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Volkswagen AG and Ford Motor Co. will cooperate on electric and self-driving car technology, sharing costs on a global scale to take a major step forward in the industry’s disruptive transformation.
VW will invest $2.6 billion in Ford’s autonomous-car partner Argo AI in a deal that values the operation at more than $7 billion, the two manufacturers said July 12 in a joint statement in New York, confirming a figure first reported by Bloomberg. This includes $1 billion in funding and VW contributing its Audi $1.6 billion Autonomous Intelligent Driving unit.
“While Ford and Volkswagen remain independent and fiercely competitive in the marketplace, teaming up and working with Argo AI on this important technology allows us to deliver unmatched capability, scale and geographic reach,” Ford CEO Jim Hackett said.
Ford shares climbed as much as 2.1% July 12 in New York. VW’s preferred stock was up 1.6% in Frankfurt.
In a nutshell: #VWGroupxFord— Volkswagen Group (@VWGroup) July 12, 2019
Expertise: two of the world’s largest automakers
We will get the world’s best SDS platform
Share R&D costs
Accelerate speed to market
Working toward autonomous vehicle leadership with @argoai pic.twitter.com/zb7WONRx2J
Unprecedented shifts facing the auto industry are forcing players to consider new partnerships and potential consolidation. VW, the world’s top automaker, offers the industry’s most ambitious rollout of electric models, while Ford, also in the top 10, is developing advanced self-driving technology with Argo.
For VW, the Argo investment offers an opportunity to potentially catch up with Alphabet Inc.’s Waymo, and General Motors Co.’s Cruise unit. Road tests and accumulating huge amounts of data are critical for the further development of self-driving cars, and few apart from Waymo are equipped to do it alone.
“It took a while to get this deal done, but it’s because we actually sorted out a lot of the hard problems,” Bryan Salesky, Argo AI’s co-founder and CEO, said in an interview. “We have a clear line of sight to production, vehicle supply and we have clear line of sight to where we want to go to market and how.”
Besides sharing costs for the development of self-driving cars, Ford will use VW’s electric-car underpinnings that form the backbone of the most aggressive rollout of electric cars in the industry, with Volkswagen spending some $34 billion. Adding more vehicles to production lines would help gain scale and save costs, and offer Ford a platform to better comply with tougher rules on carbon-dioxide emissions in Europe.
Ford will build at least one mass-market battery car in Europe starting in 2023 and deliver more than 600,000 European vehicles based on VW’s platform, dubbed MEB, over six years. A second electric model for Europe is under discussion.
Teaming up with its U.S. peer is one of the key initiatives of VW CEO Herbert Diess to overhaul the German industrial giant. Both sides reiterated July 12 the tie-up does not include entering equity ties between Ford and VW.
For Ford, a deal with VW fits with CEO Jim Hackett’s $11 billion overhaul of the company, which includes exiting the slow-selling sedan market in the U.S., shifting to focus on commercial vehicles in Europe and investing in electric-truck startup Rivian Automotive Inc. Geographically, the companies complement each other, with Ford strong in the U.S. and VW a leader in Europe and China.