CIO — Harold Kutner is Covisint’s last chance. That’s because this GM insider?its purchasing chief until he retired in 2001?was also its first chance, helping to form the auto industry e-commerce exchange with his bitter rivals at Ford and DaimlerChrysler. Both of those companies, like GM, had begun building their own public exchanges to conquer the industry before deciding to throw in their lot together with Covisint. Wall Street analysts valued Covisint at $5 billion at its formation in early 2000, at the height of the Internet bubble. These days, however, it’s not clear that the auto industry needs even one public exchange, much less three.
Seething enmity and mistrust between vehicle manufacturers and their suppliers aside, Covisint (pronounced CO-viss-int) has not developed a product or service that has caused either group to completely abandon its old ways of doing business. Kutner was lured out of a brief retirement last June to find a winning path before the bureaucracies within the Big Three automakers and the skeptical supplier community write off the exchange altogether.
It’s ironic that the gravely voiced, plain-spoken Kutner, who spent 10 years beating down suppliers on prices for tires, steering systems and the like, is now trying to sell them on a new-economy vision as Covisint’s CEO. But if suppliers don’t necessarily like him, they do respect him. He knows their business better than the dotcom types who were steering Covisint. He may also be able to twist some arms inside the Big Three, which have shown a reluctance to drop their own e-commerce ambitions. "He is a leader, and he is respected in the Big Three," says Anjan Chatterjee, North American director of the automotive and assembly practice in the Detroit office of consultancy McKinsey & Co. "So if you define his charter as forging consensus?agreeing to define what is sharable and should be shared in the interests of the entire community of OEMs as well as suppliers?I think he will be heard."
Whether Kutner can get suppliers to do more than listen is still a very open question. He claims that more than 11,000 auto parts makers have used Covisint in some fashion, but they provide only 10 percent to 15 percent of the exchange’s revenue?which means they are dabbling. (Car makers account for the other 85 percent to 90 percent of revenue.) Kutner will have to do without anymore subsidies from the Big Three, which each own nearly a third of the exchange and have put a total of $200 million into it so far but are now struggling themselves. He slashed staff and expenses and says Covisint will be "cash-flow positive" by the end of 2002. He knows the Big Three are looking for more than that, however, and he promises to make Covisint the electronic hub of the auto industry for both manufacturers and suppliers. The odds against success are great, but Covisint is Kutner’s baby, and he refuses to give up.
CIO: How has the technology vision of Covisint changed over time?
Harold Kutner: When we started, the vision was, How can we connect with our supply base and go to market with a process that doesn’t cost more than the one we already had? I think that vision came true, but the vision expanded when we started thinking that the [biggest direct suppliers to the auto manufacturers, the tier-ones,] would be connected to various tiers of their [own] supply base [through Covisint]. So now you move from just a procurement-type process to an industry-connected-type process.
And yet we hear about how suppliers have resisted using Covisint. What are the primary reasons for that?
Well, for one thing suppliers feel this is a manufacturer-owned company. So there is a little bit of lack of trust, where they think if they [make purchases through] Covisint that the car companies would find out the prices they’re paying?and if they save a lot of money, car companies are going to go after them [for price breaks]. Now obviously, no company with any integrity would share pricing, but there is that feeling of lack of trust out there.
