6 February 2003 IBM is to supply software and computer services to the Ford Motor Company in a symbolic deal that appears to finally break rival Electronic Data Systems’ traditional stranglehold over the automotive industry.
Ford will license thousands of copies of computer-aided design software developed jointly by IBM and France’s Dassault Systemes. Ford will use the software to design the body and exterior of its vehicles. IBM will also provide lucrative consulting services and support as part of the multi-year deal.
The deal represents a fresh blow to troubled EDS, Ford’s long-standing IT services provider, which has been dogged by falling profits and an inquiry into its share-trading practices by the Securities and Exchange Commission. It has also reduced its workforce by about 4% in an effort to cut costs.
But EDS has not been frozen out of Ford completely. It will continue to provide some services to the car maker, notably in the design of vehicle interiors.
While Ford may have been concerned about EDS’ present woes, some analysts have speculated that the car maker was more worried about EDS controlling its product design systems – fears prompted by the services giant’s acquisition of product lifecycle management (PLM) software company SDRC, another of Ford’s suppliers, in 2001.
Those fears may also have been fuelled at Ford by distrust of EDS’ close relationship with General Motors, its biggest client and former owner.
Financial details of the deal were not disclosed but analysts put its value at between $180 million (€166.6m) and $240 million (€222.2m). Ed Petrozelli, IBM’s general manager of PLM, said the deal could amount to “hundreds of millions” of dollars.
IBM’s recent inroads into the automotive industry have been substantial. In March 2002, it won a share of an $800 million (€740.6m) contract with Dassault to supply software and services to Toyota Motor. Company executives say IBM now has contracts with 22 of the world’s 30 biggest automotive companies.
The Ford deal also cements Dassault’s position in the automotive market for PLM software, which encompasses managing complex product data, enabling specialist design teams to collaborate on engineering plans, and sourcing components that suppliers will deliver at the right time and right price.