By on October 26, 2018

Ford Motor Company is engaged in hurried discussions with Volkswagen, with the German automaker seen as a sure-fire way to reverse falling fortunes in overseas markets. Ford needs help in Europe and Latin America, especially — a situation made clear in Thursday’s quarterly earnings report.

Since signing a Memorandum of Understanding with VW in June, the scope of Ford’s partnership has expanded from its initial focus on commercial vehicles. There was already room in the MOU’s wording for the two companies to go further. Now, it looks almost certain that passenger vehicles will become part of the plan.

According to Ford chief financial officer Bob Shanks, things are moving fast. Fast, because they have to. Speaking to Bloomberg, Shanks basically said nothing’s off the table.

“We’re having a very broad set of discussions about how we can help each other around the world,” said Shanks. “Collaboration isn’t being limited in any way whatsoever, whether it’s different types of technology, product segments or geography.”

Technology sharing is usually the main reason for an OEM tie-up, though the possibility of jointly-developed vehicles isn’t out of the question. While Ford’s next-generation Focus is seen as a helping hand in Europe, one model does not a recovery make. Thanks to a bevy of small cars, Volkswagen has both the European and Latin American markets in the palm of its hand, and has for quite some time.

It’s not just VW that Ford’s in bed with. A similar wide-ranging partnership with India’s Mahindra & Mahindra is seen as key to expanding Ford’s footprint (and profits) in that market. China gets a lot of press, but India’s expanding middle class and growing thirst for passenger vehicles holds much potential for makers of affordable vehicles.

However, while India remains a work in progress, plugging the financial leaks in Europe and Latin America is top of mind. The two regions are money sinks for Ford.

“We have a history with VW. We get along with them. And if you look at the strengths and weaknesses of each of us, we match up really, really well,” Shanks said. “We’re trying to get things done as quickly as we can because we’re all trying to improve the fortunes of each of our companies. So, we’re moving to get clarity and get moving on to the actual collaboration as quickly as possible.”

Details on what fruit this partnership will bear should emerge early next year, Shanks claims, but it won’t be fleshed out all at once. Don’t expect a “big bang,” he said.

“It will be done as fast as we possibly can, but it will be done in chunks and pieces.”

[Image: Ford Motor Company]

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33 Comments on “‘As Quickly As Possible’: Volkswagen Partnership Seen As Key to Ford’s Overseas Hopes...”


  • avatar
    IBx1

    sellsellsell

  • avatar
    Kyree S. Williams

    I mistook the Focus hatchback pictured above for some sawn-off Maserati product. That’s a good thing. Too bad we won’t get it, but I believe Ford when they say it isn’t profitable for them.

    Maybe they’ve set something up to allow for a quick US-deployment of their small cars if (when) fuel prices rise.

  • avatar
    genuineleather

    I can only assume that Ford wants to offload development of its compact/subcompact cars to VW (like GM does with GM Korea) while focusing on the NA trucks and SUVs that keep the lights on. Stories about VW merging/buying out Ford keep popping up, but I cannot imagine that would pass CFIUS, especially under the current administration.

    • 0 avatar
      deanst

      Is there some game going on to use acronyms 6% of the readership might know?

      I suspect the Ford family is the bigger problem for any sale.

      • 0 avatar
        raph

        Indeed, the Ford family’s special shares prevent a stock holder revolt and sellout to Volkswagen. Although I suppose everybody has their price.

      • 0 avatar
        EquipmentJunkie

        Let me throw the term VW MQB platform into the mix!

        I would agree that the savings come from powertrains, vehicle platforms, and the ever increasing giant of technology.

        I expect the Ford family problem will manifest itself into something similar to the Nissan & Renault partnership. Lots of autonomy that the average citizen/buyer will not perceive.

  • avatar
    mason

    Say goodbye to VAG and hello to the
    Ford Audi Group.

  • avatar
    stingray65

    Ford is always a half-step behind in pretty much everything except full-size pickups. The Fiesta, Focus, Mondeo, C-Max, S-Max, Galaxy, Kuga are generally competitive with their VW equivalents in Europe, but they offer fewer choices of powertrains (i.e. no hybrids, virtually no mass-market turbo-4 gasoline, no V-6, virtually no EVs, crappy small car automatics, very limited AWD offerings), and are refreshed less frequently than VW models. Ford (and GM when they were in Europe) never invested the money to compete with VW, and as a result have lost money for decades. Part of the problem is the lack of economies of scale, as VW uses their high volume drivetrains and platforms across the volume of Audi, VW, Skoda, and Seat (and occasionally Porsche and Bentley) and sell the same basic vehicles around the world, while Ford of Europe shares virtually nothing with Ford North America, and Lincoln basically doesn’t exist outside of NA. Hard to see how Ford can turn it around unless Trump gets the Europeans to drop their VAT and fuel prices so that F-150s and Mustangs start to look more attractive to euro-buyers.

