Online automakers look for boost from merger

Model E Corp. a dot-com that tried unsuccessfully to sell build-to-order cars via the Internet, took a second shot at success this month and merged with a Santa Monica, Calif.-based start-up that devised outsourced vehicle production plans.

Model E and Flint Inc. will merge into a single company with the temporary name of Build-To-Order Inc. (BTO). By 2004, Fremont, Calif.-based BTO plans to offer a line of custom-built vehicles that will cost about US$35,000, although officials said they hope to outsource production to other automakers with excess manufacturing capacity.

"The odds of this company's success are slim, but there are some things that it has to work with," said Jonathan Gaw, an analyst at International Data Corp. in Framingham, Mass. For example, Gaw said, BTO has the advantage of not having a dealer network, which typically adds 15 percent to 20 percent to the price of a car.

But Gaw cited other barriers that BTO will have to surmount, such as the high cost of establishing a brand.

When Model E launched its build-to-order Ironman luxury sports utility vehicle in November, it drew praise from analysts for ushering in a Web-based approach to developing custom-built cars before the established automakers did. But there was skepticism about the prospects for a vehicle with a starting price of $100,000. And BTO officials acknowledged this week that Model E never produced any of the cars.

Scott Painter, founder of Flint and chairman of BTO, said the merged company won't face the high costs of building a national brand. Instead, BTO plans to use the Web as its primary advertising vehicle and focus on a smaller audience of tech-savvy individuals. Production of the cars will be outsourced to other automakers, thereby eliminating the need for manufacturing facilities, he added.

"We're not looking to build a national brand on par with Volkswagen," said Painter. "Our break-even point is so low that's its not a difficult hurdle to cross."

Many of the details surrounding the planned merger of Model E and Flint still need to be finalized. In addition to settling on a permanent name, the companies still need to secure additional financing, recruit new executives and name a board of directors. William Santana Li, founder and former CEO of Model E Corp., was tapped to be the CEO of the merged company.

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