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Ford values VW's scale, Mahindra's efficiency in tie-upsIn intensifying alliance talks with Germany's largest automaker, Ford Motor Co. is eyeing Volkswagen AG's available manufacturing capacity to help the Blue Oval revive its money-losing European business.
“We believe that if we can form this alliance with VW … it would give us the benefit of the increased scale of their business,” Steven Armstrong, president of Ford's operations in Europe, Middle East and Africa, said Thursday. He added that an alliance with VW could “broaden” Ford's “product range.”
Details on the Volkswagen deal could come as soon as Tuesday at the Detroit auto show pending a scheduled meeting Friday of VW's governing supervisory board, according to a source with knowledge of the situation.
Under pressure to dramatically improve the financial performance of its regional businesses, Ford is seriously exploring sweeping automotive partnerships to help fix long-standing issues in Europe, South America and India, now on track to become one of the world's largest markets.
In Europe, Volkswagen would help Ford amplify its already-strong commercial vehicle business, and a successful partnership could bolster Ford's reputation and market share outside its U.S. stronghold, one sourcewith knowledge of the situation told The Detroit News.
Jim Farley, Ford president of global markets, said Wednesday evening in Detroit that ongoing discussions with the Mumbai-based Mahindra Group could unlock cost-savings for Ford as it attempts to get the proper products into the growing Indian auto market.
“Partnering, we explained about a year ago, was going to be a key part of Ford's future,” Farley said. “Boy, has it been eye-opening to work with Mahindra. The way they look at costs… It's an extremely fit company. They have real capabilities when it comes to reuse. We offer a lot. Emission certification, because emissions are getting real complicated in places like India.”
Negotiations with Mahindra to partner on SUVs and a small electric vehicle began in March following a series of memorandums of understanding and collaborations on other, smaller products. Details of the Mahindra partnership should become clear by the middle of this year,a source said Friday.
Partnering with largest SUV manufacturer in India could also help Ford sell a product that better fits the Indian market. Ford vehicles are currently too big and too expensive for the cost-focused Indian market.
Details on potential alliance with VW could come soon. Steven Armstrong, Ford president of Europe, Middle East and Africa, said Thursday Volkswagen's manufacturing scale in Europe could be a boon for the company. Ford is the leading commercial light vehicle seller in Europe, but has only the fourth-best manufacturing scale.
“Quantifying potential synergies for Ford from a partnership with VW is tricky,” Deutsche Bank wrote in a note Thursday. “But between the large combined spend on autonomous and electrification, and the potential for better capacity utilization in Europe or South America, we feel that Ford savings could ultimately amount to several billion dollars in case of a broad partnership.”
The automakers have for most of the past year been in broad-ranging discussions about partnering on everything from light commercial vehicles to electrification and autonomous vehicles. Both Ford and Volkswagen have repeatedly declined to comment about the nature of the partnership discussions, or when details might be announced.
Ford on Thursday announced it would cut thousands of jobs in Europe as part of an ongoing effort to turn the business around there. The Volkswagen partnership would be a vital part of Ford's future plans for Europe. Armstrong said Ford wouldn't have continued to sell in Europe if the strong commercial vehicles business — which it hopes to grow with Volkswagen's help — didn't have a future.
The companies have also discussed partnering on the more futuristic and expensive side of the business. The News reported in November that as part of the partnership talks, Volkswagen was considering a $1 billion-plus investment in Argo AI, the robotics and technology company majority-owned by Ford.
The potential investment in Argo was being considered as Ford and Volkswagen continue months-long talks on global partnerships, according to two sources with knowledge of the situation. Volkswagen also was considering a separate investment in Ford's in-house autonomous vehicle business, The News has previously reported.
The potential deals could result in both Ford and Volkswagen saving massive amounts of money as they invest in self-driving vehicles, aligning two of the world's largest automakers behind one of the biggest bets on the future of the auto industry. The companies could co-develop hardware and software for robotic vehicles, widen global market penetration and save money on software and licensing as a result of the partnership after the vehicles launch in 2021, the year Ford is targeting to put the vehicles on roads.
Ford and Volkswagen have also focused, among other things, on globally co-developing light-commercial vehicles. The two automakers and Argo hope to have some part of the autonomous vehicle deals finalized before the end of 2018, sources told The News in November.
VW CEO Herbert Diess said after a White House meeting in December that he might used Ford plant capacity in the U.S. to build cars. Ford executive chairman Bill Ford Jr. said then that the discussions were progressing well.
“Although there's been a lot of news about Volkswagen and Ford, Mahindra and Ford is also a very important opportunity,” Farley said. “There's a lot of potential.”
ithibodeau@detroitnews.com
Twitter: @Ian_Thibodeau
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