 one October morning, and gave him their pitch in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the back of a car as he headed to the airport.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Their efforts paid off. The strategy board approved the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ initiative in late October. It helped that the project,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ which required an investment of less than $10 million,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ didn't qualify as a big-ticket expense, at least by GM
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ standards.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ As they negotiated the internal approval process, Mr.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Kutner and his team also were vetting the software
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ companies they might choose as venture partners.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Meanwhile, across town, Ford was embarked on a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ parallel course. The No. 2 auto maker had been using the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Internet to communicate basic information to suppliers
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ for almost two years.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ In June, a Ford team that was studying Internet
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ opportunities presented a computer simulation of the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ auto company of the future to Mr. Nasser, the CEO, and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ his top managers. The vision was breathtaking: factories
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ that built to order, eliminating billions in carrying costs;
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ dealerships reporting warranty problems live from their
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ service shops so plants could correct any assembly-line
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ problems immediately; suppliers controlling inventories
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ at Ford's plants, much as discount retailer Wal-Mart
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ gives suppliers responsibility for stocking its store
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ shelves.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ "We were mesmerized by the possibilities," says
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ purchasing chief Carlos Mazzorin. Mr. Nasser ordered
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the team to push ahead.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Racing for Advantage
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ By late summer, Ford and GM were racing to line up
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ e-commerce partners, as well as suppliers for their
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ respective initiatives. For Silicon Valley, the auto
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ makers represented a huge opportunity. Executives at
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Oracle Systems Corp. got wind of GM's e-commerce
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ plans in September and soon pitched their new online
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ trading-exchange capability to the auto maker. Later,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Oracle brought the same idea to Ford, packaging it as
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ part of a broader effort to Web-ify the entire
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ auto-production process.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ GM ultimately teamed with Commerce One Inc., a small
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Walnut Creek, Calif., company that had tried earlier in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the year to attract GM's interest, with little success. But
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ by fall, the auto maker's attitude had changed. "They'd
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ been all over our Web sites," says Mark Hoffman,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Commerce One's CEO. "They're very fast," he adds,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ "You just don't expect that out of GM."
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ The e-commerce rivalry between Ford and GM broke
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ into the open within a few frenzied hours on Nov. 2.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Ford disclosed its plans at a hastily called news
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ conference early in the day, announcing its intent to start
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ negotiating a definitive contract with Oracle. Ford's
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ news release didn't even give a Web address for the new
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ site, originally to be called AutoXchange. As it turned
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ out, the Web address www.autoxchange.com was
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ already in use -- by an Arizona used-car dealer. Ford
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ insists it didn't rush its announcement, but it only recently
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ settled on its venture's final name: auto-Xchange.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ GM, which had planned to hold a detailed briefing later
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ in the week, made its announcement within hours of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Ford's. By the end of the week, GM had changed the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ name for its venture to TradeXchange, which officials
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ said suppliers liked better than the original moniker,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ MarketSite. Until its official start-up early next year,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ GM's site is operating in demonstration mode through
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ gmsupplypower.com., its existing site for suppliers.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ The signs of haste and confusion surrounding both
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ventures didn't seem to faze investors. In fact, Commerce
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ One's shares jumped 25% after its deal with GM was
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ announced. The company, which went public in July, has
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ pledged to give GM -- now by far its biggest client --
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ warrants for shares valued at $1.6 billion, provided the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ venture meets revenue goals.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Now comes the hard part. "The race is in who executes
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ and makes this operational across the whole supply
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ chain," says Brian Kelley, the Ford vice president in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ charge of most of the company's Internet activities. "It's a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ dirty, difficult process," he says.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Ford's partner, Oracle, announced its trading-exchange
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ software in July and had expected to roll the system out
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ gradually over next year. Since the deal with Ford,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ however, it has put another 100 programmers on the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ project to rush out key features like auction capability in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ time for debut early next year. Oracle also agreed to give
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Ford a financial stake in the growth of its
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ trading-exchange products world-wide, although the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ companies aren't saying how much that could be worth.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ For many suppliers, the auto makers' push poses a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ serious challenge. If both Ford and GM insist suppliers
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ do all their business on their proprietary sites, "we're
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ between a rock and a hard place," says Ray Campbell,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ vice president for purchasing at Delphi Automotive
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Systems Corp., the auto industry's largest supplier. Some
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ suppliers also worry they will no longer be able to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ charge smaller clients higher prices to make up for the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ discounts big auto companies demand.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ For Ford and GM, however, the new Web ventures may
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ present opportunities beyond simply cutting costs. Both
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ expect the sites to be generating several billions of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ dollars in transaction and advertising fees annually
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ within five years, and neither has ruled out the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ possibility of selling shares in them to the public.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ "You take one of these things public," says Oracle
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ President Ray Lane, "and the numbers are just off the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ charts."
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Write to Gregory L. White Greg.White@wsj.com
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TA
You said:
Message #29936 from John Fowler at Dec 3 1999 8:03AM
There was an interesting article on the front page of this morning's Wall Street Journal about how GM and Ford are focused on moving their purchasing, and sales,
to the web. Not a mention of Cisco, but I believe it was one of the most bullish articles I have ever read for networking companies.
As a for instance, GM has directed all it's suppliers, over 100,000, to move their entire interface with GM to the web by the end of 2001. They also expect them to
work with *their* vendors through the web.
These are just two companies, but their vendors and vendor's vendors represent many, many businesses. I'm sure the same plans, if not actions, are taking place
all across US industries.
If anyone was access to WSJ interactive, and can post this article, I think it is worth the time. It makes it clear, to me at least, that the major potential for internet
infrastructure companies is still in front of us.
John
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