Ford and Volkswagen Aim to Create a Cost-Sharing Alliance

In a surprising move, Ford and the Volkswagen Group announced today that they are seeking a strategic alliance to increase competitiveness in the segment of commercial vehicles. Representatives of both companies addressed the public explaining that the potential alliance will enable them “to better serve the evolving needs of customers globally.”

Talks will Commence in the Coming Days

“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,” said Jim Farley, Ford’s president of Global Markets. “This potential alliance with the Volkswagen Group is another example of how we can become more fit as a business while creating a winning global product portfolio and extending our capabilities.”

While representatives of the companies did not detail the prospects of the possible agreement, they did announce the signing of a Memorandum of Understanding. Additional details are sparse, but we can assume that the talks will lead to an understanding regarding tougher environmental regulations (especially in Europe). Sharing the burden of development of more advanced “greener” propulsion systems is an opportunity companies are likely to explore.

Dr. Thomas Sedran, Head of Volkswagen Group Strategy, said, “Markets and customer demand are changing at an incredible speed. Both companies have strong and complementary positions in different commercial vehicle segments already. To adapt to the challenging environment, it is of utmost importance to gain flexibility through alliances. This is a core element of our Volkswagen Group Strategy 2025. The potential industrial cooperation with Ford is seen as an opportunity to improve the competitiveness of both companies globally.”

An Alliance for the Development of Low-Emission, Electric, and Autonomous Commercial Vehicles

As the news arrived only days after Ford announced that its new Corktown campus aims to develop autonomous and electric vehicle business, we can deduce that Ford and Volkswagen talks will include electric and autonomous vehicles. After all, Volkswagen Group Strategy 2025 for commercial vehicles does promise low-emission and zero-emission light commercial vehicles and autonomous transport solutions - exactly what Ford plans to develop at the Corktown campus.

Despite the friendly talks and a possible alliance, it was unequivocally disclosed that any potential alliance would not involve equity arrangements. In short, Ford will not buy any stake in Volkswagen, or vice versa.

Volkswagen already has a successful commercial van partnership with Daimler. The Mercedes-Benz Sprinter and the Volkswagen Crafter had been produced on the same line until 2016 when the contract between the two ended. Now, the Volkswagen Group, owner of MAN and Scania trucks has formed a new partnership this year with Hino Motors Ltd from Japan. Linking with a Toyota affiliated producer is aimed at the development of the diesel-hybrid systems, advanced connectivity solutions, and self-driving technologies.

Ford, on the other hand, cooperates with Deutsche Post AG developing electric vans. Obviously, an alliance like this would have huge benefits for both companies. Especially in the world of today, when some of the major cities all around the world (London, Paris, Beijing, Brussels) are looking for ways to purify their air. Commercial vehicles are among first required to be compliant with the new emission standards. Banning diesel may be the first step in the process. Hybrids and EVs will replace diesel.