General Motors Corp. and Ford Motor Co.
will merge their Internet-based supply exchanges and
DaimlerChrysler will join the new venture, a source said today. The
exchanges are aimed at helping automakers cut costs.
The venture will be open to all auto manufacturers and
suppliers, creating one of the world's largest virtual
marketplaces, according a source within one of the three
automakers. An announcement was expected later today.
GM, Ford and DaimlerChrysler will have equal ownership in the
venture, which will operate as a separate independent business. It
could eventually be expanded to include other industries.
DaimlerChrysler doesn't have an Internet supply exchange, but GM
and Ford announced new ventures in November to require all of their
suppliers to handle purchasing online. GM buys $87 billion a year
from its suppliers, while Ford buys about $80 billion.
The ventures — GM's TradeXchange and Ford's AutoXchange —
planned to link some 30,000 suppliers to save money by cutting the
paperwork and time needed for hundreds of thousands of
transactions. GM officials had said TradeXchange could trim $90
from the $100 cost of filling a purchase order.
The automakers also used the sites to hold auctions for
equipment and supplies, and envisioned suppliers using the sites to
broker better deals on their own purchases.
The two were some of the largest ventures aimed at the trendy
idea of linking businesses over the Internet. Forecasters predict
that business-to-business transactions over the web could grow to
$1.3 trillion over the next four years, up from $43 billion in
1998.
GM and Ford had also seen the exchanges as a way to lure some of
Wall Street's fascination with Internet businesses toward
themselves. TradeXchange and AutoXchange charge suppliers small
fees for handling their transactions, and each had forecast
billions in revenues within a few years.
GM had said TradeXchange would handle $50 billion in
transactions this year. Ford had not given a similar estimate for
AutoXchange, but had set a goal of $350 million in transactions in
February.
The definitive agreement is expected to be reached in the first
quarter, subject to government and other approval. The systems
would be integrated soon after that, according to the source.
GM owns all of TradeXchange, and partnered with California
software company Commerce One to build and run the system. Ford's
AutoXchange was a joint venture with Oracle Corp. and Cisco
Systems.
