The plan is a comprehensive alliance between the two giants, although it does not involve either party taking shares in the other and the companies will continue to operate independently. The alliance will be governed by a joint committee from the two brands, led by the two respective CEOs.
An alliance of this nature between the two automotive giants has been the subject of much speculation for several months, and the announcement makes clear that the LCV market is where the potential for large-scale co-operation is going to be put to the test.
Based on the information provided at the Detroit motor show yesterday, Ford will lead the development for a next-generation mid-size pick-up truck to replace the current Ford Ranger and Volkswagen Amarok around the world. This is expected to enter production by 2022.
At the same time, Ford will also be responsible for developing a new large van for Europe. This will presumably replace the current Ford Transit and Volkswagen Crafter, and is expected to reach production in a similar sort of timeframe.
Meanwhile, Volkswagen will take the lead on developing a new family of smaller city vans for the two companies, presumably replacing the current Volkswagen Caddy and Ford Transit Connect ranges.
It’s expected that both companies will share powertrains for the relevant LCV models as part of the arrangement, but there are currently no plans to share engines on passenger car models.
Volkswagen will also share its electric vehicle development with Ford, which is an area where the German company is considerably more advanced than its American counterpart. The two companies will also work jointly on research and development for autonomous vehicles and mobility services.
What are the longer-term implications?
Last week, Ford announced it was beginning a significant restructuring of its loss-making European operations, with implications for its factories across Europe (including the UK). Although yesterday’s announcement is theoretically a separate matter, it’s impossible to believe that they won’t be connected in one way or another.
Volkswagen is also restructuring its business as it is forced to abandon its strong diesel foundations and embrace electric power across its multiple brands (VW, Audi, SEAT, Skoda, Porsche, etc.). Even for a rich global juggernaut, the cost of this shift is eye-watering.
Both Ford and Volkswagen also effectively offer completely different vehicle ranges in Europe and the USA, so a closer alliance between the two companies could reduce the levels of duplication for each of them.
Reducing duplication will also inevitably mean consolidating production in fewer factories. Shifting from petrol and diesel engines to electric motors will also mean closing current engine factories, of which Ford currently has two in the UK.
And of course, the same global conditions apply to every other car manufacturer so we can expect to see continued change in the next decade.
On the other hand, new technologies will require new investment and probably new factories, so the UK will need to be competitive if it wants to earn such investment from companies like Ford, Volkswagen or others.