FRAMINGHAM (04/18/2000) - A few months ago, Ford Motor Co. and General Motors Corp. were in a neck-and-neck race to launch the first, the biggest, the best online marketplace in the automotive industry. The story had all the makings of a great magazine article--drama, tension, reader relevance, high stakes, well-known players. With the ending still uncertain, it would have been the first of at least two installments. So we wrote it for the April 1 issue of CIO.
Well, we had no idea just how uncertain the ending really was. The reason you didn't see the story in that issue is because just a few short days before we were to ship the magazine off to the printer, Ford and GM decided to combine their two separate efforts into one monster marketplace, bringing in DaimlerChrysler as well. Goldman Sachs predicts the new company will have a potential market cap of between $30 billion and $40 billion, with annual revenues of about $3 billion by 2003. The transaction figures will be staggering.
But is that amount of money and shared control of the marketplace enough to move these bitter rivals closer together? That and many other questions remain to be seen. If our profile of the original parallel efforts would have been the first of two installments, the current story, "The Biggest Gamble Yet," by Lauren Gibbons Paul, beginning on Page 144, is but the introduction to what should prove to be a long, complicated and fascinating tale.
Part of the complexity is that both Ford and GM have existing contracts with two separate vendors to build the system. Not only will the automakers have to work together on this, so will competitors Commerce One (best known for its exchange technology) and Oracle (which has been aggressively trying to push into the exchange space, but whose real strength has been in handling the back-end, supply chain management piece of the action). And DaimlerChrysler, not to be back-seated in this deal, has reserved the right to bring in its own technology partner, SAP.
From the theoretical perspective, developing this marketplace makes big sense.
But its success is by no means guaranteed. Whatever the outcome, CIOs should keep a close eye on how this develops. If you're in an industry that shares a significant supplier base, there will be an exchange coming to your industry soon.