General Motors Corp. Chairman John F. Smith, Jr. told an industry conference last night that the giant automaker expects to transact $50 billion (US$) in business on its new business-to-business (B2B) Internet site by the end of the year.
Smith also told the Automotive News World Congress in Detroit, Michigan that GM hopes to greatly increase traffic on its consumer Web site, with an aim toward selling an additional 50,000 to 100,000 vehicles in the U.S. this year. Additionally, Smith said that GM plans to use alliances with big Internet players to drive 10 to 15 times more visitors to its consumer site, GMBuyPower.com, than last year.
B2B E-Commerce Will Have Significant Impact
Despite GM’s increase in consumer e-commerce, Smith said that he is most excited about the company’s business-to-business Web site. He added that business-to-business will have an even greater impact on the way the company operates than consumer e-commerce.
GM plans to place its entire $87 billion annual purchasing budget on its TradeXchange system by the end of 2000. The company is also prodding its 30,000 suppliers to do business with each other on the system, which has been up and running since November. As of last year, $1 million in business had been conducted on the site.
GM has also indicated that it will charge fees of as much as one percent for those doing business on TradeXchange. Some industry observers estimate that these fees could generate as much as five billion in annual revenue for the company within the next five years.
Speed Up Buying Process
While generating revenue is important, GM expects TradeXchange to speed up the often-slow process of buying parts and supplies. This acceleration could lead to substantial savings in transactional costs for both GM and its army of suppliers.
Smith pointed out that GM also wants to leverage its alliances with other automakers to build volume on the system. For instance, Japan’s Isuzu Motor Co. and Suzuki Motor Co. will handle all of their purchasing through the site. In addition, Fuji Heavy Industries Ltd., Toyota Motor Corp. and Honda Motor Co. are also considering using the site for their purchasing, according to Smith.
GM will focus on this alliance strategy to build its business around the world rather than relying on acquisitions, Smith added.
Walnut Creek, California-based Commerce One, Inc. is GM’s partner in the venture, and GM will end up with as much as a 19.9 percent stake in the company. Since GM announced the deal in November, the value of that stake has soared to $2.9 billion.