Toyota Holds Off on Joining Online Exchange

BOSTON (05/31/2000) - Toyota Motor Corp. wants in. But the world's fourth-largest automaker blames the Federal Trade Commission's (FTC) ongoing investigation into the Big Three's trade exchange for stalling its drive to join the online venture.

The industry procurement exchange was launched in February by General Motors Corp., Ford Motor Co. and DaimlerChrysler AG to cut purchasing costs.

The Big Three have formed an independent company called Covisint to manage the exchange, which officials claim could potentially handle as much as $750 billion in annual purchases.

The founders have been courting other automakers, and in April, Renault SA and Nissan Motor Co. agreed to join as nonstakeholders. By successfully wooing Toyota, Covisint would have all the top automakers as members.

On the Fence

But for now, the Aichi, Japan-based automaker is still mulling whether or when it will participate in the exchange effort.

"We are in talks regarding GM's trade exchange," said Toyota spokeswoman Veronica Pollard.

Covisint equity stakeholders GM, Ford and DaimlerChrysler decided to scrap individual efforts when they created the joint Web-based exchange.

"Covisint is being scrutinized by the U.S. government," Pollard added. "We want to understand if it will receive government authorization before making a decision."

FTC officials wouldn't comment on the investigation into the venture but said the recent growth of numerous business-to-business markets presents a new challenge for the Washington-based agency.

"We are in a learning mode," said Susan DeSanti, director of policy planning at the FTC. "The FTC is seeking to learn about how B-to-B marketplaces work and better understand how they create new efficiencies and what are their possible effects on competition and consumers.

"The fact that it's online may generate new facts for consideration but in and of itself doesn't create any new antitrust questions," she said.

The FTC plans to hold workshops on antitrust collaboration issues in late June.

Regardless of the FTC outcome, Toyota officials said the company won't seek an equity stake in the exchange if it joins.

A government source said Covisint hasn't yet filed documents required by the Hart-Scott-Rodino Antitrust Improvements Act.

Covisint officials wouldn't comment on the filing.

Analysts said that while the exchange was initially pegged to cost $200 million and be operational by year's end, the addition of major participants could delay progress.

"Like many other exchanges being announced, it will take a fair amount of capital and resources to build this thing out, particularly if it's very complex and involved in direct materials and the manufacture of products," said David Yockelson, an analyst at Meta Group Inc. in Stamford, Conn. "You have three or four behemoths all trying to integrate. It's not too much of a surprise that Toyota is hedging its bet."

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