Volkswagen Crowds Auto B-to-B Marketplace

SAN MATEO (04/18/2000) - The thirst for controlling the supply chain continues at high speed as Volkswagen last week revealed plans to join the ranks of manufacturers creating an online exchange for auto parts.

Volkswagen will partner with IBM Corp., Ariba Networks, and i2 Technologies to develop the exchange, which officials said will dramatically cut supply chain costs.

Commonly called a buy-side exchange, the VW marketplace is expected to invite other automakers to participate with suppliers, but that appears to be unlikely as other automakers have their own plans.

Others considering exchanges include the Japanese automakers as well as the auto suppliers themselves, according to Adam J. Weiner, senior auto analyst at Gomez Advisors, in Lincoln, Mass.

Ford Motor recently dropped its plans for an independent exchange and opted instead to join with General Motors and DaimlerChrysler in an exchange that is set to be launched later this year.

"The reason we joined with DaimlerChrysler and GM, is we heard from suppliers [that] they are worried about having to work with too many exchanges," said a Ford spokesperson.

Although a small number of competing exchanges in the auto industry or in any other industry segment may not be a cause for concern, too many exchanges will become a problem both for suppliers and exchange creators, according to Weiner.

"The real value of an exchange is to have a limited number of points to be able to go to, to understand the supply and demand," Weiner said.

Once beyond a few competitors, the concept of an exchange becomes self-defeating. "Suppliers will begin to ask themselves what are the dollar costs in terms of technology and training to be a part of each exchange," Weiner said.

Volkswagen AG, in Wolfsburg, Germany, is at www.vw.com.

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