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Ford, Microsoft set venture
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September 20, 1999: 7:13 p.m. ET
Investment in CarPoint Web site aimed at changing way cars are built
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - Ford Motor Co. and Microsoft Corp. announced a joint venture for Internet auto sales Monday geared to changing the way cars are designed and built.
The venture comes in the form of an unspecified Ford investment in Microsoft's car-buying site, CarPoint.
Steven Ballmer, president of Microsoft Corp. (MSFT), and Jac Nasser, president and chief executive of Ford Motor Co. (F), told a San Francisco news conference the move represents the next phase in both e-commerce and car manufacturing, as the new site plans to offer an enhanced build-to-order system to link consumer order configurations directly with automotive manufacturers' supply and delivery systems.
These new Web tools are intended not only to give consumers greater information on the availability and status of the vehicle they want, but the database also should help the manufacturers focus on options and customer preferences to a much greater degree than in the past, according to the two executives.
"It's going to change the way we think about the business and the way we conduct business," said Nasser. "It's not just a communication or a selling channel.
"What it'll really do is give us better information exactly what consumers want in terms of adjacent features and specifications," added Nasser. He said current sales information is colored by the features on the cars already available on dealers' lots. By allowing consumers greater freedom to order the car as they want it, and either find it at another dealer, a distribution center or even at the factory floor, the manufacturers will get more accurate information.
Instant feedback
"We'll be able to get instant feedback what consumers really want, what people are ready to pay for," he said.
Some analysts suggested this is the direction that the Internet is taking all businesses, and it's important to Ford that it be on the cutting edge of that trend.
"With that kind of information, you can begin to manufacture based on the types of demand that you are seeing out there, as opposed to manufacturing a set amount of vehicles that may sit on dealer lots," Richard Hilgert of Fahnestock & Co. told CNNfn Monday. "You can begin to manufacture something that you know is going to move rather quickly."
Automakers have been working to reduce the time it takes to fill dealer orders in an effort to cut costs and inventory levels. Under the current system, some cars can sit on dealer lots for months before they are sold because the color or equipment packages may not be as popular.
"I think the whole auto industry is moving towards build to order," said Lise Buyer, director with Credit Suisse First Boston in San Francisco. "I think this is a smart move by Microsoft, focusing on what it does best, writing software, and a smart move by Ford, moving it forward on how it sells cars."
About 40 percent of car buyers now turn to the Internet for information during some stage of their buying process, a figure Nasser expects to rise to at least 75 percent within three to four years. Most of those buyers are turning to multi-company sites first, such as CarPoint. Competitors of CarPoint, such as those at publicly-traded Autoweb.com and privately-held Carsdirect.com, claimed Monday that the announced marriage of two deep-pocket titans isn't bad news for them.
"It's bringing more and more visibility to the category," said Dean DeBiase, chairman, CEO and president of Autoweb.com Inc. (AWEB). "This is a trillion dollar market. We don't think this is anything someone can monopolize."
Autoweb.com's stock closed Monday at 9, down 1/8. Another publicly-traded site, autobytel.com inc. (ABTL) saw its stock close down 5/16 at 13-3/4. Stock of Cobalt Group Inc. (CBLT), which manages Web sites for more than 4,000 dealers, was down 13/16 to 10-5/8.
Ford's stock closed unchanged at 49 15/16, while Microsoft was up 1 1/8 to 97 9/16. General Motors Corp. (GM) stock was off 1/16 to close at 65, while the U.S. issue of DaimlerChrysler AG (DCX) was up 7/16 to 71 11/16 was unchanged.
All the major automakers have been focused on improving their online sales channels in recent months, although none has taken the steps that Ford did Monday. An official at one of those competitors questioned Monday whether the build-to-order model is truly a good fit for the automobile industry.
"We're still doing research to find out how big a deal it is for consumers (to order the car they want)," said Tom Peyton, senior manager of Internet strategies for the U.S. brands of DaimlerChryler AG. (DCX) "The Web is putting all business in a state of evolution. The paradigms and models for selling today may not be in effect three years from now. I'm not going to say it's not going to change. I can only tell you by examination of the current buyers, there are some advantages to being able to make delivery today or having an order today delivered in a few days."
Nasser and Ballmer insist that CarPoint will stay a multi-manufacturer site where consumers can get information on all makes and models of cars available and not be weighted to Ford products. They also are seeking investment in the site by other manufacturers in the future.
"We think it is a good idea that other automotive manufacturers are involved in terms of equity ownership," Nasser insisted. "I think true success is we build an engine for the complete automotive industry on a global basis."
Ballmer said the customer preference data and the build-to-order technology will be licensed and sold to multiple manufacturers.
"This is an all-makes and all-models site," said Ballmer. "We want to license it [build to order technology] to the world. We'll fail if CarPoint doesn't sell its information broadly to manufacturers and dealers."
Operators of the other sites insist they're talking to other manufacturers as well, and DaimlerChrysler's Peyton says his company is looking at some potential partnerships. If a side comment by Ballmer is correct and an IPO is in CarPoint's future, it would be best for the joint venture for current public issues like Autoweb.com and autobytel.com to do well, said CSFB's Buyer.
"Wall Street is very much about relative valuations," she said.
The other established auto sites are moving in the same direction of compiling information about customers' preferences, and allowing buyers to search for or order the cars they want, so they shouldn't be left behind by Monday's announcement, Buyer said.
"Were the other sites static, then I would be quite nervous," she said. "But no one in the race is standing still." But there will likely be some shake out of sites eventually, she added.
"We don't need six to seven players, but we probably need two or three," she said.
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