    • 0 avatar
      raph

      Well I don’t think Mustangs will sell much more than they do unless Ford offers a 2.0 liter or smaller T4 in the car (and a smaller car for that matter, something more akin to the foxbody cars really). IIRC most of the sales over seas have been the V8 car since the 2.3 T4 isn’t small enough to escape the higher taxes on “large” displacement engines.

      In any event I believe a quarter to a third of Mustang’s sales volume comes from outside the US.

      • 0 avatar
        Ce he sin

        You hear a lot about “displacement taxes” here but they’re not common. Instead many jurisdictions have CO2 based taxation, which admittedly amounts to a similar thing in that bigger engines burn more fuel and produce more CO2.

  • avatar
    gasser

    An interesting merger. After the diesel scandal that cost VW $20B to $30B and the monthly Ford recalls with a cratering stock price, where is the liquidity?? Do you think the banks will loan money with the Ford family control on one side and the German unions on the other side? The above observations on cars/trucks/power trains/platforms make a lot of sense. The clash of cultures doesn’t seem to make so much sense.

  • avatar

    Will we have Diamond star motors or Diamler Chrysler, only time will tell.

  • avatar
    Lichtronamo

    Sad that it appears Ford is on the path to cease being independent. The Ford family’s value in the company continues to decline such that the idea of selling becomes more to the them especially those not directly connected to the business. By ending its car lines in NA and now looking to do the same with this VW tie up in other markets, Ford is only left being regional light/medium truck maker.

    • 0 avatar
      Big Al from Oz

      Lichtronamo,
      And their success in the truck business in the US is relying on the Chicken Tax. A 25% the Trumpettes never discuss.

      You can see how protectionism has gone wrong in the US, while the rest of the World’s global vehicle makers are doing better.

      The US auto business needs to inject some lean into themselves, real lean that is competitive.

      • 0 avatar
        DenverMike

        @BAFO – The poor old “chicken tax” has about zero to do with the wild, obscene success of Ford trucks.

        The chicken tax would favor Toyota, Nissan and Honda pickups, primarily, if at all. And way before Ford trucks, but probably not much.

        But then the chicken tax might be a little annoying to any automaker importing “global” vans, such as Ford, GM and FCA.

        So why does the tax exist? The fight is with Europe, which isn’t really known for its “pickup” trucks, but the EU of course has a chicken tax of their own, and without any pickups to really protect. The EU really does have a good reason for it. Doesn’t it? Don’t kill too many brain cells figuring that one out.

        I know you’re still sniveling about Hilary losing, but..

        Yeah Ford isn’t great at doing cheesy sedans, and it’s not really the big deal people want it to be, they’re not exactly Rocket Science, but then again…

        OK, look at it this way: Crocodile Dundee might not be the greatest signer, probably sucks at it, but that’s OK, right? That’s what Kylie Minogue is for.

        Now how good do you think Kylie is with Crocs?

        Leave the pickup trucks to Ford and cheesy, throwaway sedans to VW. Together they could take over the world.

        • 0 avatar
          vehic1

          DenverMike: If the Ford trucks were such colossal moneymakers, and Ford was running their business so well – why would they need to collaborate, or get bought out, by other companies? This was probably well on the way, before anybody won the presidency with a 46%, second-place vote.

          • 0 avatar
            DenverMike

            Some times a collaboration makes sense. Mick Jagger and David Bowie? Run DMC and Aerosmith? Anthrax and Public Enemy?

            Not that any of them can’t stand alone, but why not capitalize on competitor’s strengths, especially if indirect competitors, while they capitalize on your strengths in trade?

            Who would’ve thought Ford and GM would collaborate on a shared transmission? But it’s OK for VW to need help in the areas of where Ford is excellent at? Especially with trucks?

            Yes Ford has been losing in Europe, and so has VW in North America in terms of volume. VW can’t figure out NA, no different than Ford with Europe.

            If that’s not a very good reason for a collaboration, what is?

  • avatar
    Jeff S

    I never thought I would see the day that Ford could possibly become part of another auto company. I realize that this article does not state Ford is merging with VW but usually this is a sign that it could happen. There could be a day when the Ford family wants to sell out to another manufacturer and this could be the start. This might be for the best. I believe we will see a day when there are no US based auto manufacturers.

