VW's Diess says Ford tie-up on AVs, EVs close to final

Volkswagen Group is nearing a deal to cooperate with Ford Motor on electric-car technology and self-driving vehicles, according to VW CEO Herbert Diess.

Talks with Ford are "progressing well" and are close to being finalized, Diess told a gathering of the carmaker’s 500 most senior executives on 13 June in Wolfsburg, Germany.

VW and Ford signed a deal in March to develop a pickup truck and have been in talks about extending the alliance to include autonomous driving and mobility services.

Ford said talks are continuing and that it would share updates when details became firm. "Discussions have been productive across a number of areas," a Ford spokeswoman said in an emailed statement.

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 this week. Such a partnership could rival Google affiliate Waymo and General Motors' Cruise unit in ambition and scope, one of the people said.

Earlier this week, VW said it had ended its partnership with self-driving car software firm Aurora. The dissolution of the partnership came after Aurora said that it would build autonomous platforms for commercial vehicles with Fiat Chrysler Automobiles.

Ford's majority-owned subsidiary Argo AI is building an automated "driver" that could compete with Aurora's technology.

China counterweight

Diess said VW needs a counterweight to China in the U.S.

"Today we are a company that’s strongly influenced by China. Without a strong presence in the U.S. -- still our weakest region -- global trade conflicts risk putting us in a dire situation," he said.

VW is facing a downturn in China, its largest sales region, amid rising trade tensions and tightening rules on vehicle emissions.  The carmaker has responded with a number of initiatives including a partial listing of its heavy-trucks division Traton and by weighing a sale of non-core assets such as a unit that makes ship engines.

On Thursday, Diess also called for the company to become more nimble and more valuable.

The truck share sale planned for the coming months and the Ford tie-up will be key to lifting the VW’s low valuation, Diess said, adding that there could be more industry mergers and acquisitions. 

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."

Traditional rivalries between carmakers have started to fall by the wayside as a costly shift to electric cars and new models for car ownership gathers pace. Automakers are looking to add scale to spread the costs of making battery vehicles. While sales of electric cars are rising rapidly, they remain a fraction of combustion cars.

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