US auto maker Ford Motor Co. and its German counterpart, Volkswagen AG (VW), announced Tuesday they will join forces to build pickup trucks, vans and develop electric vehicles. The first batch of deliveries is expected in 2022.
Ford Motor Co. President and CEO, Jim Hackett, left, meets with Dr. Herbert Diess, CEO of Volkswagen AG, Monday, Jan. 14, 2019, at the North American International Auto Show in Detroit. (Photo: AP/Carlos Osorio)
The collaboration came as a decline in Ford's market share in Europe forced the company to cut thousands of jobs on the continent, amid VW's resolve to further tap into the North American market. The alliance is also an effort to salvage a downward sliding and rapidly transitioning auto industry as a whole.
"The companies estimate the commercial van and pickup cooperation will yield improved annual pre-tax operating results, starting in 2023," read a joint press release issued by the companies as they made the announcement via a conference call during the ongoing North America International Auto Show (NAIAS) in Detroit, the US state of Michigan.
According to the plan, Ford will make medium-sized pickup trucks for both companies while charting out development and production of larger vans for the European market. VW, for its part, will design and manufacture a new city van model.
The collaboration doesn't involve either side taking each other's shares, the press release said.
"Over time, this alliance will help both companies create value and meet the needs of our customers and society," Ford CEO Hackett said.
"It will not only drive significant efficiencies and help both companies improve their fitness, but also gives us the opportunity to collaborate on shaping the next era of mobility," he added.
"Volkswagen and Ford will harness our collective resources, innovation capabilities and complementary market positions," VW Chief Executive Officer Herbert Diess said.
"At the same time, the alliance will be a cornerstone for our drive to improve competitiveness," he added.
The auto manufacturers also signed a memorandum of understanding eyeing cooperation on driverless cars as well as electric vehicles. "Both companies also said they were open to considering additional vehicle programs in the future," the press release said.
No specifics concerning those aspects are available yet, as the pair only declared that works related to the details will continue in the coming months.
At a roundtable on the sidelines of NAIAS on Monday, Diess said "there's still a lot of hype" with respect to autonomous cars. "A lot of money flowing in, but I think it's still a long way to go until we really get the first paybacks."
"There's one alternative, which could be joining forces with Ford. It's not yet decided. But it's still a long way to go, many millions to be poured in and probably some setbacks to expect," Diess said of a potential teaming up with Ford in the self-driving technology.
Ford said last week that it is carrying out "comprehensive transformation strategy" in Europe, which includes thousands of job cuts, closure of plants, as well as suspension of sales of low-profit models. The company said the strategy aims to "strengthen its brand and create a sustainably profitable business in Europe."
Ford didn't disclose the exact number of its European employees that will be laid off. "I'm not going to get into specific numbers today," Steve Armstrong, the company's vice president and president for Europe, Middle East and Africa, told reporters last Thursday, adding that it is a country-neutral "European-wide review."
Armstrong, noting the company currently hires over 50,000 workers in Europe, said the European job cuts will be "a significant number of positions," and that Ford is also seeking joint ventures in Russia.
"We have had periods of profitability (in Europe) but not on the level it should be," he said.
These are no good times for VW either, particularly in North America, which remains a relatively niche market for the German giant.
While endeavoring to expand its business in the United States, VW is facing potential tariffs from the US government of 25 percent on cars and car parts imported to the country, a major source of tension between Washington and Brussels.
US President Donald Trump invited German auto executives, including Diess, to the White House for talks in December, but a statement released by the White House after the meeting didn't say whether the president raised the tariff issue during the discussion.