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General Motors backs Covisint with £69bn spend

Chris Mugan
General Motors has made £69bn-worth of trades on Covisint, the motor industry business-to-business marketplace, since it was launched seven months ago.

The manufacturing giant announced the figure, representing contracts over the next six years, at a management briefing in the US run by the Centre for Automotive Research in Michigan.

Ford, GM and DaimlerChrysler launched Covisint last year as a joint venture. Nissan, Renault and Peugeot joined them despite disagreements over the choice of technology platforms.

GM has made extensive use of Covisint's Quote Manager system that handles procurement of materials used in manufacturing. Quote Manager accounted for all but £1.4bn of the company's spend. Of the remainder, GM spent £140m on catalogue purchases and more than £1bn in online auctions where GM sold back materials it no longer needed.

GM found that it saved time by using Covisint to source materials, rather than finding new suppliers or reducing unit prices on purchases, according to a GM spokesman.

"There are some cost savings by placing orders electronically, but the most significant benefit has been faster sourcing. This saves money because it saves time for us and for our suppliers. It allows them to begin engineering work sooner," said the spokesman.

Mikael Arnbjerg, market analyst at research group IDC, said the figures showed GM was taking Covisint seriously.

"GM is taking a very missionary stance with Covisint. Most companies that use e-business talk about reducing prices or finding new suppliers but GM is talking about reducing delivery times and, eventually, collaborative development. These are long-term processes," he said.

While many companies used e-business for indirect goods, such as office supplies and IT services, GM was taking Covisint right to the heart of its operations by using the quote manager for materials used directly in production," said Arnbjerg.

"GM have only spent $200m on catalogue goods that businesses typically purchase online. You can see from GM's turnover on Covisint this is direct purchasing," he added.

Arnbjerg said the figures were an important step forward for the online marketplace, after Covisint's initial problematic start.

"I was worried about the governance of Covisint as all these competitors in the motor industry came together, but GM clearly regards Covisint as an external partner. It has established itself as an independent player," Arnbjerg said.

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