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.