Herbert Diess (left) and Jim Hackett
The Wolfsburg want to ally with the US competitor. Now only the supervisory board has to agree.
Düsseldorf, BerlinSessions of the Supervisory Board are included Volkswagen recently developed its own momentum several times. Some topics have been removed from the agenda or the panel has made decisions to the board without consultation, participants say. The next meeting is scheduled for Thursday next week – and then there should be unity among the 20 checkers. CEO Herbert dies wants them their plans for far-reaching cooperation with the US automaker ford for approval.
The two car companies have already agreed on joint production of pick-up trucks in January. VW want for these brawny vehicles the works of ford use to finally succeed in the market segment. This was just the beginning. VW boss Diess and his colleague at Ford, Jim Hackett, have more in mind: They want to cooperate in the fields of electromobility and self-driving cars as well as in the production of transporters.
So it’s about the future – and the auto companies are breaking new ground. Volkswagen offers Ford access to its Modular Electrical Modular System (MEB) for a fee. Behind the bulky term hides the platform on the basis of which most of the electric cars of the VW Group are to be manufactured in the future. The Wolfsburg are leading the MEB among the major manufacturers, but that had its price. The development costs were in the billions. Part of it should come in via Ford, it was said.
For Ford, the opening to Volkswagen in return should save the business in Europe. Without electric cars, the US company could not reduce the average consumption of vehicles sold in European countries as much as the EU demands. Ford would have to pay large fines from 2021 onwards, the amount of which would endanger Europe’s existence.
Diess and Hackett also expect high savings from a joint development of self-driving cars. Although the number one (VW) and number four (Ford) are already heavyweights in the industry. However, spending on these systems is immense, as extensive testing and development is needed. From the perspective of the industry, manufacturers from China have a great advantage here, as more data can be collected and used in the country.
Joint venture between Argo and AID planned
Ford has made a good starting point with the acquisition of Argo. As a subsidiary of the US group, Argo is now driving forward the development of autonomous systems. The Wolfsburg people want to participate in this society. A joint venture is planned, in the Volkswagen the Munich AudiSubsidiary AID is likely to contribute. AID works for Audi on autonomous programs.
Most recently, the negotiators sent by Hackett and Diess had argued hard about the price. The talks were temporarily stuck according to informed circles – the cooperation threatened to fail before it had started properly.
Ultimately, however, both sides have agreed, now the approval of the VW Supervisory Board is still missing. The room for this was a revaluation of autonomous activities. From the perspective of experts, autonomously driving cars will come to the streets later than originally assumed and probably used by fewer customers. This realism let the prices fall, it said in group circles. First, autonomous systems should prevail in the commercial sector. Transport companies can save a lot of money when drivers are no longer needed.
Comprehensive cooperation in the important future fields offers enormous advantages for car manufacturers. But the negotiations were not easy. “Every company has its idiosyncrasies that have to be considered. And it’s also about vanities, “added a high-ranking manager to the Handelsblatt. Ford and Volkswagen see themselves as pioneers in the automotive industry.
If the Volkswagen supervisory board approves the alliance with Ford, then this should be one of the biggest successes for Diess as VW boss. Opposite the rivals Toyota and Hyundai from Asia as well as opposite BMW and Daimler the two allies would have enormous cost advantages. However, these would only come about if the employees of Ford and Volkswagen work closely together.
Ford is under pressure in Europe
The companies confirmed talks about an alliance. It was on the right track, had VW boss Diess recently told top managers. A Ford spokeswoman said, “The talks with Volkswagen have been productive in a number of areas.” For details, the corporations but did not comment.
VW is about a lot of money – for Ford, it is also about the presence in Europe. Because again and again there were massive losses, last year alone it was almost 400 million US dollars. That’s unacceptable to Hackett. He has prescribed a radical austerity plan for the European daughter. Around 12,000 Ford employees are to leave, six plants are to be closed.
Germany must shoulder a substantial share of the rehabilitation program. At the production sites in Cologne and Saarlouis, about 5400 jobs are already being canceled this year. With the emergency program, the European business should become profitable this year. “Ford is just fighting to stay in Europe,” even VW CEO Diess had said in March at a works meeting. VW could play a key role in solving the future problems of Ford Europe.
An acquisition of the MEB-Elektrobaukastens from the Lower Saxony would provide the group savings in Billions. Ford has not yet developed its own battery-powered vehicles for the European market. In-house developments exist so far only for the American home market. But these models cover the typical taste of US customers who prefer much larger vehicles.
For Europe, Ford needs smaller electric cars. For them Volkswagen is to provide the base with its MEB kit. Incidentally, Ford also wants to use the VW platform in China, where the vehicles are similar in size to those in Europe. In the People’s Republic, the US group has also recently been in the red.
Job cuts are unlikely to stop
The plan to use Volkswagen’s MEB electric platform is likely to be followed with particular interest in Cologne and Saarlouis. In the years 2023 and 2024, the production of the Fiesta and Focus passenger cars – two classic cars from the marriage of the internal combustion engine – will take place there. So far it is still completely unclear which models could be produced afterwards at the two German locations.
Ford’s VW MEB platform gives Ford the perspective of exploiting German locations in the longer term with the production of new electric cars. That would be good news for the more than 20,000 German Ford employees. “We are looking ahead,” said a Ford manager in Cologne. Only to delete and shorten is no future assurance.
However, even new electric cars will not be able to stop the job cuts in Cologne and Saarlouis. Ford Germany boss Gunnar Herrmann had recently suggested that the job cuts will continue in the coming years. The production of electric cars is much easier than the production of vehicles with burners. Scientists have calculated that at least 20 percent of jobs should be eliminated.
There are many reasons for this comprehensive cooperation between VW and Ford. However, this is not a self-perpetuating one, as is the case with the example Renault and Nissan showed. The companies from France and Japan have been working together for many years in many fields, but have never really found each other. After the expulsion of over-father Carlos Ghosn the union now threatens to fail.
The supervisory boards of Volkswagen should be aware of the opportunities and risks of the pact with Ford. After all, the negotiations have been going on for a few months now. During this time, the topic was repeatedly discussed in the Supervisory Board, it was said in Group circles.
The management around Diess has thoroughly prepared the cooperation and eliminated all conceivable problems, as they said. Whether the 20-member Supervisory Board really paves the way for this at its next meeting is not clear. At previous meetings, even important projects threatened to fail because individual representatives or groups were not prepared to reach consensus. This happened sometimes suddenly and unprepared, as it was complementary from the panel.