Ford Motor Co. (F) - Get Report confirmed its trans-Atlantic alliance with Volkswagen AG (VLKAY) Tuesday at the Detroit Auto Show that will focus first on commercial vehicles but could later extend to electric and self-driving cars as markets in the world's two biggest economies continue to slow.
The combination does not include ownership stakes for either carmaker, but will focus instead on fresh investments into technologies in the self-driving and electric vehicle sector, which many analysts feel will be the key driver of future profits as China, the world's biggest car market, makes the switch away from traditional combustion engine cars. The companies aim to deliver medium pickup trucks for global customers in 2022 and follow with commercial vans in Europe the year after that.
"Over time, this alliance will help both companies create value and meet the needs of our customers and society," said Ford CEO Bob Hackett said. "It will not only drive significant efficiencies and help both companies improve their fitness, but also gives us the opportunity to collaborate on shaping the next era of mobility."
Volkswagen shares were marked 0.7% higher in Frankfurt, rising in concert with other European automakers on the back of reports that China is preparing fresh fiscal stimulus to arrest the slowest pace of economic growth in a decade.
Ford shares fell 1.7% close of trading Tuesday, changing hands at $8.84 each, a move that still leaves the stock some 18% higher than its Christmas Eve low of $7.63.
"Volkswagen and Ford will harness our collective resources, innovation capabilities and complementary market positions to even better serve millions of customers around the world," said CEO Herbert Diess. "At the same time, the alliance will be a cornerstone for our drive to improve competitiveness."
Earlier this week, Volkswagen said it would invest $800 million in an existing assembly plant in Chattanoga, Tennessee, a move the company said would create 1,000 new jobs and "make a contribution, step forward, to avoid tariffs between Europe and the U.S.", according to Diess.
Last week, Ford said it will review its operations in Russia, combine its U.K. headquarters just outside of London and shutting a transmission plant in France as part of a regional overhaul aimed at turning its European operations into profit.
Ford also said job cuts in its 53,000-strong workforce would follow, but hoped "as far as possible" they would come through voluntary action.
China's automobile market, the world's largest, recorded its first annual decline in more than two decades last year as new car sales slumped amid a slowing economy and rising trade tensions between Washington and Beijing.
The China Passenger Car Association said Wednesday that sale fell 6% over the whole of 2018 to just over 22.7 million units. That figure is firmly ahead of the 17.5 million tally recorded in the U.S., but shows the first year-on-year decline since the early 1990s.