Reuters : Auto business has high hopes for e-commerce

A Special Report From Neil Winton, European Auto Correspondent

VIENNA, Nov 29 In this special report Reuters, the leading provider of news reported that; "Electronic commerce will transform global automotive industry economics by cutting billions of dollars in costs, but don't expect to see concrete results any time soon, auto industry experts said on Thursday.

Car manufacturers can use the Internet to widen their supply base by recruiting component suppliers from outside traditional areas. The opening of competition will help them to slash costs, delegates at a conference organised by Automotive News Europe were told.

Also using Internet technologies, cars can be built for customers with only a couple of weeks between the ink drying on the order contract and delivery to the front door. Ford reckons that it can slash delivery time to 15 days by 2004 from this year's 60 to 65 days.

But new e-commerce companies such as Covisint, formed before the Internet bubble burst, have promised huge savings and efficiencies and are now finding it hard to deliver concrete gains.

Covisint was formed in early 2000 by General Motors Corp , Ford, and DaimlerChrysler . Renault its affiliate Nissan of Japan, and Peugeot signed up later. Volkswagen < VOWG.F> and BMW of Germany have set up their own Internet-based organisations.

FUMBLING

``It's obvious that they've (carmakers) not really got started and are still fumbling for the right direction,'' said Mike Wattam, a delegate to the conference and managing associate at Britain's Wattam and Associates.

``The benefits will be impressive, but it's clearly early days yet,'' Wattam said.

Volvo, part of Ford's upmarket Premier Automotive Group, was cautiously optimistic. Steve Armstrong, Volvo's vice-president for purchasing, said the company's use of e-commerce was still relatively low.

``There is a long way to go to maximise the opportunities,'' Armstrong said.

Ford of Europe's vice-president for manufacturing, John Fleming, said e-commerce was important to its plans to cut costs, improve quality and start a dialogue with customers and employees.

``E-commerce will add transparency to the process of development and manufacture of Ford's new products,'' Fleming said.

Fleming also said Internet technology would allow Ford to cut the time between an order and delivery from 60-65 days at the start of 2001 to about 50 days now, 40 days in 2002, and down to 15 days by 2004.

BMW is now leading the race for the so-called build-to-order car, according to industry experts. Others in the front rank are Renault, Mercedes, Volkswagen's upmarket subsidiary Audi and Ford's luxury brands including Volvo and Jaguar.

According to investment bank UBS Warburg, the global industry is determined to exploit build-to-order. UBS Warburg's Xavier Gunner said benefits include reducing manufacturers' discounts and improving the use of working capital. Reduced stocks in showrooms would cut dealer capital costs. Component purchasing would be more efficient.

UBS Warburg estimates build-to-order could save between 600 euros and 4,000 euros ($3,556) per vehicle.

PEUGEOT SAVINGS

Peugeot's vice president for purchasing, Herve Guyot, told the conference the company would save about 200 million euros in 2001 using auctions to buy components, and that this figure would jump to at least one billion euros in 2002.

Guyot said design collaboration would be an important feature of e commerce applications in the long term, but not just yet. Supply chain management progress had also been slow.

Lars Olrik, managing director of Covisint Europe, agreed that collaborative design had not yet really started but had huge potential. The best was yet to come, he said."

"``It will be a ground breaking year for e-commerce (and the auto business) in 2002,'' Olrik said