Ford mulling a partnership with Volkswagen for vehicle development

Auto majors Ford (F) and Volkswagen are exploring ways to work together, which would help both the firms to help each other to compete better with their rivals globally. The companies officially confirmed on Tuesday that they are in talks to find ways of developing vehicles together, including commercial vehicles.

The auto giants also added that there will not be any stake/ownership change, which means merger possibilities are not on the cards for now. The partnership is coming at a time where globally consumer tastes are evolving amidst changing the technological landscape and intense competition to grab market share. There is an increasing pressure for automakers to produce environmental-friendly vehicles, which makes it inevitable for global automakers to turn their attention towards hybrid and electric vehicles.

It’s worth noting that both Ford and Volkswagen have been grappling with their own issues for some time. Ford has made its intent clear to shift gears attuned to the changing consumer landscape. Last month, the Michigan-based firm decided to stop production of cars in North America and wanted to focus on SUVs, trucks and crossovers, which would bring in better margins. Ford also wanted to reduce its spending to the tune of $5 billion between 2019 to 2022 time frame.

The US auto giant also has been forging partnership globally to beef up its electric and autonomous vehicles. On Monday, Ford announced that it has bought the dilapidated train station in Detroit and plans to convert it as a tech hub where 2,500 employees will be working on autonomous and electric cars.

On the flip side, Volkswagen has been under tremendous pressure for the past three years post dieselgate scandal. The company has spent over $30 billion related to the issue resulting in the indictment of the then CEO Martin Winterkorn. Relating to the scandal, earlier this week luxury carmaker Audi’s CEO Rupert Stadler was arrested in Munich.

Related: Audi CEO behind bars due to dieselgate emission scandal

Post the scandal, Europe’s largest carmaker group has been fighting many battles. In order to tackle the multitude of issues, Volkswagen announced in April this year that Herbert Diess will be replacing CEO Matthias Muller from August. Volkswagen also added that it’s revamping the entire group into six business units and made China as a separate portfolio. With Diess taking over the reins the company wants to execute its “Strategy 2025” goal with a renewed focus leaning towards hybrid and electric vehicles.

The new partnership would augur well for both the firms as it would save costs for their new vehicle development. Since their portfolio of vehicles in the commercial side is complementary, Ford and Volkswagen would benefit from cross-selling and scale up faster based on the needs, which would help them to stay ahead of the competition and cater to evolving consumer demands.