Auto Mega-Site Adds Key Supplier

The Dearborn, Michigan-based Visteon said the move will allow it to trim costs while expanding its e-business strategies and revenue growth.

"We're enthusiastic about our participation in Covisint, which will help strengthen our common standards and infrastructure," said Susan Skerker, senior vice president of business strategy and corporate relations for Visteon.

With plans to operate an Internet-based business-to-business (B2B) exchange for firms in the auto industry supply chain, Covisint's core offerings will include services to assist in product design, supply chain management and procurement functions performed by auto manufacturers and their suppliers. These functions are expected to reduce unwanted inventory and slash both costs and red tape.

Visteon's revenues topped $19.4 billion (US$) last year. The company also said it purchased more than $9 billion in goods and services during that time.

FTC Nod Signals Go-Ahead

Visteon's entrance into Covisint follows last week's announcement that the U.S. Federal Trade Commission (FTC) had approved the joint venture, bringing the agency's six-month investigation to a close.

Covisint was the first B2B exchange ever to be reviewed by the FTC, as regulators initially feared that the major auto manufacturers would use the exchange to impose pricing models and purchasing practices on suppliers. The automakers, however, assuaged these antitrust concerns by maintaining that Covisint would be open to other manufacturers and would not gouge smaller players.

"As we learned at the FTC's workshop in June, B2B electronic marketplaces offer great promise as a means through which significant cost savings can be achieved, business processes can be more efficiently organized, and competition may be enhanced," said FTC Chairman Robert Pitofsky in the commission's announcement. "B2Bs have a great potential to benefit both businesses and consumers through increased productivity and lower prices," he added.

Close Monitoring

Since Covisint remains in the early stages of development, the FTC noted, the commission could not say that the venture's implementation will not cause competitive concerns. In light of this threat, the agency said it will closely monitor the exchange's operational practices and reserve the right to take action if it runs afoul of antitrust laws down the road.

As it gains FTC approval, many analysts view Covisint's success as a bellwether for other industries embarking on similar ventures. Covisint is still waiting for Germany's antitrust regulatory agency to give it the go-ahead, marking the last step before the company undertakes recruitment drives and other critical elements of its business plans.