More Ford VW Collaboration

At the recent auto show in Detroit, Ford and Volkswagen announced another collaborative tie-up. This comes at a time when Ford have announced some poor numbers and the proposed agreement could help both parties reduce costs. It is not the first time that the two companies have shared technology, platforms and other components – Motoring Weekly recently wrote about Ford using VW’s MQB platform.

For this announcement though, the focus is on commercial vehicles and pickups – the latter being a big part of Ford’s sales focus in its home market, having dropped most of the passenger car models locally, in favour of what should have been high profit pickups and SUVs.

The key for Ford is to target the midsize pickup market segment, something that they do well in many markets with their Ranger model and to push deeper into the commercial van market with the Transit. Volkswagen recently entered the same marketplace with their Amarok pickup and have been developing smaller “city” vans. Both need to keep market share whilst developing new products and like the earlier agreement that produced the the first series VW Sharan / Seat Alhambra / Ford Galaxy, this agreement will enable cost sharing for both parties.

Ford will use the Ranger platform to build a joint vehicle for the European, South American and African markets – and highly likely to be sold in Asia as well considering they have manufacturing plants there. That would enable Volkswagen to sell into markets it cannot get into quickly today. Ford would also develop a large van based on the Transit for the same markets whilst Volkswagen would extend the development of their smaller commercial vehicles for Ford to sell as well.

Both parties have said that they expect the joint products to come to market by 2022 and they would both receive an annual pretax cost reduction of about $500m – something that both parties need as the industry battles with trade tariffs on one side of the Atlantic and Brexit on the other. In addition, the two companies will look at sharing more within their autonomous and electric car programs to try and speed up the development of these products. Volkswagen had announced a new plant to be created in the US for their electric vehicles, so it will be interesting to see if that plan continues or whether they collaborate with Ford and use up some spare factory capacity.

Ford had already committed to renovating the old Detroit Grand Central Station as a technology hub and “nerd node”, perhaps some of the savings in development and production costs will see this group get more investment and a direct line to their VW colleagues in Wolfsburg. Both Ford and Volkswagen will need to really think about where their products are going to be marketed. Too much overlap will cause conflict in some geographical locations – for example, Volkswagen is strong in Europe and parts of Africa and Asia whilst Ford is strong in the US, South Africa, Australia and both have a presence in Brazil and China. It would make sense to ensure that certain models are built for a particular market segment such that the overlap is reduced and profits per vehicle maintained.

Here at Motoring Weekly, we will be watching this agreement closely to see if it is extended to other segments and how it helps both companies.