Cooperation was and is not uncommon in the automotive industry. For decades she has been practicing different style flowers – usually with moderate success. At the beginning of the 1990s, there was only one panacea for the CEOs of large manufacturers: growth through takeover. So Daimler bought the American manufacturer Chrysler, BMW, the British carmaker Rover.
After these very painful entrepreneurial experiences for buyers and sellers, one turned in the last 20 years of this presumed success recipe the back and dedicated itself from then to the participation. It came to large, dust-raising alliances, for example between Volkswagen and Porsche, Renault and Nissan, Peugeot and Citroen or Fiat and Chrysler.
But what Volkswagen and ford announced a few days ago, should be a new chapter in the field of automotive cooperation. ACooperation in such a grand style has never been,
Gigant in the permanent crisis
Both Volkswagen (sales: 230.7 billion euros in 2017, 642,292 employees) and Ford (sales: 145.7 billion US dollars in 2017, 202,000 employees) are crippling giants and driven by their time. The time is running out for the management in Wolfsburg and Dearborn.
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Atreus
Stefan Randak is the director and head of the automotive practice group at the interim management provider Atreus in Munich.
Volkswagen, one of the world’s biggest mass producers, faces the biggest challenge in its history. The fraud in the exhaust emissions of the diesel engines beats at 27 billion euros, the premium subsidiary Audi stumbles, which weakens such an important Chinese market, not to mention disastrous numbers in the US, where the diesel affair has damaged the trust of customers sustainable and a pick -up called Amarok just does not get up and running.
Also, the growing competition from new promoters and the simultaneous “arrest” in the largest technical restructuring process since the invention of the automobile (alternative propulsion, autonomous driving, digitization) make VW to create. CEO Herbert diess, may and does not want to wait. For example, a € 44 billion investment package has recently been put in place to promote e-cars, autonomous driving and the digitization of vehicles.
Also read: Interview with Audi CEO Schot
Deep sleep and uncertainty
James Hackett of Ford is not much different. He is also CEO of one of the largest mass producers in the world, but also a crisis-ridden one. E-mobility, autonomous driving and digitization have largely been overslept in development to date. The European business – the market share is only around 8 percent – has been running low for a long time. And Brexit creates maximum uncertainty.
Ford produces in Britain on a large scale. According to Morgan Stanley, up to 24,000 jobs could be eliminated within the Group, most of them in Europe. That would be 12 percent of the total workforce. South America, Asia, Africa and the Middle East have suffered losses since 2018. Now everything is up for grabs. The only bright spot: the US market and the successful pick-up truck.
And as if that were not enough worries for both group leaders, there is, to make matters worse, another, incalculable risk factor: US President Donald Trump. His threatened punitive tariffs hang like heavy storm clouds over both automobile companies and could cost them billions in additional costs.
Infinite possibilities
The field of possible cooperation between the two companies is great, from today’s perspective almost inexhaustible:
– Ford is weak in the light commercial vehicle business (transporter), which is within the Volkswagen Group, however, a successful domain. Together, markets could be tapped better and development and production costs reduced. Time is short, since from 2020 onwards stricter limit values for CO2 emissions within the EU are pending.
– Volkswagen has always been weak in the US market, the pick-up Amarok is not running. Ford, on the other hand, has a strong position in America, and successful pick-ups are the Group’s most important product class. The F-150 is Ford’s biggest winner and the world’s best-selling pickup.
– Ford is a beginner in the field of electromobility. After all, Volkswagen already has the MEB (Modular Electric Modular System) electrical platform for battery-powered vehicles.
– In autonomous driving Ford needs every experience that you can get hold of. The backlog of the rival General Motors must be made up quickly, its largely self-propelled fleet of Cruise brand will soon come on the market. The Ford subsidiary Argo is to accomplish this, but urgently needs money. It wants to collect billions of dollars from investors and other car makers. Volkswagen could help here.
– In the field of battery cell manufacturing, both companies are blank and dependent on Asian manufacturers. Both companies are currently exploring their options separately from each other.
– Investing Volkswagen in the US and securing American jobs together could at least mollify the angry White House president, who resents the diesel scandal and considers German automakers a fundamental evil in the global economy.
Cooperations replace participations
Mass alone is no longer enough to be in the forefront of the auto industry. The high costs of switching from traditional manufacturers to digital mobility providers are also overwhelming for the industry’s giants. A problem that can only be solved through meaningful cooperation. Businesses on both sides of the Atlantic will also need to work together to defend the upcoming Chinese tech giant. The end of acquisitions and large-scale investments has begun.
The cooperation between the big names of the industry will come. As “burnt children” of their time and knowing all the mistakes that other group leaders have made in the past, you will not have to rush it, but still have to approach with the required speed.
Stefan Randak is the director and head of the automotive practice group at interim management provider Atreus in Munich and writes here as a guest commentator. Guest comments do not necessarily reflect the opinion of the editors.