Covisint Names Ex-Investment Banker as CEO
Covisint, the auto parts trade exchange founded by the Big Three auto makers, named a chief executive Wednesday, ending a search of more than a year that was casting doubt on the fledgling Internet company’s ability to survive.
Kevin W. English, head of e-commerce for Credit Suisse First Boston investment bank, will take the reins of the company May 1, 15 months after it was formed by General Motors, Ford Motor and DaimlerChrysler. He will serve as chairman, chief executive and president.
If successful, Covisint probably will quickly become the world’s biggest Internet-based marketplace, where the Big Three, Renault and Nissan--and any other auto makers who join--can procure parts and supplies through Web-based ordering and auctions.
Potentially more than $600 billion in annual transactions could pour through Covisint. It also makes the cost of doing business in the auto industry’s supply chain, notoriously “old economy” in its complexity, vastly cheaper, reducing the cost of a single invoice from more than $150 to only $15.
Participants also can manage excess parts much more easily, auctioning them off in a matter of hours rather than the weeks it generally takes today.
Covisint has been criticized for being slow to get off the ground, partly because the technology is being supplied by two rivals, Oracle and CommerceOne, which originally had partnered in separate trade exchanges with Ford and GM, respectively.
The venture had difficulty as well in finding a chief executive willing to settle in the Detroit area, leading to speculation that Covisint might establish headquarters in California to attract a CEO. However, English said during a conference call that Covisint would be based in southeast Michigan.
“This is the beginning of a very large and profitable company,” English said. “Everything I do will be focused on customers: acquisition, retention, support and training. We have to convince everyone in the supply chain to use Covisint parts.”
His appointment was criticized by some industry analysts.
English brings “a badly needed sense of direction to the initiative,” said W. Daniel Garretson, senior automotive analyst with consultant firm Forrester Research in Cambridge, Mass. But the fact that his experience is in finance and not the automotive industry will fuel suppliers’ suspicions that his mission is primarily cost-cutting rather than improving manufacturers’ relationships with suppliers, Garretson said.
The appointment of English is “a head-scratching move,” Bruce Richardson, an analyst with AMR Research, told Reuters. “The experience he had in the past is not relevant. They should have hired someone with an automotive background.”
English said he will travel frequently throughout the U.S. and to Europe and Asia to strengthen ties with auto suppliers. Perhaps anticipating analysts’ criticism, he stressed repeatedly that he is the right person for the job, having worked in e-commerce and taken public TheStreet.com, of which he was once chief executive.
There were great hopes that Covisint would go public with a sky-high valuation two years ago when business-to-business companies were hot, but lacking top management, that never came about.
English said he’s in no rush. “With respect to an IPO, the capital markets are closed,” he said. “It’s important first to build the scale that we need . . . and nurture the customer relationships we need to be successful.”
