Covisint Question Tough to Answer

It was the question everyone wanted answered. And no one could answer it. In fact, it caused a bit of tension on the dais on the final day of the Traverse City conference.

Just how much money will a Tier 1 supplier save once Covisint is fully operational? Host David Cole posed the question to perhaps the only people in the industry capable of estimating the savings anticipated for the Internet exchange being created by the Big Three, Renault SA and Nissan Motor Co. Ltd.

It's a touchy question because there is concern among suppliers that the savings will be more sizeable for automakers than for partsmakers. And it isn't clear whether Covisint will be the only exchange by which suppliers and automakers will buy parts and supplies. Some auto executives have said suppliers will need no other portal for communication once Covisint is ready. Suppliers say that there's nothing wrong with a little competition.

And then there's the federal government, which is combing through the Covisint proposal for potential antitrust violations.

Ralph Szygenda, chief information officer for General Motors Corp., said the savings will be significant. Brian Kelley, president of ConsumerConnect, Ford Motor Co.'s e-commerce endeavor, told the crowd that savings will vary drastically because each company will use Covisint uniquely.

Then Kevin Demery got a chance. He is the senior director of business development at Commerce One, GM's original partner for e-commerce and now a driving force launching Covisint along with Oracle, Ford's original partner.

Mr. Demery said he hopes that optimistic analysts are right. (Estimated savings fall between $1,200 and $3,500 per vehicle.)

But then he mentioned a reverse auction conducted three weeks earlier on Ford's AutoXchange site in which a supplier actually made out quite favorably, thanks to the Internet auction.

"It was for electrical equipment - and the auction went so quickly he (the supplier rep) never got to give his BAFO - his best and final offer," Mr. Demery said. "Yet he won the deal well above where he thought he would. It was a reverse auction, so he supplied a lot of equipment at much higher margin because the process moved it up. He wants to be careful about letting this out."

Mr. Cole joked that he saw Mr. Kelley taking copious notes on the story, but Mr. Kelley wasn't amused.

"We don't want to discuss AutoXchange or (GM's) TradeXchange," Mr. Kelly said bluntly. "They're separate issues. Ford has AutoXchange, and GM has TradeXchange. They are separate and competing exchanges until they combine once Covisint is launched."

Mr. Demery, apparently sensing he'd cracked open a hornet's nest, jumped in. "I was saying that as a compliment," he said as he looked kindly down the table to Mr. Kelley.

"No, no, I understand," Mr. Kelley said. "It's just that we can't have that discussion now."

Earlier in his speech Friday, Mr. Kelley offered reassuring words to the crowd about Covisint.

"The real benefit is inventory reduction, reduction in cycle times, savings in price, efficiency in communication, translation and transparency of information throughout the supply chain," he said.

"And when we get the approval to launch, which we do expect to come - we don't know the timing but we do expect the approval to come - we know that the industry will benefit dramatically from it. All of us will - OEMs, suppliers, dealers and consumers."

Mr. Demery agreed. "The Covisint site could be the dashboard for the auto industry, for the internal industry. People could just wake up in the morning and go to Covisint and find out all the daily news, all of the activities, what's going on. This should be the dashboard that we start our day from."

He also noted that he heard throughout the week several different "change management" philosophies.

"You have to ask yourself a question on change management. Do I have cats or dogs?" Mr. Demery said. "Now, dogs are fun. You call a dog, they come. You throw a stick, they will go get it. They are very responsive. Cats look at you kind of funny, wondering what the heck you are talking about. And then they ignore you. To get a cat to move you have to build a little sunny spot in the corner, and they'll kind of migrate over to it. So determine whether you need a sunny spot or a big stick. Work on the change management."