In an industry known for pyrotechnic product launches and $1 million holiday galas, the bombast surrounding Covisint's birth was noteworthy.

At the annual World Automotive Congress, a required event for aspiring industry titans, William Clay Ford Jr. likened the Internet to the moving assembly line that his great-grandfather pioneered in 1913--widely considered the most revolutionary invention in the automobile industry.

"The Internet is going to be the moving assembly line of the 21st century," Ford told reporters. "It's going to increase productivity, reduce loss, and surprise and delight customers that much."

Yet for all the wonders that e-commerce holds, some fear that the technology may be the weakest link in Covisint's futurist supply chain. Experts worry that the exchange's vast scope requires hardware and software too complex for widespread adoption, especially in a marketplace with products as diverse as file folders, dash-mounted CD players and trunk carpeting.

Even Enrico Digirolamo, Covisint's chief financial officer and executive director of business development, acknowledges that an estimated 70 percent of the world's 30,000 automobile suppliers could not immediately participate in the online marketplace because they lack the required computing infrastructure. Research company Gartner estimates that the exchange will not be able to conduct more than rudimentary transactions until 2002, based on the complexity of the venture and its low-tech clients.

The project has not been free of problems at the high end as well, as its software leaders have brought their own baggage to the process.

Commerce One chairman Mark Hoffman, a West Point graduate, was a sworn enemy of Oracle for more than a decade. In 1984, Hoffman helped found database archrival Sybase, taking over as CEO in 1992.

Hoffman could not be reached for comment on Covisint, but Ray Lane--who at the time of the exchange's founding was president of Oracle--said the software rift seemed even more bitter than the century-old divisions in the auto industry.

"Every time Mark and I got together, when we got down to details, it turned difficult," Lane said. "We couldn't figure any ways to put the technology architectures together until that one breakthrough meeting at the hotel...Today Covisint is based on that architecture."

Covisint has recently begun conducting auctions, but only between automakers and their handpicked, highest-volume parts makers--familiar companies known as "tier one" suppliers. Among that select group, only about 50 suppliers have learned the fundamentals and have agreed to participate.

As smaller suppliers try to catch up, Covisint is already planning to expand into non-automotive products such as stationery and office chairs. The burgeoning online mall will connect to other marketplaces such as those in the oil and chemical industries, according to the project's marketing executives.

It is this expansion, high-tech experts say, where things could turn ugly.

"Having outlasted the hype around its creation, Covisint now starts the long road toward creating a viable business," AMR analyst Kevin Prouty wrote in a recent research paper. "On that road, Covisint must build a large company from the ground up, continue to contain partner conflicts, lay a complex technology infrastructure, and market itself to a group of skeptical and fearful suppliers. Outside that, it should be a piece of cake."

Although Oracle and Commerce One representatives tout marketplaces they have created in such disparate industries as aeronautics and vitamins, no one has attempted to unite so many fields at once. The auto business, by virtue of its large employment ranks, touches industries ranging from pulp, rubber and carpets to dental services, mainframe computing and electrical utilities.

If every company that sold material or services to the auto industry were to use Covisint, the system would crash immediately. Covisint executives carefully chose which suppliers would participate in the first auction in October, making sure they were fully wired and trained in time for the well-orchestrated grand opening.

Covisint says roughly half of the auto industry, by volume, has agreed to participate in the exchange--including the largest suppliers, such as Lear, Johnson Controls, Visteon and Delphi Automotive. General Motors alone spends about $87 billion a year with 30,000 suppliers worldwide.

Yet many of Covisint's potential clients--small suppliers who make such unglamorous but necessary items as grommets and fasteners--could not join in the bidding process because neither their office equipment nor their purchasing agents were equipped to participate.

Digirolamo's own office, inside Covisint's temporary headquarters in Southfield, Mich., is a testament to the auto industry's relative lag in technology: It was not outfitted with high-speed online connections until a month ago. The company's 300 workers moved into the building and began conducting operations faster than local telecommunications providers could install lines.

But Digirolamo is confident that suppliers will eventually adopt Covisint. If they don't, he said, they will waste money and resources while others learn to operate on Internet time.

Several times during a one-hour interview, Digirolamo drew parallels between acceptance of Covisint and the push-button phones that replaced rotary dials. "We didn't switch until 1982 at GM," he said, waving his brushed bronze cufflinks emblazoned with a calligraphic "D." "I had to dial 40 digits to get to Uruguay. Once you switch to direct-dial, you can't go back. Covisint will be the same kind of transformation."

Still, that comparison hardly does justice to Covisint's vast labyrinth of technology. The levels of Internet adoption between the farthest links in the auto-supply chain and Oracle are so distant that many experts are skeptical of Covisint's potential, at least in the short term.

