Ford, MS to offer build-it-yourself cars

Details of the Ford-Microsoft alliance are expected to be announced Monday in San Francisco by Microsoft (Nasdaq:MSFT) President Steve Ballmer and Jacques Nasser, Ford's chief executive officer and president.

The alliance between the two giants in their respective industries underscores how e-commerce is challenging traditional ways of doing business, and pushing the high-technology and manufacturing industries closer together.

Traditionally automakers have competed against each other with new cars and trucks and manufacturing efficiency. Now automakers are seeking technology allies to revamp their distribution systems, cut costs and inventory, and gain the broadest access to Internet car consumers and information about them.

Direct sales to consumers
People familiar with the Microsoft-Ford deal said Ford, of Dearborn, Mich., will take a minority stake in a newly formed joint venture with Microsoft's CarPoint auto sales Web site (www.carpoint.com). The joint venture will operate independently, but will still be under the umbrella of Microsoft, much like MSNBC.com, Microsoft's joint venture with General Electric Co.'s NBC unit.

CarPoint now will have the capability of selling cars directly to consumers as well as continuing to send sales leads to dealers. Any sales will still be finalized through a franchised dealer. The direct component will help CarPoint compete with direct-selling rivals such as CarsDirect.com (www.carsdirect.com).

Dealers said they have been made aware of Ford's plan for a joint venture with Microsoft. Many dealers are wary of online auto sales because they believe it will make them obsolete.

Ford will be Microsoft's "lead partner" in CarPoint, but Microsoft, of Redmond, Wash., expects other automakers to take stakes as well. Honda Motor Co. is expected to use one piece of the venture's technology, a dealer-management system called DealerPoint, in its dealerships.

Ballmer recently said CarPoint "isn't tied to the rest of our core competency," prompting speculation the unit would be sold. People familiar with Microsoft's thinking said CarPoint won't be spun off to the public, but instead will serve as a model for partnerships in travel, real estate, finance and other sites on MSN. The company will use MSN's large audience to attract outside investors and at the same time promote CarPoint's core technology to the auto industry at large.

Gaining an edge
Microsoft executives believe the company's tight coupling between its Web sites and its core technology will give it an edge over stand-alone car Web sites such as Autobytel.com (www.autobytel.com) and Autoweb.com (Nasdaq:AWEB) (www.autoweb.com). Those sites have market values of between $225 million and $250 million; in negotiations with Ford, CarPoint's valuation was set much higher, according to people familiar with the discussions.

Under the joint venture, Ford will use Microsoft technology to create a "build-to-order" system that will match a customer's order with available cars anywhere in the inventory chain, from dealer lots to distribution centers and back to the factory floor, the people said.

Consumers will be able to access the build-to-order capability through CarPoint as well as Ford's other sites such as Ford.com (www.ford.com) and BuyerConnection (www.buyerconnection.com), which will be based on the CarPoint "platform." In the future, consumers will be able to choose paint, interiors and other accessories to customize a car to their particular wants, according to people familiar with the technology.

Build to order
Building cars to order in days, rather than weeks, is the auto industry's current obsession. General Motors Corp. recently allied itself with Microsoft's arch-rival, Sun Microsystems Inc. which in turn has a broad alliance with America Online Inc. (NYSE:AOL) Separately, Toyota Motor Corp. recently announced it will launch a pilot project to deliver cars within five days of order from a factory in Canada.

For Ford, the deal represents the next phase of its "e-tailing" strategy that includes its dealers and its numerous Web site ventures. Under the CarPoint-Ford arrangement, Ford will have access to reams of data about how shoppers search for cars online and what kind of cars they actually want.

CarPoint's databases already are enormous with millions of shoppers going to the site. It has a network of 3,000 dealers and has registered about 500,000 consumers to its Personal Auto Page, compared with Ford's owner site with about 100,000.