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November 15, 1999Driving
at Internet Speed: For months, observers of e-business trends have been predicting two things: (1) the impact of business-to-business will be much more significant than business-to-consumer sales, and (2) the arrival of the leaders of the “brick and mortar” world to the Internet will lead to an upheaval of the e-business landscape. Recent movements by two of the Big Three automotive manufacturers give us an earlier indication of just how accurate these predictions have been. Ford led off with the announcement of a partnership with Oracle to link its supply chain of 30,000 businesses through its AutoXchange initiative. Not to be outdone, General Motors followed suit several hours later with the announcement of a partnership with CommerceOne and the launch of GM TradeXchange. Both companies purchase over $80 billion per year, making AutoXchange and TradeXchange potentially two of the largest Internet sites in existence. Inter@ctive Week viewed the announcements as a “huge vote of confidence in the Internet as a reliable platform for business-to-business commerce. It went on to suggest that the initiatives "almost certainly make GM and Ford two of the largest spenders and revenue generators on the Internet, on a scale comparable to Cisco Systems." Forbes magazine predicted that the two announcements "represent important steps toward an entirely new made-to-order business model." This point was underscored by Mark Hogan, group vice president of General Motors’ "e-GM” division. In a feature interview with Salon, Mr. Hogan argued that the Internet "changes everything we do -- it changes our manufacturing model, because rather than having long pipelines of work-in-process inventory, and long pipelines of finished-good inventory at the dealerships, we're going to shorten both.” Both automakers have moved remarkably fast in launching these initiatives, and have aggressively aimed to launch the new sites in the first quarter of 2000. Questions remain, however, around whether Ford and GM will be able to convince their suppliers to move at the same rapid pace they adopted. What about retail? While high profile start-ups like Autobytel and Autoweb have attracted considerable attention in the area of online automotive sales, the major manufacturers have recently shown that their online initiatives will not be limited to the supply chain. Buoyed by evidence that car sales are moving online, the automotive manufacturers are seeking ways to become involved in direct online sales. Last month, GM began testing GM DriverSite, its online used-car sales site, while its U.K. subsidiary, Vauxhall Motors, announced that it would become the first automaker to sell directly over the Internet. More recently, Ford announced that it will use Priceline.com’s “name-your-price” system to test auctions of used cars in the state of Florida. The automaker's efforts in retail have not been universally applauded. The Washington Post exclaimed that “civil war has broken out in the U.S. auto retail industry,” amid reports that dealers are "up in arms" over the automaker's movements toward the direct sale and delivery of new and used vehicles. Dealers have so far been very successful in convincing state legislatures to restrict the ability of auto manufacturers to sell directly to consumers. At least 17 states explicitly prohibit auto manufacturers from selling directly to consumers, while a number of other states have enacted weaker provisions protecting dealers. Related links Details
of GM TradeXchange (Corporate
site: CommerceOne) E-Business Watch is published solely for informational purposes and is not a solicitation or an offer to buy or sell any stock, mutual fund or other security. E-Business Watch does not attempt or claim to be a complete description of the markets or developments referred to in the material. All expressions of opinion are subject to change without notice. The information is obtained from sources which 4SP considers reliable, but has not independently verified such information and does not guarantee that it is accurate or complete. The E-Business Watch is not intended as investment advice.
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