SAE 2001: Free Markets Making Mark with Auto Suppliers

DETROIT -- While Covisint fiddles, FreeMarkets Inc. says it is burning up the Internet with online auctions involving several automotive suppliers.

Six-year-old Pittsburgh-based FreeMarkets says it has helped process $14 billion in transactions over the Internet since 1995 -- nearly $10 billion in the last year alone, resulting in savings to customers totaling more than $2.7 billion.

Although it won't say how much automotive business it has conducted so far, it does boast more than 15 top tier automotive customers, including Dana Corp., Eaton Corp., Delphi Automotive Systems Corp., Valeo SA, Visteon Corp. and MacLean-Fogg Co.

Just last month, FreeMarkets announced it had netted a two-year deal with Valeo, which plans to use the Internet portal to reverse auction more than $300 million in goods and services in 2001. Visteon so far has sourced contracts for more than $390 million in goods through FreeMarkets, company officials say.

In all, FreeMarkets says it has had 9,300 companies from 55 countries participate in online markets in some 165 categories ranging from electronics to plastics to food and pharmaceuticals. It has 19 offices in 13 countries.

At a demonstration for the media at the Society of Automotive Engineers exhibition here, FreeMarkets conducted a mock auction online using its FullSource software and service. With the service, buyers get help developing an auction strategy, recruiting relevant suppliers and evaluating bids. During the auction, FreeMarkets has one expert on staff for every supplier involved to ensure there are no technical snafus. For instance, if a bidder's computer system shuts down, FreeMarkets can take directions over the phone and act as a surrogate online bidder for the company.

FreeMarkets also offers a lower-priced software/service called QuickSource that suppliers can use to conduct their own online auctions without all the technical support and service of FullSource.

What separates FreeMarkets from Covisint, the U.S. Big Three automaker-led purchasing portal still struggling to get off the ground, is its technology and experience, says Kent Parker, vice president and general manager for the firm's automotive business.

"Running an auction is the easy part," he says. "It is all the upfront work (that makes the difference). It is our technology, our global market operation centers and our market sensibility. We've been at it the longest."