Ford Motor Company (F) and Volkswagen AG are teaming up to tackle costs and deal with shifts in the automobile industry. Both companies announced that they plan to start building commercial vans and medium-sized pickups starting as early as 2022.
As part of the deal, Ford will manufacture medium-sized pickups for both companies that are expected to roll out as early as 2022. Ford will also build large commercial vans for the European customers of both firms while Volkswagen will build city vans.
The partnership will help the companies share investments and drive efficiencies and scale, but does not involve any cross-ownership between them. Experts have ruled out possibilities of a merger between both firms as their ownership structures pose limitations.
Ford and Volkswagen have also agreed to work together to explore opportunities in autonomous and electric vehicles as well as mobility services. They said they might also consider additional vehicle programs in the future.
The automobile industry is undergoing a transformation with the emergence of new technologies and changes in customer preferences. Many major carmakers are changing strategies and partnering with their peers for the development of new technological capabilities.
Ford is a leader in the US while Volkswagen is a major player in Europe. The alliance with the Michigan-based company will help Volkswagen expand its footprint in the US. At the same time, Ford is experiencing weakness in its European market and the alliance with Volkswagen could help the company strengthen its business in the region.
Last week, the company announced a major overhaul of its European operations. The restructuring will include job cuts and factory closures and the automaker has also decided to stop producing some of its less-profitable car models.
Ford’s sales volume in its Euro 20 market dropped 2.9% in December 2018 to 93,700 vehicles compared to the same month in 2017. Euro 20 represents 20 of Ford’s traditional European markets and includes France, Germany, Italy and Norway among others.
For full-year 2018, Ford’s total vehicle sales in the Euro 20 markets totaled 1.35 million vehicles, down 0.5% from 2017. Market share reached 7.6%. Passenger vehicle sales were down 3.5% while commercial vehicle sales were up 8.1%.
Volkswagen’s vehicle deliveries increased by 2.1% in the USA during 2018. In Europe, deliveries rose 1.2% while in the Central and Eastern Europe market, deliveries grew 7.1%.
As of 3:00 pm ET, Ford’s stock was down 1.95%.