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VW Board Puts Ford Alliance on Agenda for July Meeting

June 26, 2019
VW Chief Executive Officer Herbert Diess earlier this month told 500 top executives in Wolfsburg, Germany, that talks with Ford are “progressing well” and are close to being finalized.

Volkswagen AG’s supervisory board plans to discuss and possibly approve next steps toward expanding an alliance with Ford Motor Co. when it meets in two weeks, according to people familiar with the matter.

An agreement announced in January to cooperate on vans and pickup trucks with Ford could be firmed up at the July 11 board meeting, with the alliance potentially extending to include joint work on self-driving and electric-car technology, according to the sources, who asked not to be identified due to the meetings being private.

VW Chief Executive Officer Herbert Diess earlier this month told 500 top executives in Wolfsburg, Germany, that talks with Ford are “progressing well” and are close to being finalized, according to prepared remarks. The pact is part of VW’s plan to share costs amid record expenses required to develop new technologies.

VW’s tie-up with Ford is likely to include an investment in the U.S. company’s autonomous affiliate Argo AI, and a deal could be announced as early as July, people familiar with the talks said earlier this month. Such a partnership could rival Alphabet Inc.’s Waymo and General Motors Co.’s Cruise unit in ambition and scope, one source said.

Ford and VW have discussed an approximate valuation for Argo of $4 billion, an individual familiar with their deliberations said in February.

The Ford cooperation and the planned listing of VW’s truck unit Traton SE are among VW’s key initiatives to lift the depressed valuation of the world’s largest automaker. A high valuation is “an important acquisition currency in the upcoming phase of consolidation in the industry,” Diess told the top VW managers. It’s also “a virtual currency for partnerships that we need for the transformation.”

Diess ruled out entering equity ties with Ford in January when initial plans for the alliance were mapped out.

Traditional rivalries between carmakers have started to fall by the wayside as a costly shift to electric cars and new models for car ownership accelerates. Automakers are looking to boost scale to spread the costs of making battery-powered vehicles. While sales of electric cars are rising, they remain a fraction of combustion cars, and the investments required to develop self-driving autos are enormous.

Evidence of the push for consolidation includes Fiat Chrysler Automobiles NV’s failed proposal for a tie-up with Renault SA to become the world’s third-largest automaker. Daimler AG and BMW AG also have teamed up on car sharing and autonomous driving.

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