Ford Motor Co. CEO Jim Hackett, left, and Volkswagen AG CEO Herbert Diess talk on the floor of the Detroit Auto Show today.
Ford and Volkswagen will formally announce on Tuesday the first of what is expected to become a broad range of joint ventures and other partnerships, the head of the German automaker told TheDetroitBureau.com during an impromptu interview at the North American International Auto Show.
The tie-up will begin with a partnership involving commercial vehicles that should help VW expand its marginal presence in the pickup segment, with Ford gaining access to product in other commercial sectors. But there are other projects that have been approved by both companies’ boards that will be revealed on Tuesday, said Volkswagen CEO Herbert Diess.
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Not everything will be announced this week, Diess said, confirming that the relationship is a work in progress. He noted that beyond what either has already been set in motion, “We are looking at other things.”
The two automakers signaled their interest in working together last June when the signed a memorandum of understanding, or MoU, focused on commercial vehicles. But they quickly began exploring other opportunities, Diess acknowledged, confirming months of rumors.
(Ford, VW could roll out a series of deals over “coming weeks and months.” Click Here for the story.)
“We are very complementary,” he said, explaining that in markets like Europe and China, where VW is strong, Ford is struggling. The reverse is true in the United States. And the CEO said that is something the two companies now hope to take advantage of.
Hackett, left, and Diess compare notes during a discussion at the NAIAS 2019
With commercial vehicles, Diess explained, Volkswagen “does not have the economies of scale (so) combining makes a lot of sense.”
While it was widely expected that the two carmakers would have something to announce early this year, the precise timing was anything but certain. As recently as last Wednesday, company sources cautioned that any initial deals would need formal board level approval. That has since happened and, Diess noted, he made the decision to come to the U.S. only last Friday.
“Tomorrow we will announce a few things with Ford,” he said after wrapping up a walk with Ford CEO Jim Hackett through the Detroit Auto Show that wrapped up at the Volkswagen stand.
The “question” the German executive said, is “how big” the relationship with Ford will grow.
(Click Here to see more about Ford’s discussions with Volkswagen.)
Diess noted that the two carmakers have had on-and-off relations dating back “decades.” In fact, Ford’s then chairman and CEO Henry Ford II turned down the opportunity to buy the damaged assets of Volkswagen immediately after the Second World War.
In the 1980s, the two makers combined operations in Brazil and Argentina. The joint venture, dubbed AutoLatina, eventually ended badly for Ford which exited the alliance in a weak position building products that didn’t click well in the market.
Volkswagen of America chief Scott Keogh, left, and VW AG CEO Herbert Diess share a laugh during the Detroit Auto Show.
Ford has “a lot of institutional memory,” and will make sure that any new deals avoid the same traps and pitfalls of the past, Jim Farley, the head of Ford’s global operations, told TheDetroitBureau.com last week.
Key will be finding “the right products,” he stressed, adding that Ford will “have to protect its brands. Balance,” he added, “is really very important.”
Among the other areas Ford and VW are exploring are electrified and autonomous vehicles. And it appears likely that one or the other could assume lead in various markets. Joint manufacturing operations are also expected to be in the eventual package of joint ventures.
(To see more about Ford being transparent about its turnaround plans, Click Here.)
The one thing sources at both companies have ruled out is any form of equity swap.
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