If Covisint's technological challenges are daunting, its cultural and psychological obstacles are monumental.

The auto industry has never collaborated on a project this large, and skeptics wonder how companies that have been cross-town nemeses for nearly a century will be able to sit on boards together without partisan politics. So deep are these sentiments that Covisint's yet-to-be-named chief executive will probably have to be someone outside the industry, partly to eliminate bias.

Even Covisint's founding partners had a tough time ignoring their historical animosity.

"This is an unnatural act, spending so much time with someone from Ford," GM's Harold Kutner said when asked to recall his first brainstorm sessions with Ford counterpart Brian Kelley.

Kutner, who wears a gold chain-link bracelet and has a fondness for polka-dot ties, said the antagonism and awkwardness quickly subsided as he and his counterparts realized the potential cost savings. He said that he, Kelley and Gary Valade, DaimlerChrysler executive vice president for procurement and supply, are now "one voice in three bodies."

But in the anachronism that is the U.S. auto industry, corporate agendas are often motivated by machismo-bred tradition and warlike paranoia toward the opposition. Supporters of Covisint and other initiatives to bring the auto industry into the Information Age worry that its old-school attitudes and rivalries will hamper progress in manifold areas, ranging from recruitment efforts to political decisions about the company's location.

Such concerns are at the heart of a fierce debate in Michigan, where Covisint has promised to stay for at least one year. Much more than an effort to retain a local business, the question of Covisint's location has become an emblematic crusade representing the region's ability to shed its Rust Belt image and take part in the New Economy.

Michigan is fighting aggressively for Covisint, which will likely employ 500 people by the end of the year, by offering $1 million in recruitment funds and other perks if it stays put in Southfield or moves to nearby Ann Arbor or another Detroit suburb. That's not an unusual tactic for the state, which hopes to minimize unemployment and poverty during recessions by doling out multimillion-dollar gifts and tax holidays to companies that promise to maintain factories or office complexes in the state.

Doug Rothwell, chief executive of the Michigan Economic Development, knows that Michigan's reputation leaves something to be desired. His own office in Lansing, only blocks from the state capitol, sits in a pedestrian mall eerily quiet on a sunny fall weekday at high noon. Nearby, boarded-up storefronts blight what was a bustling shopping zone three decades ago.

"There is at least the perception that Michigan is not a high-tech state," Rothwell said. "Covisint is potentially the biggest B2B and represents an evolution of our most fundamental industry. For us to lose that would be a great blow to our status as auto capital of the world."

Oakland County executive L. Brooks Patterson, who is wooing Covisint to stay in Southfield or elsewhere in the prosperous county directly north of Detroit, was more blunt. "If we can't land Covisint here, we're saying that we're not so high-tech after all," said Patterson, a local power broker who had to end an interview to meet Texas Gov. George W. Bush during the presidential candidate's swing through Michigan.

Acutely aware of the sensitivity surrounding the subject, Covisint founders are cautious when talking about the headquarters' permanent location. They know that it will be easier to hire tech-savvy workers if the company is based in Silicon Valley, and they emphasize that they want Covisint workers to be a breed apart from the typical auto industry denizen.

The average auto company loses between 2 percent and 5 percent of its work force in a typical year--not counting periods when one automaker is offering extraordinary buyout packages or during an economic recession. The average employee is in his mid- to late-40s.

By contrast, technology companies in tech hubs such as Silicon Valley lose roughly 25 percent of their work force each year, often to competitors fond of aggressive recruiting. Ages vary tremendously, but it's not unusual for a small to midsized e-commerce company to have only a handful of workers over 40.

Human resource experts say both scenarios are extreme and unhealthy. And because Covisint is a combination of the auto and tech industries, it faces unique human resource challenges.

If its average tenure reflects the auto industry, "the problem is that you risk calcifying the organization," said Ilya Talman, president of Chicago technology recruitment company Roy Talman & Associates. "If it's too high, and that's what I suspect it will be, you have problems the other way. Companies that are founded by multiple parents always have problems, and the workers are like the children who get hurt."

