Earlier this year, Detroit-based automotive giant Ford and German automaker Volkswagen (VW) announced that they have been in talks since mid-2018, and in January of 2019 they signed a memorandum of understanding (MoU) regarding the production of commercial electric and autonomous vehicles. With China, the world’s largest automotive market, and California, an undeniably powerful auto market, pivoting towards eliminating emissions and focusing on clean, electric power, it makes sense that the automakers would want to put themselves in a position to lead these fronts. While many supposed leaks have come out since this announcement, most of which originating in Europe, many of the rumors come to conflicting conclusions, making it unclear where Ford and VW truly stand in regard to a global partnership. This article aims to dissect the information currently available in an attempt to decide whether or not the partnership is plausible and, if it is, what it would mean for the automakers and the industry.
Recently, Ford has been struggling with declining sales in major markets such as China, Europe, and South America- regions where VW plays a dominant role in the automotive market. As Ford continuous to try to restructure and pivot onto a more successful path looking forward, partnering with an automaker that’s successful where Ford is performing poorly seems like a logical step towards getting the American automaker’s feet back under themselves. Already, Ford is planning on letting go of 54,000 jobs in Europe alone in an effort to reduce spending and hopefully increase profits in that market. On the flip side of the same coin, VW hasn’t been performing where they would like in America, Ford’s most dominant market. With factors such as vehicle automation and electrification put aside, this already seems like a potentially plausible partnership based on the markets the automakers could help each other gain more traction in.
Should a set agreement be made, this wouldn’t be the first time Ford and VW partnered up on a global scale. In the 1980s the two automakers partnered in a joint project called AutoLatina in a combined effort to tackle the then-struggling markets in Brazil and Argentina. Unfortunately for Ford, once things started shifting upward VW suddenly abandoned the joint venture, effectively stealing the positive momentum, which they still maintain today, and leaving Ford struggling in said markets. With that in mind, both parties are being careful not to rush into any joint projects that could leave one party vulnerable to failure while the other steals the market.
As stated above, there have been a lot of conflicting rumors about what the two automakers have been discussing, and what kind of partnership may come out of their talks. One of the more recent rumors, reported by a Wall Street Journal insider, states that VW is looking to invest a lot of money, reportedly a total around $1.7 million, in the company Argo. For those who haven’t heard the name before, Argo is a startup focused on perfecting autonomous driving, and they are a subsidiary of Ford. In regard to their current relationship with Ford, the Argo website reads, “Together, we’re moving towards 2021: the year Ford’s self-driving vehicles, with fully integrated Argo technology, will be in commercial operation in multiple cities across the country. These vehicles will be used for ride hailing and delivery services.” This comes just shortly after VW tried to invest in, then outright buy, autonomous startup Aurora. Aurora declined the offers made by VW and has gone on to recently announce that they secured over $530 million from companies such as Amazon, Sequoia, and others. It would make sense, then, that VW switched their scope to investing in a different autonomous startup, and the rumored investments they are considering with Argo could essentially make Ford and VW equal stakeholders in the company.
Besides simply buying into an ownership position, a lot of speculation says that VW would also bring their own assets to the table. On top of potentially investing into Ford’s autonomous subsidiary Argo, VW could share ownership of, or share knowledge and resources from, their own electric and autonomous projects. There is a lot of speculation surrounding the situation, but it wouldn’t be too far a stretch to see VW offering access to or resources from its Moia mobility service brand or the Audi Autonomous Intelligent Driving project. Further, as an automaker set to really make an impact in the EV market in the next few years, VW could potentially offer the use, or at least share manufacturing insights from, the VW MEB electric vehicle platform it’s inviting other automakers to use.
Overall, it’s hard to come to a sound conclusion on what the talks between Ford and VW might bring, as for every seemingly-reliable source of insider knowledge pointing one way, there’s another equally-reputable rumor saying otherwise. What we do know is that the automakers “signed a memorandum of understanding to investigate collaboration on autonomous vehicles, mobility services and electric vehicles and have started to explore opportunities,” meaning there are talks happening in the realm of EVs and autonomous vehicles for both companies. We also know that Ford CEO Jim Hackett told the Detroit Free Press recently that he is enthusiastic about teaming with the largest carmaker in the world. With Ford looking to cut costs internationally in order to increase profits, and VW looking to achieve a similar goal in the American market, it seems to make sense that the automakers would start a joint venture to help each other in their struggling markets. For now, we’ll have to just wait for the next official statement from the automakers on the state of their discussions and whether or not they decide to form a partnership.
At Holbrook Auto Parts we’re excited to see Ford and VW talking about potentially forming a partnership. As the Motor City continues to fight to restore itself to its former glory, Detroit could see a lot of much-needed jobs and revenue come from an uptick of Ford’s sales in a global market. Further, a partnership between the automakers could potentially create job openings in Detroit as VW establishes a stronger presence in the American market, further helping the city economy. For now, we’ll just have to wait and see how these negotiations play out.
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