Volkswagen and Ford Consider Alliance
Volkswagen and Ford are considering an alliance which could have far-reaching implications for the global auto industry.
It is claimed that both manufacturing giants plan to announce this far-reaching alliance shortly after the new year.
Any alliance between these two powers would leverage their individual strengths and offset any weaknesses they may have. There is a move towards massive technological transformation and these companies see the benefits of collaborating in many areas.
One of the main motivations for this move is to bring to market electrified and autonomous vehicles. Both these companies have already spent billions developing these new technologies. Volkswagen CEO Herbert Diess told reporters in Washington, D.C:
“We are in quite advanced negotiations and dialogue with Ford to really build up a global automotive alliance, which also would strengthen the American automotive industry,”
Many European auto executives have been meeting to figure out a way to ease trade tensions between the USA and European Union over car manufacturing as Trump has threatened to impose major new tariffs aimed at restricting access to the American market by European automakers.
The two companies have been talking for almost a year but now have formally signed a memorandum of understanding to jointly develop and assemble commercial vehicles. Ford’s president of global markets, Jim Farley, said:
“Ford is committed to improving our fitness as a business and leveraging adaptive business models — which include working with partners to improve our effectiveness and efficiency,”
“We look forward to exploring with the Volkswagen team in the days ahead how we might work together to better serve the evolving needs of commercial vehicle customers — and much more.”
By both companies combining their marketing and distribution operations, they could have great advantage in the markets and areas where each manufacturer is struggling. Ford could obviously play the lead role in the US and Volkswagen could show its dominance in Europe and China.
One of the main focuses of the Ford and Volkswagen partnership will be the development of autonomous and electric vehicles. Ford’s new technology will see it repositioning itself as a “mobility company,” rather than an automotive manufacturer.
The combined development efforts from the planned alliance between Ford and Volkswagen could see massive payoffs for both companies.
Ford has committed $4 billion to autonomous driving, including the $1 billion acquisition of Pittsburgh-based autonomous vehicle development company Argo AI. Ford also plans to invest $740 million to transform the long-abandoned Michigan Central Depot and change it into the headquarters of its new subsidiary, Ford Autonomous Vehicles.
They are not the only companies looking for collaboration that could overcome the traditional rivalries. Honda has also joined in partnership with the General Motors’ autonomous vehicle program, investing $750 million in its Cruise Automation subsidiary. It will also spend another $2 billion over the next decade.
Not all big car manufacturer alliances have been successful though. Back in 2005, General Motors tried to exit a dysfunctional relationship with Fiat, eventually costing GM $2 billion. At the moment, there are also concerns that the 20-year-old Renault-Nissan-Mitsubishi Alliance could be coming undone following the arrest last month of Carlos Ghosn, the man who initially put it together.
Over 40 years ago, Volkswagen and Ford combined their operations in South America’s two largest markets, Brazil and Argentina. The partnership helped them get through a long economic slump until in the 1980s, VW decided to exit Autolatina and go it alone. Because of the way the market had shifted, however, it left Ford in a weakened position that it has never fully recovered from.
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