Covisint Books 'Impressive' Procurement Volume

With the year barely half over, auto-industry exchange Covisint LLC reports that it has already managed transactions worth more than $33 billion. That's equal to about 13% of the $240 billion worth of procurements that the Big Three automakers sign off on each year.

DaimlerChrysler AG recently said it has used Covisint for $3 billion in procurements. Ford Motor Co. and General Motors Corp. each had been doing $2 billion to $3 billion on their own private exchanges before those operations were rolled onto Covisint earlier this year. Kevin Prouty, automotive analyst for AMR Research, says a handful of large auto suppliers that he declined to name have added to Covisint's total. Prouty says he's "surprised and impressed" by Covisint's early transaction volume. Based on its slow performance last year, Prouty says, he had expected the exchange would reach the $40 billion level by the end of next year.

Prouty says most of the procurement handled by Covisint this year has been for highly engineered parts and strategic materials used in finished automobiles, the services that are at the core of Covisint's mission. According to figures the exchange released Wednesday, Covisint's 1,000 registered users conducted 420 auctions during the first six months of this year--primarily for strategic materials. Fully 2.5 million individual items were bought, using the exchange's 200 catalogs, in 20,000 individual transactions. Those items included parts and materials used in finished products and parts for maintenance, repair, and operational supplies.

Covisint also has inked a co-marketing agreement with E-Steel Corp. under which Covisint and E-Steel will each pitch the other's services, but won't integrate those services. Prouty says on its surface, the deal looks like co-advertising, but is likely to result in E-Steel's operation being integrated into Covisint in the near future. Covisint says only that the relationship with E-Steel may be deepened in the future. Ford uses E-Steel for procurement of $30 billion to $40 billion in steel each year. "It would be huge" for Covisint to be able to collect transaction fees on Ford's steel purchases alone, Prouty says.

In another development, Covisint says it has formally incorporated its Japanese subsidiary, Covisint Japan K.K., which will be headquartered in Tokyo.