GM Web-Based Dealership Software Deal Dies

In a setback to its goal of fostering made-to-order mass retailing of its cars, General Motors Corp. yesterday said it's dropping a proposed investment and software development deal with The Reynolds and Reynolds Co. that was aimed at providing Web-based technology and services to GM's dealers.

GM last spring announced an initial agreement with Reynolds, a Dayton, Ohio, software vendor that focuses on auto dealers. The memorandum of understanding between the companies called for GM to buy a 10% stake in Reynolds, and in return, the software vendor would become the exclusive provider of e-business technology to the automaker's 8,000 dealers in North America. Reynolds also was due to be anointed as GM's "preferred" provider of retail management systems used by dealers.

The agreement was considered a significant step toward mass customization and build-to-order car buying. "At that time, it was very clear that we and GM had the same vision of creating a seamless online/off-line experience in auto retailing," a Reynolds spokesman said today.

But there were disagreements over funding and the real value of the preferred-supplier status that Reynolds was supposed to receive. "Over the last six months, as we negotiated, we've never been able to get to an economic model that justified giving up 10% of [our] equity," the Reynolds spokesman said. "So both parties decided to stop negotiations."

Just last month, Reynolds issued a statement saying that it was continuing to negotiate a final deal with GM. But in the software vendor's own announcement yesterday that the talks had ended, Reynolds CEO Lloyd "Buzz" Waterhouse said he doesn't expects Reynolds' short-term revenue to be affected by the collapse of the proposed deal.

A GM spokeswoman said problems arose in the negotiations when Reynolds tried to go beyond the terms outlined in the original memorandum of understanding. GM executives "found the proposal to be unworkable in terms of [its] overall value to GM and its dealers," she said.

Unrelated agreements between GM, its dealers and Reynolds will remain in place, the spokeswoman added. But GM said it now plans to seek other ways of providing e-business technology to dealers.

In another announcement yesterday, Reynolds named Waterhouse as its new CEO and said former chief executive David Holmes will now serve as its chairman. Waterhouse, 49, joined Reynolds last year as president and chief operating officer after working at IBM for 26 years.

Reynolds, which has been streamlining its operations to focus solely on selling software to auto retailers, last week reported that revenue for its fiscal year ended in September totalled $924 million. Net income in the company's fiscal fourth quarter amounted to $27 million on revenue of $247 million.

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