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Ford, VW Form Alliance: 'Our Industry Is Undergoing Fundamental Change'

January 15, 2019 10:04 am
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The pioneer of the assembly line is joining forces with the company that made The People’s Car.

Ford Motor Company (NYSE:F) and Volkswagen AG (OTC:VLKAF)(OTC:VLKAY) announced Tuesday a collaboration that aims to develop commercial vans and medium-sized pickups as soon as 2022.

Dearborn and Wolfsburg said they expect the joint vehicle development will create scale and efficiencies with shared investments in vehicle architectures. The automakers expect their partnership will result in better yearly pre-tax operating results for both companies beginning in 2023.

The announcement comes in the midst of the North American International Auto Show in Detroit.

The Fine Print

The alliance does not involve cross-ownership between the two companies. It will be governed by a joint committee led by Ford CEO Jim Hackett and Volkswagen CEO Herbert Diess and include senior executives from both Ford and VW, the companies said.

“Our focus will be on significantly improving the competitiveness of both companies,” Hackett said on a conference call with reporters.

Ford does not expect any workforce reductions at any Ford plants as a result of the collaboration, the CEO said.

While he declined to share any details on which plants may be involved and whether any workers will be relocated, Hackett said Ford’s intention is to use existing facilities.

The collaboration comes at a pivotal time for both companies, as Ford stakes its future on trucks and SUVs and Volkswagen recovers from a devastating diesel emissions scandal.

Autotrader executive analyst Michelle Krebs said more tie-ups like the one announced Tuesday are likely.

"A single automaker can’t be all things to all customers around the globe as vehicle and technology development become increasingly more expensive," Krebs said.

Hackett: Alliance Targets Growing Truck, Van Demand

Ford is expected to engineer and build medium-sized pickups for both companies as well as larger commercial vans for the European market under the alliance, while VW plans to develop and manufacture a city van.

Ford’s truck and van nameplates include the Transit and Ranger, while VW produces the Transporter, Caddy and Amarok. The two companies produced 1.2 million light commercial vehicles worldwide in 2018.

“With the demand for medium-sized pickup trucks and commercial vans expected to grow globally in the next five years, this alliance will provide us with more industry-leading products to address that demand,” Hackett said.

“Together, we’ll also save on costs.”

Electric, Autonomous Talks Ongoing

The companies have signed a memorandum of understanding to research a collaboration on autonomous vehicles, mobility services and electric vehicles, and are considering additional programs in the future. Work on the details of the MOA is ongoing, they said.

Diess said VW aims to become the No. 1 automaker in electromobility by 2025.

“It’s no secret our industry is undergoing fundamental change,” the CEO said, citing the trends of electrification, new regulations, autonomous vehicles and changing customer preferences.

While Ford and VW are ruling out equity ties, Diess said a potential collaboration on electric drivetrains in China is on the table.

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Photo by Dave Parker/Wikimedia.

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