Daily Management Review

Volkswagen - Ford alliance: first pickups, next electric cars


The German and American car builders are launching a strategic partnership at the time of a decisive restructuring of their business.

Cubosh via flickr
Cubosh via flickr
A new transcontinental alliance is being formed in the global automotive industry. Its initiators are Europe’s largest auto concern, German Volkswagen, and America’s second largest car builder, Ford. Yet, negotiations on the strategic alliance turned out to be more difficult than expected.

Nevertheless, leaders of the two companies, Herbert Diess and James Hackett, announced on January 15th start of cooperation in development and production of commercial vehicles, primarily pickups. Volkswagen and Ford reached a basic agreement on this partnership in June 2018. Now, they have officially announced some details.

The partnership will start with development of commercial vehicles. At the first stage, the two auto giants will jointly develop mid-size pickups - cars with a closed cabin and an open cargo area - for Europe, South America and Africa. They should go on sale in 2022 and already in 2023 contribute to improvement of the operating financial performance of both firms.

At the same time, Ford will be developing larger commercial vehicles for the European market for the two companies. Volkswagen, in turn, will create minivan platform (City Van) for transporting goods in urban environments. It could be put into production either at the Ford plant in Turkey, or at the Volkswagen plants in the same Turkey or in Poland.

In addition, Volkswagen and Ford will continue exploring opportunities for interaction in areas such as electric cars, autonomous driving and mobility services. In the future, companies do not exclude a possibility of joint development of other types of cars. In this case, it is not about cross-ownership of shares (as, for example, in the case of Renault and Nissan), nor about a merger (similar to Fiat and Chrysler).

Thus, the alliance created without much haste is more like interaction of Volkswagen with its largest competitor in the world market - the Japanese corporation Toyota, more precisely - with its subsidiary Hino Motors. It produces trucks and buses and in April 2018 signed a framework agreement on strategic cooperation with the relevant division of the German concern - Volkswagen Truck & Bus. The document also mentions electric traction and autonomous driving.

The fact that Volkswagen and Ford are starting their strategic partnership with pickups is quite natural. Founded by Henry Ford, the company is a large and long-time specialist in the production of this primordially American car type. Its Ford F-150 is the world's best-selling model in this segment. At the same time, Volkswagen Amarok is not a big commercial success yet.

Therefore, the German concern decided that it could not do without an experienced partner. The American corporation, in turn, is interested in a partner that can make a significant material and technological contribution to the costly development of new models for this segment, which is experiencing a real boom in the huge American market.

In recent years, about every sixth car sold in the United States has been a pickup truck. Once they were mainly bought by farmers and artisans, but today they are increasingly perceived not so much as commercial vehicles, but as a symbol of the American way of life. They have become much more comfortable and very popular among citizens as a family car.

About three years ago, Fiat Chrysler wound up production of limousines and compact cars in the USA and focused on the production of SUVs and pickups. Ford decided to move in the same direction.

At the same time, it seems that the American corporation does not intend to pave the way for Volkswagen to its home market, but expects that, together with the German concern, it will be able to more effectively fight for buyers in other continents. Apparently, both auto builders are convinced that the American fashion for modern pickups will cover many other countries in the foreseeable future.

Besides, Ford’s management is now well aware that electric cars and autonomous driving are the new main directions of development of the global automotive industry. The American corporation has separate developments in this area. First of all, it is a controlling stake in the manufacturer of autonomous driving software Argo AI. The firm also has a small project for production of freight electric vehicles in Germany). In general, however, it is lagging far behind a number of American and Asian competitors.

Therefore, a strong partner is vital for Ford in this area. Volkswagen, fascinated by diesel technology, also missed the beginning of a cardinal reversal in the global automotive industry. Now, thanks to huge investments, it is quickly catching up, so that if the formed alliance deepens, the Germans will have something to share with the Americans.

source: dw.de