Covisint is emerging as the industry's dominant online trade exchange, although not the only one.
A group of eight Tier 1 suppliers, known as S8 - Dana, Delphi, Eaton, Bosch, Tenneco, Timken, TRW and Valeo - recently concluded studies on business-to-business Internet-enabled technologies.
The studies were widely expected to lead to collaboration on future projects, including the possibility of a Covisint alternative. But each member will now pursue its own respective approach to e-business.
Meanwhile, Covisint has cleared regulatory hurdles in the USA and Europe and last month hosted the first live component auctions for ArvinMeritor and Delphi.
But Covisint has not yet convinced everyone of its advantages. The prospect of a European competitor to Covisint is being kept alive by Volkswagen. Although keeping a relatively low profile, VW is continuing to develop its own internal exchange, the Electronic Supplier Link (ESL).
VW's initiative is in partnership with US software companies i2 Technologies, Ariba and IBM. The web-based exchange is at an early operational stage, but has yet to attract other automakers despite VW's assertion that it is open to everybody.
BMW, also linked with Ariba, is continuing to pursue its own business-to-business Commerce Platform - although it excludes auction capabilities for production parts.
Although Covisint looks dominant in the original equipment market, it is likely to face fierce competition from web-based aftermarket exchanges. One of these is the recently formed TecCom, a European online procurement exchange for the aftermarket backed by 21 suppliers including Bosch, Valeo, Delphi, Magneti Marelli, Continental and ZF.
TecCom is aimed at streamlining and speeding up business processes in a notoriously fragmented sector. It would allow suppliers, distributors and repairers to manage orders and deliveries online, in addition to managing inventories and handling invoices.
Despite the significance of VW's independent strategy, announced in April, the company has played down its potential role as a focal point for a European competitor to Covisint. The ESL operation has so far involved more than 100 individuals from six different companies, including Ariba, i2 Technologies, IBM, gedas, A.T. Kearney and VW itself.
Development work has proceeded in a low-key atmosphere. But alliance partners have already created VW's business-to-business marketplace strategy and rollout plan. Along with the first 'business release' of the software, they have designed a new business-to-business web infrastructure based on IBM's WebSphere standards, and integrated i2 and Ariba applications with VW's legacy systems.
Despite the lack of publicity about ESL, VW purchasing boss Francisco Javier Garcia Sanz gave details of the program at the Formel Q supplier awards ceremony in Sardinia in mid-October. Sanz believes that VW's own exchange platform is the logical extension of its existing procurement strategy.
'With total group procurement volumes of some DM96 billion (E48.6 billion), distributed principally across three regions and nine different brands, we represent a powerful market potential in our own right,' said Sanz.
ESL is now through the pilot stage and, like Covisint, is already holding online auctions, with a target of completing 100 auctions by the end of this year. Sanz said suppliers are being asked to make bids online, and extra procurement and logistics features of the system will be added later this year. Full roll-out for ESL is scheduled for the beginning of 2001.
'Our expectations for this online marketplace are high, but thoroughly realistic.' said Sanz. 'By making our procurement processes substantially leaner and faster, we intend to shorten throughput times by up to 70 percent and cut costs by up to 60 percent.'
VW and BMW's decision to pursue their own networks means that just one major European carmaker - PSA/Peugeot-Citroen - has yet to make its Internet procurement strategy clear. Renault has joined Covisint together with Ford, GM and DaimlerChrysler - and Fiat has aligned itself with Covisint through its link with GM.
PSA Chairman Jean-Martin Folz said in September that the company will participate in marketplaces, but has yet to define its strategy. This could mean joining Covisint, but collaboration with VW's ESL cannot be ruled out.
In the meantime, PSA will launch its own supplier portal early next year, designed to function as an information exchange for parts prices, quality control and logistics. The portal will also provide an EDI (electronic data exchange) interface between suppliers and PSA's Ingenum engineering platform. But a major decision on global parts purchasing on the Internet remains to be taken.
The decision by the S8 group of suppliers to bring to an end their joint studies on business-to-business initiatives suggests that the chances of a supplier-initiated e-marketplace to rival Covisint are now slim.
Some suppliers continue to criticize the massive power Covisint will wield. But many now acknowledge that, in the original equipment arena at least, Covisint offers a compelling package in terms of procurement, supply chain management and product development.
But the S8 group says its time was not wasted. Kevin Moyer, vice president and director of e-business at Dana, believes that through the S8 collaborative exploration, all participants gained a better understanding of new technology and how to use it most effectively.
'Each company will use this knowledge to enhance its own technical capabilities and to complement the endeavors of its customers,' he said.
For some suppliers, joining Covisint will not be the end of their e-business strategy. In early November BorgWarner announced its intention to join Covisint while simultaneously forming a number of partnerships to maximize the effectiveness of its e-business strategy.
These partnerships will include working closely with Cisco Corp., International Internet Consulting Corp., and GE Information Systems.
Jack Kalina, BorgWarner's chief information officer, said: 'Joining Covisint is one of several steps we are taking to leverage potentially valuable forms of information technology across our organization'.
Other suppliers still prefer a route independent of Covisint and other collaborative e-marketplace options. Magneti Marelli recently signed an agreement with FreeMarkets Inc. The US company will provide the Italian supplier's Powertrain Systems operation with access to its business-to-business e-marketplace for a selected number of components. This will enable Magneti Marelli to take advantage of the opportunities that online sourcing can offer.
'It is important for us to start to test new ways of purchasing goods and services,' said Umberto Basilari, purchasing vice president of Magneti Marelli.
FreeMarkets has worked with a number of other auto suppliers including Visteon, Eaton, Navistar and Delphi.
Analysts are pleased that Covisint looks unlikely to have a host of competing web procurement networks in the auto industry. Many have worried that the creation of too many business-to-business trade portals would undermine their ability to function efficiently, creating costly and unnecessary complexities.
Predictably, Covisint's members are also pleased. Several of them had expressed concern about possible rival exchanges, especially those initiated by suppliers themselves.
Peter Weiss, one of the temporary CEOs of Covisint, says even the idea of an online exchange linked specifically to the aftermarket is unnecessary. Weiss believes Covisint itself could be used to streamline aftermarket distribution.