FOOL PLATE SPECIAL
An Investment Opinion
eBay, Saturn Team Up on Used Car Inspections

By Dave Marino-Nachison (TMF Braden)
June 12, 2000

As Paul Commins noted in a Fool News item last week, sometimes the value of a business-to-business partnership is best measured not by its impact on the participant businesses but in whether one gets a paper cut from the press release.

Other times a deal makes pretty good sense, and that was the case this morning in the form of a deal in which Saturn, the feel-good division of General Motors (NYSE: GM), will set up an automobile inspection service to be part of the new used car auction site being developed by eBay (Nasdaq: EBAY) and AutoTrader.com. Sellers could get the Saturn "seal of approval" for their cars; buyers might eventually be able to purchase service plans from the dealerships.

The more costly an online auction purchase, the more reasons a shopper has to be on guard -- and with the slew of stigmas already associated with used car shopping (did the memory of an old "lemon" just jump painfully to mind?) there are certainly plenty of reasons why such a business will need to show a willingness to do some hand-holding.

eBay has shown it: Take a look at its services page, where links to financing, escrow, collector-car insurance, and even shipping providers are featured. Those efforts, along with eBay's already-strong brand equity, appear to be paying off. (It's useful to keep in mind that a strong brand reflects more than just name recognition.) The AutoTrader.com joint effort was launched in March and now lists some 1.5 million vehicles -- about a quarter of the total value of eBay's listings, according to the company.

And Saturn could use a little something extra. Sales growth at the division was essentially nonexistent last year despite a strong year for total industry sales. Perhaps behind that statistic is the fact that while Saturn's cars are generally considered safe and economical -- and the company has expanded its product lines and features in recent years -- many shoppers' tastes have drifted to larger, more ostentatious and powerful models for which Saturn has no comparison.

Nontraditional enterprises are familiar ground at Saturn, which also offers consulting and training services to corporations and other organizations. Now they will be offering auto inspections to eBay shoppers in a play not only to get some incremental revenues but to get more people to their showrooms. Financial terms weren't disclosed, but a Bloomberg report said the service may cost about $100. A national rollout is planned for this year. There are about 400 Saturn dealerships in the U.S., most of which have service departments.

There's probably little fodder for the traders here, and trying to value a deal like this in such short order is pretty tough. There's no guarantee, after all, that eBay sellers will take their cars to Saturn rather than elsewhere. But the announcement is a valuable demonstration of how an effective business can find creative ways to endear itself to shoppers -- and of how such developments are worth noting even if they don't manage to move a company's stock for a couple of minutes.

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