Auto e-market faces big hurdles

The Big Three automakers say they hope to see $50 billion worth of transactions flowing through their newly announced online marketplace by year's end. But before they hit any marks, they face some sizable technical and organizational hurdles in setting up the site if their business processes are truly to be improved and any substantial cost savings realized, experts said last week.
General Motors Corp., Ford Motor Co. and DaimlerChrysler AG themselves have estimated that the work could cost $200 million, and that's just the start of the fun.
Getting at least two intensely competitive technology vendors to work together will be one of their first challenges. Ford's Auto-xchange is based on Oracle Corp. software. GM's TradeXchange uses products from Walnut Creek, Calif.-based Commerce One Inc. And Stuttgart, Germany-based DaimlerChrysler, an SAP AG customer, could bring yet another player to the table.
"I don't see how Commerce One, Oracle and a third provider could work together on something like that," said Erica Rugullies, an analyst at Giga Information Group Inc. in Cambridge, Mass.
Also, there are "three huge automotive companies with multiple back-office systems and thousands and thousands of trading partners, all of which have their data in different formats, and they'll all have different levels of Internet sophistication," Rugullies said.
Pierre Mitchell, an analyst at AMR Research Inc. in Boston, said the next step will be getting suppliers to migrate from electronic data interchange (EDI) over value-added networks, which is tightly coupled to production and accounting systems, to XML-based transactions over the Internet. "They're not going to rip out their mission-critical EDI just to reduce the transaction charge a little bit," Mitchell said, because the security and implementation risks may not outweigh the savings.
Chad Childers, a Web administrator at Ford, said the three automakers must agree on standards and enforce them in the supply chain. "Negotiating these political issues is a big thing," said Childers. "For example, open standards may not work with all suppliers."
Gartner Group Inc. in Stamford, Conn., predicted that the unnamed marketplace primarily will handle only auctions and the procurement of indirect materials prior to 2002.
"Processing the transactions from soup to nuts (will) be a challenge," said Gartner analyst Bruce Bond, noting that connecting each automakers' systems to the marketplace and changing business processes will be difficult. "Our gut feeling is that they haven't fully thought through how they are going to do that."
The parties were meeting last week to begin working on the details, said GM spokesman David Barnes. They'll be