Volkswagen and Ford Announce Alliance Without Cross Equity

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Volkswagen AG and Ford Motor Company today announced the first formal agreements in a broad alliance that has far reaching implications in Europe, South America and Africa. Volkswagen AG CEO Dr. Herbert Diess and Ford CEO Jim Hackett during a joint conference call said the companies will first deliver medium pickup trucks for global customers starting in 2022. They intend to follow with commercial vans in Europe. Equity markets were neutral immediately after the announcement.

The history of such industry collaborations is difficult and littered with road kill. The problem is whether the two global giants and hundreds of thousands of workers can walk in step together or stumble over each other.

Ford Motor CEO Jim Hackett (left) and Volkswagen AG CEO Dr. Herbert Diess.

The van and pickup agreements are targeted to deliver scale and efficiencies for each company starting in 2023. The companies estimate the commercial van and pickup cooperation will yield improved annual pre-tax operating results, starting in 2023. Ford said this is worth $500 million in efficiencies for an ambitious platform consolidation with specific targets.

Dr. Herbert Diess, CEO, Volkswagen AG said, “Volkswagen and Ford will harness our collective resources, innovation capabilities and complementary market positions to serve better millions of customers around the world. At the same time, the alliance will be a cornerstone for our drive to improve competitiveness.” The alliance will be governed by a joint committee led by Hackett and Diess and will include senior executives from both companies.

Since the work coincides with Ford’s European restructuring and triggers product allocations for VW’s German and European product allocations, a strategic review of Russia the work needs to begin now. It is a sweeping effort involving unions, plants, products, suppliers, marketing and go to market strategies for both companies, distributors and dealers. Hence the public announcement today with limited details since the work is already underway.

In addition, Volkswagen and Ford have signed a memorandum of understanding to investigate collaboration on autonomous vehicles, mobility services and electric vehicles and have started to explore opportunities. Both companies also said they were open to considering additional vehicle programs in the future. The teams will continue working through details in the coming months.