VW, Ford are mulling self-drive tie-up as talks broaden, report says
UPDATED: 10/26/18 11:48 am ET - adds more details
Talks between Volkswagen Group and Ford Motor Co. on forming an alliance have broadened to include potential collaboration on autonomous driving and arrangements to make vehicles for one another, people familiar with the matter told Bloomberg.
The potential cooperation on self-driving technology could result in significant cost sharing, said the people, who asked not to be identified because negotiations are ongoing. Ford’s CFO separately told Bloomberg News in an interview that talks are open-ended.
“Collaboration isn’t being limited in any way whatsoever, whether it’s different types of technology, product segments or geography,” Ford CFO Bob Shanks said Thursday. “We’re having a very broad set of discussions about how we can help each other around the world.”
Ford shares reversed declines on the news and rose as much as 0.8 percent to $9.06 as of 11:30 a.m. Friday in New York. Volkswagen shares also pared their drop in Frankfurt trading.
A more significant alliance between Volkswagen and Ford has the potential to be one of the more compelling tie-ups for the industry. VW is the world’s largest automaker and has been spending tens of billions of dollars cleaning up after its three-year-old diesel emissions scandal. Ford is embarking on a costly and years-long global restructuring and just abandoned a profit margin target it had set for 2020. Partnering with rivals is one way to lower costs and get new cars and technology to market faster.
A VW spokesman said talks with Ford are progressing well, but declined to elaborate on details.
When VW and Ford first announced they were exploring joint projects in June, the only area they specifically discussed was development of commercial vehicles. VW CEO Herbert Diess had told reporters in August that the German giant is generally open to expanding cooperation with Ford beyond light commercial vehicles and noted previous joint projects worked out well.
Ford has been struggling to reverse losses in markets including Europe and South America. It’s also in similar talks with Mahindra & Mahindra Ltd. to broaden an alliance that began to develop models for India and other emerging markets, including sport utility vehicles and electric cars. Together with its self-driving partner Argo AI, Ford has also said it’s open to outside investment, including providing autonomous technology to a second automaker.
“With VW and Mahindra, we haven’t put boundary conditions in terms of where we could collaborate,” Shanks said. “We’re looking at the strengths and the gaps of each company on both sides of the table and trying to understand how we can help each other.”
Ford CEO Jim Hackett hinted that the partnerships were progressing when he spoke to analysts on the company’s earnings call earlier this week.
“We look forward to sharing more about this global redesign of the company,” said Hackett, who is leading an $11 billion restructuring of the company. “We are going to be coming to you more frequently, including we’re going to talk about these strategic partnerships in the near future.”
Ford rose the most in more than nine years on Thursday. A $2 billion pretax profit in North America on the strength of sales of high-profit pickups and SUVs exceeded analysts’ expectations and was early validation for the automaker’s controversial decision to abandon sedans in America.
Striking deals with VW and Mahindra could further improve Ford’s outlook. Morgan Stanley analyst Adam Jonas predicts Ford will lose $3.6 billion in Europe from 2019 to 2021, making it the least-profitable automaker in that market.
In South America, where VW also operates, Ford has lost more than $4 billion since 2012. Sharing costs to develop cars and new technology with another automaker could help reverse those losses.
“In the world we’re in, where the future is so ill-defined because it’s yet to be created, companies are going to have to collaborate more together,” Shanks said Thursday during a break from meetings with investors and analysts in New York. “We have a history with VW. We get along with them. And if you look at the strengths and weaknesses of each of us, we match up really, really well.”
The same is true with Ford’s relationship with Mahindra, Shanks said.
“That’s very important in these types of collaborations because getting along well is a good part of the formula for success,” Shanks said. “There’s lots of examples where that hasn’t been the case and, ultimately, they haven’t succeeded.”
A Mahindra spokesman declined to comment.
Shanks wouldn’t say if there is a deadline for reaching deals with the automakers, but he said talks are proceeding with urgency.
“We’re trying to get things done as quickly as we can because we’re all trying to improve the fortunes of each of our companies,” Shanks said. “So we’re moving to get clarity and get moving on to the actual collaboration as quickly as possible.”