US automaker Ford Motor is teaming up with Germany's Volkswagen to share resources in the production of more than 8 million commercial vehicles. The partnership is part of an expanded alliance between the two firms aimed at forming new synergies and reducing costs.
The partnership, which is expected to last for several years, will include the production of different commercial vehicles using shared manufacturing facilities. The vehicles that will be produced will include a city van, a 1-ton cargo van, and a medium-sized pickup based on the Ford Ranger platform. The commercial vehicles will mainly be supplied to fleet operators, government agencies, hospitals, and other companies.
Ford president and chief executive officer, Jim Hackett, mentioned on Wednesday during a virtual conference that the assembly of the vehicles is expected to begin early next year. He added that the partnership should last at least until the life cycle of the vehicle models and possible beyond. Both companies have apparently already agreed on the production volume along with other details of the new agreement.
In a press release, Volkswagen's chief executive officer, Herbert Diess, explained that the economic downturn caused by the coronavirus pandemic has resulted in companies finding ways to evolve and adapt. Volkswagen's partnership with Ford is seen as a vital alliance that will greatly drive down costs and broaden global distribution for both automakers. The alliance is also expected to enhance the positions of both companies within their respective markets.
The limited alliance, which does not include cross-ownership, will mainly be focused on business outside of North America. Both companies have reportedly been working on the deal since January last year.
According to sources close to the deal, both companies do intend to expand the alliance to include other products such as electric vehicles, among other models. The alliance will reportedly include the use of Volkswagen's MED architecture, which will likely serve as a platform for new electric vehicle models made by both companies.
For Ford, the deal is part of its massive $11 billion restructuring strategy. The plan is for the company to shift some of its focus on its commercial vehicles division to increase profits. Added funds from the shift will then be used to fund efforts to develop and integrate emerging technologies such as electric drivetrains, autonomous driving, and smart production.
Last week, Volkswagen had made a $2.6 billion investment in US-based autonomous driving startup Argo AI. Ford also holds a majority stake in the company, which it purchased back in 2017.
