Shakeup at Covisint

Appointment of purchasing veteran as CEO brings procurement focus back to auto exchange

Tempe, AZ  July 1, 2002  Auto industry-sponsored e-marketplace Covisint on Friday announced that its CEO was stepping down, to be replaced by a purchasing veteran, in a move apparently aimed at returning the company to its procurement roots.

The marketplace also reportedly will cut 100 employees and contractors, on top of 50 jobs eliminated in April, bringing the company's staff down below 300.

With the resignation of Kevin English after 14 months as Covisint's first chief executive, Harold Kutner, former vice president of worldwide purchase at General Motors Corp., will take over as chairman and CEO of the e-marketplace, which was founded two years ago by the Big Three automakers. In addition, Bruce Swift, former vice president of purchasing for Ford of Europe, is joining Covisint as president and chief operating officer.

The shakeup at Covisint represents a return to the marketplace's original focus on procurement and integration, according to AMR Research analyst Kevin Prouty, writing in an alert from the technology consultancy. The appointment of Kutner, already a board member of the online exchange, signals that Covisint's major backers  which now include Daimler Chrysler, Ford, GM, Nissan, Peugeot Citroen and Renault  are ready to use the marketplace to force suppliers to adopt uniform standards for connectivity and integration, according to Prouty.

"With Kutner in charge, you know there has to be some serious backing from the OEMs [original equipment manufacturers] to drive Covisint full bore into the industry," the analyst wrote. "No longer will suppliers be allowed to stand around wringing their hands of the latest Covisint announcement. Priorities will be set and delivery promised. Suppliers will have to comply."

Kutner was a 39-year veteran at General Motors when he retired from the business last year. As head of procurement at the automaker, he controlled some $90 billion in annual spend and developed a reputation for wielding that purchasing power to drive hard bargains with suppliers.

Kutner's appointment also means the industry's leaders are serious about capturing the reduced costs that closer buyer-supplier integration promises, according to W. Daniel Garretson and Eric Brown, analysts with consultancy Forrester Research. "The move represents a renewed focus on collaboration and industry cost savings that the beleaguered industry consortium can't afford to pass up," Garretson and Brown wrote in a research note.

But the Forrester analysts predicted that the new CEO will have his work cut out for him. To succeed, they wrote, Kutner will have to push the major automakers to drive greater amounts of their procurement transactions through the Covisint hub and use the e-marketplaces central position in the industry to drive greater adoption of Web services as a way to make integration easier for all players.

AMR and Forrester differed somewhat in their take on the fate of reverse auctions at the auto e-marketplace. Prouty indicated that suppliers will "have to learn to love reverse auctions" as the automakers use the online bidding tool to drive down costs. But Garretson and Brown suggested that Covisint should "kill the auctions," the adversarial nature of which would undermine the marketplace's goal of encouraging collaboration between the original equipment manufacturer's and their suppliers.