Ford Wins B-to-B Auction Race's First Stage

SAN FRANCISCO (02/10/2000) - Ford Motor Co. was thumping its chest on Wednesday and bragging that it beat arch-rival General Motors in the race to have the first business-to-business auctions for the auto industry. Ford also said that its AutoXchange has enlisted Cisco Systems as a technology provider and equity owner.

The auto exchanges are closely watched in the b-to-b e-commerce world because they are so large and visible and, in some ways, are leading indicators of how rust belt industries are trying to drive the Internet into their very souls.

Cisco, the San Jose, Calif.-based computer networking giant, became the second-most valuable company in the country Tuesday when it hit $450 billion in late trading, edging out General Electric.

AutoXchange, which is a semi-autonomous business unit owned by Ford, Oracle and now Cisco, completed its maiden auction earlier this month when the company entertained bids from a handful of companies seeking to win a contract to provide a particular component to the No. 2 U.S. automaker. In a so-called "reverse auction," Ford awarded the contract to the supplier who promised to deliver the product at the lowest price, while meeting other terms such as delivery time and quality.

Brian Kelly, president of Consumer Connect, an umbrella group for Ford's e-commerce efforts, would not identify the specific component but said the winning bid came in at $78 million. (While Ford was making a big deal about this auction, it was actually beaten to the punch about six months ago by Visteon, Ford's parts subsidiary that conducted its own auction for tens of millions of dollars in printed circuit boards last August.) Kelly says that Ford and its suppliers will provision $300 million in supplies via AutoXchange this month. Thousands of Ford suppliers have the ability to connect to Ford and each other via AutoXchange, but so far only a small fraction of them are actually using the new marketplace to conduct business.

Ford intends to use its muscle to make suppliers come on board, but many suppliers are wary of doing business through a market dominated by such a powerful industry player.

As part of a deal announced Wednesday, Cisco will sell technology to Ford and its suppliers and has taken an undisclosed equity stake in AutoXchange. Before Cisco joined, Ford and Oracle respectively owned 65 and 35 percent of AutoXchange, which the companies hope to spin off in a public stock offering this year.

General Motors has teamed with Commerce One to pursue a similar exchange that is expected to go live this month, and both GM and Ford are courting other auto makers such Toyota and Honda. Convincing those kinds of companies to join either Ford or GM on the Web is going to be essential for both auto exchanges to be the major industry hubs they desire to become.

That vision includes Ford and GM each moving to the Web the approximately $90 billion in materials and supplies that each buys annually, but also enticing their suppliers to do business with their own suppliers via the exchanges. That is a very appealing concept, but one that is a long way from being realized. As Oracle's Lane acknowledges, "This is going to come down to execution." And for the moment, Ford is doing that slightly better than GM. Cisco provider deal.

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