Whatever the limitations, Covisint's range of functions is staggering in theory, if not in real-world application.

One central feature is the "reverse auction"--a process by which an automaker or large supplier solicits bids from competing suppliers online. The auction host must preselect a group of suppliers that are able to bid, and suppliers must demonstrate a history of quality and order fulfillment to be eligible.

Once the group of bidders is selected, the auction host can go to Covisint's Web site and announce that the bidding has started. The host must specify a time limit on the auction--two hours or two months, for example--and bidders then begin submitting prices.

The lowest bidder doesn't necessarily win the contract. Whether the supplier can produce the parts to a certain technical specification within certain time constraints and deliver the parts on a rigid schedule to a moving assembly line are other key factors. A supplier's on-time record during previous contracts may be considered as well.

Another Covisint mainstay is the "forward auction," implemented as an eBay-like clearinghouse for unused items. This seems ideal for an industry burdened by the high cost of excess parts, heavy scrap merchandise and electronic components that become obsolete faster than the vehicles they were meant for.

If too many electric window motors are built for the new Ford Focus, why not sell them to another automaker for slightly less money instead of throwing them out or letting them take space on the factory floor?

Buying and selling products could be only the beginning of Covisint's uses. If the system works as planned, it could be used to improve logistics in ways never imagined.

For example, though reliable data is scarce, experts say one-quarter to one-half of all trucks that deliver parts to assembly plants return to their suppliers empty or only partly filled. Why not auction that empty truck space so that suppliers can transport more products throughout the industrial Midwest? After all, 75 percent of all suppliers are located within a 10-hour drive of Indianapolis, so lots of trucks must be making needless runs.

Covisint technology is also capable of streamlining supply-chain management, forecasting which assembly lines or factories are nearing capacity and which can squeeze out more parts. And it will link engineers to automakers and their suppliers so everyone can collaborate in real time with computer-aided design drawings that team members can tailor to their needs, whether they're at a research park in Tokyo or a truck factory in Tuscaloosa, Ala.

Collaboration is another key feature. As many as 1,000 people from dozens of companies--all with secure sign-on names and passwords--could view artist renderings or computer-aided designs in a vast repository dubbed "Visual Vault." As many as 60 people at once could comment on the images during an online conference call.

Instead of taking months of coordination and thousands of dollars in travel expenses for all of the supplier representatives to fly to Detroit for a meeting, the Web conference would take moments at a sliver of the cost. Based on the time and cost savings, Covisint directors estimate that they can quarter the average time that it takes to design and build a car. That means a new-generation Chevy Blazer or Ford Taurus would hit showrooms every 12 months to 18 months, instead of the 48 months or longer it now takes.

"The basic fundamentals of manufacturing haven't changed," Covisint marketing specialist Sam Sharan said. "We're still bending metal. But now we're opening the whole process up to universal communication. That's what speeds everything up."

The concept extends well beyond the car business. Last month, several giants in the aviation industry, including British Airways, United Airlines, American Airlines, Continental Airlines and U.S. Airways, said they would form a marketplace for buying jet fuel, plane parts, maintenance, and other goods and services that they estimate will total $32 billion in spending a year. The exchange plans to begin to offer services during the first quarter of 2001.

In February, Oracle unveiled a venture with giant Sears Roebuck and France's Carrefour to build an online marketplace serving the retail industry. Sears and Carrefour will initially share a majority stake in GlobalNetXchange, which will link them to their 50,000 suppliers, partners and distributors over the Internet.

And in March, six of the largest meat and poultry processors, including Cargill, Farmland Industries, Gold Kist, IBP, Smithfield Foods and Tyson Foods, said they would form a marketplace for meat and poultry buyers and sellers.

Although Covisint won't detail the exact technology it is using, analysts say the exchange combines off-the-shelf software from three main suppliers: Oracle, which will provide supply chain management software and its 8i database management software; Commerce One, which will provide procurement software and services; and Nexprise, which will supply software for building links to suppliers.

Covisint will also use software from many other companies, including content management company Documentum, and will custom-develop software for various parts of the exchange. Services firms Cap Gemini Ernst & Young, Boston Consulting Group, and PricewaterhouseCoopers are providing consulting services to build the exchange.

As tempting as all this sounds, many caution Covisint against taking on too much, too fast. Several independent e-business experts agree that the exchange should focus on only a handful of projects--in particular, getting small to midsized suppliers wired so they can eventually participate in auctions, collaborations and logistical services.

"As more light is shed on Covisint, it is clear that Covisint won't become the be-all and end-all of automotive e-business," AMR's Prouty said. "But it has the opportunity to become a central hub for business transactions in the automotive industry."

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