    • 0 avatar
      Big Al from Oz

      Jeff,
      I don’t know if you can recall I talked about the rationalisation of the auto industry a number of years ago.

      I think the US manufacturers really need to sit down and realise that US specific regulations, protection of large vehicles has created an environment where the US manufacturers are not as competitive on the global stage as they could of been without those protective instruments.

      As the US market shrinks proportionally, so does it’s leverage. Ford and GM failed here. They continued on treating their global businesses as regional entities producing what they thought were competive products for that region moreso than the European and Asian manufacturers.

      US manufacturing, needs to sit down and look at how it’s doing business. The world has changed and many alternative and highly competitive business models are evolving and I think the Asians are leading the way.

      It’s not all down to cost of labour. But, now the US has higher commodity prices and high wages destroying its competitiveness on top of sub par business models.

      • 0 avatar
        DenverMike

        @BAFO – The US created an environment extremely favorable for import/offshore brand automakers, greater than any other meaningful car market, practically to the demise of its “domestics”.

        But somehow you still squawk about all this “US protectionism”. The US market is what happens consumer can have practically anything they want, if automakers, including import brands, are willing to provide them.

        This leads to more segments than any place else, even if we don’t have 20 brands of midsize pickups to choose from.

        Except this leads us to likely biggest hurdle facing “would be” import automakers: US Lemon Laws…

        • 0 avatar
          DenverMike

          Yes I feel sorry for automakers not able to meet the needs of the US consumers. Did I mention US Lemon Law?

          So it’s not tariffs or technical requirements keeping foreign automakers out of the US. Those automakers have themselves to blame and their home countries for their extreme protectionism and shielding from import competition, including very high import-tariffs and ridiculous taxes, that made those domestic automakers not competitive globally, made specifically for those local and in-country taxes, have weak offerings, and or very unreliable.

          Not to mention “US Lemon Laws” which you’re probably hearing about for the first time, and unheard of in your part of the world, including SE Asia and Africa.

  • avatar
    Jeff S

    @Denver Mike–VW will face more competition in the future from the Chinese. Eventually the Chinese auto industry will be making and selling those cheesy sedans on a much larger global basis. Ford is in a transition stage and anything can happen. Get the profits up, costs down, and stock price up and then become a takeover target.

    • 0 avatar
      DenverMike

      If it’s a remote part of the world VW is popular in, and Ford isn’t (or totally absent), wouldn’t consumers there be much more inclined to buy a Ford car when they know it’s a VW under the skin, with new/used parts found all around and local mechanics (extremely) familiar with?

      Would you consider that a sellout? Or a clever ploy?

  • avatar
    Jeff S

    I am more inclined to buy a Ford car than a VW based on my experience. I don’t dislike Ford but I see that they could eventually become a takeover target which I would say the same thing for GM. The auto industry will see more consolidation and more emphasis on cost reduction and efficiencies. As for trucks it is a matter of how much longer the Chicken Tax will exist for now it is safe under the current administration but after that who knows. Every manufacture is looking at the bottom line and how to reduce costs and eliminate low profit products. If you have to make a less expensive and less profitable vehicle then you are for the most part forced to make it in a lower cost country with lower paid workers. The current administration takes away the advantage of making lower profit vehicles in lower cost countries and that is a major reason why Ford is getting out of the car business along with increasing profits and increasing stock price.

    Increase profitability then you become more desirable as a take over target and the stockholders will want to take the profits from a takeover. If a company loses money and is not profitable then it will either declare bankruptcy and/or be acquired or if a company reduces costs and builds up cash reserves then it is a target from competitors that want their assets and the stockholders want the profit from an acquisition.

    • 0 avatar
      WallMeerkat

      It was Ford who wanted the Chicken tax.

      Now they have to import Transits from Turkey with seats and windows, which are designed to be destroyed in front of tax inspectors. Absolutely crazy.

      • 0 avatar
        JimZ

        “It was Ford who wanted the Chicken tax.”

        evidence, please.

        edit: don’t bother, I know you don’t have any. the “chicken tax” got it’s name because EUROPE put a stiff tariff on chicken coming from the US, and Pres. Johnson enacted a retaliatory tariff on imports of several items, of which only one was light trucks.

        You know, because Trade Wars Are Easy To Win.

  • avatar

    Remember, if you get in bed with any German company it ends up not being a merger of equals. Chrysler never recovered from such a deal. I am not surprised Hackett has decided to sell out Fords ability to engineer and design cars.

    Ford is a national disgrace, which will eventually have to be bailed out by the government.


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