JOHANNESBURG — Joint ventures across the motoring world are quite common; Renault and Nissan, Mercedes and Nissan, Toyota and BMW, Fiat and Mitsubishi to name but a few. This week Ford and VW announced such a venture, with specific focus on vans and bakkies (pickups) in the short term and a longer term view on electric and autonomous technologies. The short term focus is on boosting pre-tax profits, for a quick win and a test of the waters, with Ford estimating an uptick in the books from as early as 2023. As it’s expected that demand for bakkies and commercial vans will climb in the next 5 years this partnership makes a lot of sense. The economies of scale available to both parties is, as you’d imagine, an enormous benefit with Ford working on larger commercial vans for the European market, while Volkswagen works on a city van, swapping notes (and potentially production capacity) at the end of the process. Perhaps the more interesting point behind this alliance is the opportunity to explore future technologies later on, allowing the two Goliath’s to go head to head with newcomers like Tesla and Google in the electric and autonomous mobility sectors. VW is at this stage far ahead of Ford with electric vehicles, while Ford is similarly ahead of VW with autonomous technologies. So there’s a lot riding on the next five years. Accordingly a joint committee headed by the respective CEO’s will oversee matters, as such alliances are prone to issues surrounding cultural and process differences. Not to mention acceptance from the respective customer bases of the end result. The reception to the recent partnership between Mercedes and Nissan in the X-Class-Navara project is testament to that. – Miles Downard
By Christoph Rauwald and Keith Naughton
(Bloomberg) –Â Volkswagen AG and Ford Motor Co. will join forces to build pickup trucks, delivery vans and possibly more, putting old rivalries aside to work together and confront a rapidly changing auto industry.
The pair is set to start delivering the medium-size pickups and commercial vans from 2022, creating what VW Chief Executive Officer Herbert Diess called “the strongest player in this segment.” VW and Ford are also holding talks for joint work on electric cars, autonomous vehicles and digital services.
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“It fits into our overall strategy to join forces with strong partners for specific topics” Diess said on a conference call Tuesday. He ruled out forming any equity ties with Ford, saying the cooperation “will improve our competitiveness globally.”
The collaboration on trucks and vans will help cut development costs and better optimise factory capacity. But the carmakers still have more talks to carry out to pool resources so they can better compete with tech giants like Alphabet Inc.’s Google, which are plotting inroads with self-driving technology and digital services that have the potential to undermine traditional business models.
Kicked can
“VW and Ford’s basic alliance will do little to excite shareholders as it merely focuses on vans and pickups,” Bloomberg Intelligence analyst Michael Dean said in a note. Potential collaboration on electric cars and autonomous driving “are being kicked down the road.”
Volkswagen shares were up 1% Tuesday afternoon in Frankfurt, while Ford dropped 1.8% to $8.80 as of 11:10am in New York.
The tie-up is set to improve operating results from 2023, the companies said. Jim Farley, Ford’s president of global operations, estimated annual pretax gains of about $500m from the agreed vehicle projects for his company. Diess was more vague, mentioning savings in the “three-digit” million range.
“This is a toe in the water kind of deal,” said Jeff Schuster, senior vice president of forecasting for researcher LMC Automotive.
The jointly developed vehicles will primarily be for Europe, South America and South Africa, at least for now. Diess said he was “very open” to potentially sharing VW’s electric-vehicle technology called MEB in Europe and possibly China, a region where Ford’s business has eroded.
Who will do what: Ford to develop mid-size pickups for both companies. Ford plans development, production of joint larger vans for European market. VW plans joint city van
The auto giants said they have more to discuss about new-technology collaboration and where they will work together around the world. For now, their collaboration excludes North America, where VW has long struggled to grow its namesake brand beyond niche status, despite its ranking as the world’s No. 1 automaker. Last year, VW had just 2% market share in the US and is outsold by Subaru there.
Ford, on the other hand, has racked up losses in Europe and watched its market share slide, prompting the Dearborn, Michigan-based manufacturer to map out thousands of job cuts in the region last week.
“There’s some concern that basically Ford is giving VW access to their trucks – to the Ranger, to the Transit – and not getting a lot more in return with the City Van,” Schuster said. There are some concerns that the deal my benefit Volkswagen, “but does it benefit Ford?”
VW’s spending
To stay ahead in the sector’s generational shift, Volkswagen has allocated a record €44bn ($50bn) in spending over the next five years, seeking to use engineering prowess and scale to halt the expansion of new rivals like Tesla Inc.
VW, based in Wolfsburg, Germany, said on Monday it will spend spend $800m to expand its only US vehicle assembly site in Tennessee to produce electric cars for North American buyers as of 2022. That announcement got the White House’s attention.
Ford has also started on an $11bn restructuring and earmarked a combined $15bn in investment toward electrified and driverless cars in the coming years.
Past alliances
It’s not the first time VW and Ford have teamed up, with executives from both sides touting past projects including joint ventures in South America and Portugal. Under Diess, who took over as CEO last year, VW has pledged to change an often insular culture and become more open to working with other companies.
The manufacturer’s last major alliance with Suzuki Motor Corp. ended in a London arbitration court before the first joint vehicle was built. Collaboration between global manufacturers is often beset by problems that stem from cultural differences, highly complex supply lines and production plans.
Diess is determined that VW reap the benefits of its investments in e-car and self-driving technology, which may be an obstacle to greater collaboration with Ford, according to LMC’s Schuster.
“They want to control it,” Schuster said of VW. “And that doesn’t play well in an alliance.”
Both Ford CEO Jim Hackett and Diess stressed the positive atmosphere during the recent negotiations, with the VW CEO describing Ford as “like-minded partner with similar views and aspirations.”
“You’d be pleasantly surprised how well these folks have worked together,” Hackett said on the call.