Along those lines, Talman and others speculated that Covisint, which has been operating with employees on loan from other companies and consultants, may not have the experience needed in the high-stakes world of technology recruitment. Its workers, who have been bankrolled by the founding automakers and technology partners, will be put on Covisint's payroll by the end of the year.

Representatives for the exchange say its new chief executive will determine the company's permanent headquarters--which could be in Michigan or anywhere else, such as a technology hub like Silicon Valley, Seattle, Boston or New York.

"There's no question we'll have a major presence in Michigan, as we'll have one in Europe and Asia," Ford's Kelley said, refusing to speculate on the location of a permanent headquarters. "Where the headquarters is located is less important than an understanding that this is a global company operating in a virtual world."

That international perspective raises other cultural challenges: How will Covisint participants communicate in a marketplace for 40,000 companies around the world, whose founding partners speak English, French and Japanese and whose suppliers are as likely to be Philippine wire-harness makers as they are German electronics specialists?

In addition to buggy translation software and widely varying levels of Internet adoption, Covisint is bumping into less technical cross-cultural problems: BMW, Honda Motor and Volkswagen--Europe's largest automaker--have declined to participate in the project, citing security concerns and philosophical differences with the American companies behind the venture. Toyota Motor, Japan's largest automaker, initially agreed to participate in the exchange but has since hedged on that commitment.

Nevertheless, the most formidable cultural obstacles facing Covisint may be rooted in its own back yard, among the suppliers and unions in the Detroit area.

In a snub to what could become the farthest-reaching partnership in the auto industry, the United Auto Workers (UAW) doesn't even mention Covisint on its Web site. Union leaders are not talking about Covisint, and several officials said they had not yet heard enough about the exchange to determine whether it would help or hurt their rank and file.

One GM assembly line worker in Pontiac, Mich., who did not want to be named, said he is skeptical of the venture because it could take away blue-collar factory jobs. Like many union members, he also displayed an antipathy toward any new idea that senior executives were concocting.

"I like the Internet, and I use it for email, and my kids are always playing on the computer," he said. "But this is not just about the Internet. They say 'technology,' and what it really means is 'less humans.'"

Scientists say such fears aren't completely unwarranted: Combine Covisint with technology called "collaborative sensing"--software being developed at Sun Microsystems, Xerox and elsewhere that allows "smart" machines to collect and analyze data in real time--and you could do away with factory workers who manually diagnose machines and direct parts flow.

In theory, that could help those on both ends of Covisint's transactions. But some suppliers have little confidence that the automakers will create an environment of fair trade, regardless of its technical capabilities.

Small suppliers are worried, for instance, that Covisint will charge outrageous participation fees. They insist that the automakers--who required price cuts of up to 5 percent a year on particular auto parts throughout the '90s--will view Covisint as a lucrative revenue stream to help buoy flagging vehicle sales in a gas crunch or a recession.

Moreover, suppliers note that they would have to spend money to teach workers how to use the system, install new computers that in many cases require new wiring, and possibly hire people who are already fluent in Covisint software, presumably at a higher pay scale.

Covisint has not yet outlined its fee structure, but charges could range from 1 percent to 4 percent of the value of the contract.

That may not seem like much, given the enormous costs of paper pushing and telephone calls associated with current bidding processes. According to Ford research, it costs roughly $150 to process the paperwork involved in a single purchase order; the same transaction online costs $5 to $15.

But many suppliers dismiss such statistics as marketing hype to generate a buzz on Wall Street for an initial public offering of Covisint, expected in 2001. They dismiss Covisint as they dismiss the hundreds of Silicon Valley start-ups that went public and turned young executives into millionaires, get-rich-quick folks who have never gotten their hands greasy on an assembly line.

Besides, they say, even small percentages are big in the auto industry, where the average purchase order for an equipment manufacturer is $75,000. A 1 percent fee would be $750.

D.J. Cho, a Covisint marketing executive, knows that the venture is mired in paranoia and plagued by conspiracy theories. His task--recruiting new suppliers to join the fold--is a daunting battle.

"We've had a lot of heartache with this because the public has had so many misconceptions," a weary Cho said while flipping through a PowerPoint presentation on Covisint's merits. "We're not revamping every process they've ever had--we're just taking out inefficiencies."

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