Ford and Volkswagen Team up to Cut Costs

Ford and Volkswagen have announced that they would be teaming up to cut costs related to developing new technologies and to counter a slowdown in sales by entering into a new alliance.

The companies will start by collaborating on the development of commercial vans and mid-size pickups. They would also share their resources with regard to technologies of the future such as autonomous vehicles, mobility services and electric vehicles. Car manufacturers now have to contend with big technology companies like Google and Apple who have plenty of cash at their disposal when it comes to technological innovations.
Commenting on the alliance, Ford’s CEO, Jim Hackett said at the Detroit auto show that the alliance would help both companies to create value and to cater to the needs of both their customers and society. He said that through this deal, both companies would have “the opportunity to collaborate on shaping the next era of mobility”.
In June 2018, Volkswagen and Ford had signed a memorandum of understanding to explore several joint projects, and this included the development of a range of commercial vehicles. Hackett is also now considering the possibility of Volkswagen building Ford-branded cars in Europe.

The alliance between Ford and Volkswagen would be the largest such collaboration in the automotive industry and would be a boon to both the companies. Ford had recently announced that it was closing plants in Europe and laying off thousands of its employees, saying that Brexit had affected the company’s “evolution” in Europe. Hackett admitted that Brexit had a deep impact on Ford but is still hoping to continue with Ford-branded products in Europe. He said that Ford would never leave the European market as GM did in 2017, by selling its Vauxhall and Opel brands to the PSA Group.

Volkswagen is still suffering from the fallout of the “dieselgate” scandal and has been affected by the slowdown of sales for its diesel models. Ford too has been hit by a slump in the sales of its diesel models. Both Volkswagen and Ford have been affected by the decline in sales in the Chinese market, the largest automotive market in the world. For the first time in 20 years, car sales fell in China. It is expected that the market for cars in the United States will contract over the next two years after a period of growth.

The alliance between Ford and Volkswagen comes at a critical time for both leading automakers as they are both are investing billions in new technology which includes electric vehicles and autonomous vehicles. It is not yet clear whether these new technologies would be profitable in the long run and it costs a lot to develop them.
Ford has allocated USD 15 bn for electrified and driverless vehicle technology in the coming years and it is renovating Detroit’s landmark Michigan Central Station into a “mobility lab” for new car technology.