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Its software was supposed to become the American auto industry's standard. Instead, Powerway Inc. finds itself scrambling once again to recover from a sudden reversal of fortune.
Detroit-based General Motors Corp. has terminated its 2-1/2-year-old agreement to implement Powerway's quality-control software throughout its supply chain. As a result, Powerway's CEO Theodore Wozniak has stepped down and the company has fired a quarter of its work force.
"It's frustrating and disappointing that, under such great financial pressure, the American-based manufacturers are cutting in this area," said venture capitalist Tom Hiatt, who serves as Powerway's chairman. "We're still in conversation with other automakers, and still confident ... that Powerway.com will eventually emerge as an industry standard."
Hiatt has repeatedly led investments in Powerway over the years through his venture firm Centerfield Capital Partners and its precursors. Four core members of Centerfield's executive team oversee
Powerway's day-to-day operations.
Its managers say they remain confident in Powerway's potential as a transformative technology for the auto industry. Hiatt compared the software-maker's fortunes to Federal Express, which famously took years longer to revolutionize parcel delivery than its founders expected.
"It's not called patient capital for nothing," Hiatt said. "The fact is, Powerway had significant increases in sales for the last three years. Until we were hit by tins economic tsunami by GM like many other suppliers, we had our best months ever in January and February of this year."
But by any measure, the loss of the largest North American automaker as a customer is a huge blow.
"For a relatively small company like Powerway, losing a big customer like GM is always a problem because of the obvious revenue hit," said Mark Bunger, principal analyst for Cambridge, Mass, based Forrester Research. "In auto, it's especially problematic because it's a tightly knit industry with only a few large players, and who you are working with today is a big factor in determining who will buy your software tomorrow."
Worse, Hiatt revealed that Powerway's 2002 agreement with Detroitbased Ford Motor Co. to also make the software standard in its supply chain fizzled almost before the ink was dry.
Now, Powerway must fall back on its close relationship with...