VW and Ford on track to unveil global alliance

The new Volkswagen CC is displayed during a media preview of the Auto China 2018 motorshow in Beijing in April 2018. VW is said to be unveiling a new co-operation alliance with Ford next week
Image: DAMIR SAGOLJ/REUTERS

Volkswagen and Ford Motor will unveil a deeper alliance next week that goes beyond co-operating in commercial vehicles in a move meant to save the motor firms billions as they develop new technologies, two people familiar with the plan said on Wednesday.

Ford and VW have been exploring closer co-operation as trade frictions force carmakers to rethink where they build vehicles for Europe, the US and China, and as software companies prepare to launch their own self-driving cars.

“A global alliance is expected to be announced,” one person said, adding that the pact will be unveiled on Tuesday next week during the Detroit auto show. The companies have previously said any alliance would not involve a merger or equity stakes.

The expanding alliance highlights the growing pressure on all global motormakers to manage the costs of developing electric and self-driving vehicles, as well as technology required to meet tougher emissions standards for millions of internal combustion vehicles they will sell in the future.

Slowdowns in the world’s largest motor markets – China and the US – have ratcheted up the pressure to cut costs.

The scope of the alliance is still being determined, the people said, as talks about co-operation in the area of electric and autonomous cars continue.

The sources asked not to be identified because the negotiations are ongoing.

The framework of the alliance would include the pooling of resources in autonomous technology and VW investing in that Ford business, and Ford licensing Volkswagen’s MEB electric vehicles platform, the second person said.

When the commercial vehicle alliance is announced next week, the companies will also say they are close on deals covering the autonomous and electric vehicle businesses, the person said.

VW officials have talked about gaining access to Ford’s Transit commercial van and the Ranger midsized pickup truck, as well as building their vehicles in Ford plants.

Speaking at an event in downtown Detroit to unveil the company’s revamped large Explorer SUV, Ford’s president of global markets, Jim Farley, said he had no news to share with reporters about the status of talks with VW, but said they are “progressing well”.

“We see real value in working together,” Farley said.

“The discussions have been very specific.”

He said over the coming weeks Ford will share details on how it will restructure its global operations, including in South America and Europe.

VW had no immediate comment.

Ford shares were up 3.9% at $8.70 (R120.86) on Wednesday afternoon. VW shares gained 2.4% to close at ß146.48 (R2,346).

In June, Ford and VW unveiled a pact in commercial vehicles including vans, and said they were investigating “several joint projects”.

In December, VW CEO Herbert Diess said: “We are in quite advanced negotiations and dialogue with Ford Corporation to really build up a global automotive alliance, which also would strengthen the American automotive industry.”

At the time, Ford executive chair Bill Ford said that talks with VW about an alliance were going very well.

Diess has talked openly about the savings and greater efficiencies that Europe’s largest motormaker hoped to achieve through an alliance.

VW officials also have repeatedly emphasised the only way to make electric cars a mass-market product is through economies of scale to make them as affordable as diesel vehicles.

The alliance with Volkswagen serves as a big bet for Ford CEO Jim Hackett since he took over in May 2017 from the ousted Mark Fields with the mandate to speed up decision-making and cut costs.

Some analysts and investors have been frustrated by Ford’s laggard stock price and a perceived lack of details from Hackett about the Dearborn, Michigan-based firm’s $11bn (R152bn) restructuring.

Ford officials had called the commercial vehicle programme a “quick win” and discussed how a broader tie-up would allow the No 2 US motormaker to reduce the number of different vehicles it builds and shrink manufacturing, engineering and purchasing costs.

An alliance would help Ford achieve its goal of doubling global pretax profit margins to 8% by 2020, up from 4.4% in the third quarter of 2018.

In July 2018, Ford created a separate unit to house its selfdriving vehicle operations and was seeking outside investors in a move similar to one made by GM with its Cruise Automation self-driving unit.

Ford said then it would invest $4bn (R55.6bn) until 2023 in its newly formed Ford Autonomous Vehicles LLC, including the $1bn (R13.9bn) it previously had earmarked for Argo AI, the Pittsburgh-based self-driving startup it acquired in 2017.

Ford expects to launch selfdriving vehicles for sale by 2021.

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