Ford, VW share details of high-stakes partnership

Source: By Cathy Bussewitz and Tom Krisher, Associated Press • Posted: Tuesday, July 16, 2019

Volkswagen will invest $2.6 billion into a Pittsburgh autonomous vehicle company that’s mostly owned by Ford as the automakers who were once rivals deepen their partnership to develop driverless and electric vehicles in an ultra-competitive landscape.

The two automakers will become equal owners of Argo AI LLC, and they plan to put autonomous vehicles on the roads in the U.S. and Europe as early as 2021, the companies said Friday (Energywire, July 12).

The deal also includes a plan for Ford to use VW’s EV platform to build zero-emissions cars for the European market starting in 2023.

Auto companies have been teaming up with each other as well as with big technology firms over the past few years to try to spread out the enormous costs of developing self-driving and electric vehicles. Ford Motor Co. CEO Jim Hackett expects the large crowd of players to be narrowed down.

“The stakes are high here,” Hackett said at a news conference Friday. “There’s only going to be a few winners who create the leading platforms for the future. We cannot be late, Ford can’t be late, and we have to be great.”

The decision to team up helps Ford and Volkswagen share the steep costs — and risks — of developing technology for driverless vehicles, and gives Argo AI more cash to attract talented engineers, crucial to success. It also will help the automakers pivot from cars that compete on engine performance to those where the unique characteristics of the driver experience will be driven by software.

“The auto industry, in the past we’ve been criticized for a lack of interest in working together, and what you’re seeing with Volkswagen and Ford is a commitment to doing that on a number of projects,” said Joe Hinrichs, president of automotive for Ford.

What it comes down to for both the auto and technology companies is time and money. Driverless cars may not become commercially viable or generate revenue for years. There are also enormous upfront costs to change plants to produce EVs.

Among the combinations announced in recent years:

  • In May, a group of investors poured $1.15 billion into GM Cruise LLC, the autonomous vehicle unit of Ford’s main competitor, General Motors Co. Cruise already had attracted investments from Honda Motor Co. Ltd. and Japan’s SoftBank Corp., and is valued by the companies at around $19 billion.
  • Ride-hailing company Uber joined with Toyota Motor Corp. to build autonomous vehicles last year.
  • Chip maker Intel Corp. bought Israeli self-driving technology firm Mobileye for about $15 billion in 2017.
  • In April, Ford said it would invest $500 million in EV startup Rivian to build a Ford vehicle on Rivian’s underpinnings.

Auto and tech industry experts say partnerships like Ford and VW will become more common.

“One company cannot bankroll the development alone,” said Akshay Anand, executive analyst for Kelley Blue Book. “Partnerships will continue to ramp up in coming years, crossing boundaries most would not have envisioned even 10 years ago.”

With EVs, manufacturers are under pressure to release zero-emissions cars in markets such as China and Europe to meet tougher pollution limits. Ford already has its own platform, which it will continue to use for the majority of its EVs, but the relationship with Volkswagen will help Ford to develop smaller EVs that are desired in the European market.

Ford hopes to sell 600,000 vehicles in Europe using VW’s technology over six years starting in 2023. VW, the world’s largest automaker measured by sales, already has invested $7 billion in its new platform, which it plans to use to build 15 million EVs worldwide in the next decade.

“Ford has taken flack for years for not having a robust EV strategy, and VW has had its own fair share of challenges, but this can help both companies reinvent themselves as innovative technology leaders,” said Jessica Caldwell, executive director of industry insights for Edmunds.com. Edmunds provides content for the Associated Press.

As for Ford and VW, Hackett and VW CEO Herbert Diess left the door open to more collaboration between the companies, but they did not say whether there were specific additional partnerships in the works.

The Ford-VW alliance vaults Argo into one of the highest-valued autonomous-vehicle development companies in the world.

The VW investment includes $1 billion in cash and the $1.6 billion value of VW’s 200-person autonomous intelligent driving company. Ford already has committed to putting $1 billion into Argo, which the companies now value at $7 billion.

The two companies announced plans in January to collaborate on developing commercial vans and medium-sized pickup trucks while exploring electric and autonomous vehicles together. They said Ford would develop larger vans and pickups while Volkswagen would develop a smaller van for crowded cities.

Shares of Ford rose 2.6% in afternoon trading Friday.