Covisint e-hub acquired by FreeMarkets

Covisint, set up by the Big Three US auto manufacturers at the height of the internet bubble, is selling its online auction business to FreeMarkets.

While Covisint will live on - potentially reaching profitability within the next 12 months - developing portals and other collaborative tools to serve the automotive sector, the move will be seen as a blow for what was once seen as the most promising areas of internet-based B2B trading.

Bob Paul, Covisint CEO, said in a statement: "The sale of our auction services to FreeMarkets is a logical and evolutionary step as we continue to focus our strategy on the Automotive Industry Operating System and delivering supplier management portals and data messaging services."

FreeMarkets pointed out its presence in the sector to date, saying it has already helped companies source around $20bn worth of goods and services.

While Covisint was founded by DaimlerChrysler, Ford and General Motors many other car giants were quick to join in, notably Renault/Nissan, Toyota and even eventually Volkswagen.

Major software players Commerce One and Oracle were also on board but the benefits of collaborating on such ventures were soon called into question. The EC investigated MyAircraft.com in Europe while the US Federal Trade Commission (TC) had a sniff around Covisint, working out whether they were anti-competitive.

But with regulatory approval a more fundamental obstacle became apparent: some suppliers would boycott so-called Dutch auctions in the form of e-marketplaces or e-hubs in all sorts of vertical markets because they could wipe away their profit margins.

While no value has been put on today's acquisition, FreeMarkets said it will hire "select" Covisint auction services employees. The deal is expected to close later this month.