NEW YORK — Ford Motor Co and Volkswagen AG said they will spend billions of dollars to jointly develop electric and self-driving vehicles, deepening a global alliance to slash development and manufacturing costs.

How soon those investments will pay for themselves is an open question across the global auto industry.

Ford and VW executives said the latest collaborations could save hundreds of millions of dollars for each company. But the projects will take time.

The transitions to electric and self-driving vehicles, as well as the production volumes, were uncertain, said Ford Automotive President Joe Hinrichs at a news briefing on Friday in New York.

Because of that uncertainty, and spiralling costs, “we are going to see more collaborations" between automakers, Hinrichs said.

Ford and VW have already started cooperating in the area of commercial vehicles and midsize pickup trucks as part of the auto industry's broader effort to redraw production and sales footprints to cope with more stringent regulation and fragmented markets.

VW will invest $2.6 billion in Argo AI, Ford's self-driving cars venture, and will buy $500 million worth of Argo shares from Ford, giving the two automakers equal stakes in the startup.

Ford also will build an electric car in Europe using VW's MEB electric vehicle platform, the companies said.

"Our global alliance is beginning to demonstrate even greater promise, and we are continuing to look at other areas on which we might collaborate," VW's Chief Executive Herbert Diess said on Friday.

Ford expects to build more than 600,000 electric vehicles in Europe over six year starting in 2023, sourcing components and the vehicle underpinnings from VW, helping both to cut costs.

Hinrichs said it would take four years to design Ford's electric car around VW's MEB architecture, and retool a Ford of Europe plant to build the vehicle.

VW said it had committed $7 billion to its MEB platform, which is expected to underpin 15 million vehicles worldwide from the VW group over the next decade.

Diess said Ford would pay VW "set by set" for the use of VW's electric vehicle components, and that revenue from those Ford vehicles over six years could reach $10 billion.

Analysts at Citi said Ford's licensing of Volkswagen's MEB platform was a "transformational" step for both companies.

"It likely provides VW with an unassailable scale advantage," Citi analyst Angus Tweedie said in a note published on July 10.

The cooperation with VW on electric vehicles in Europe is part of Ford's previously disclosed $11.5 billion EV investment worldwide.

Hinrichs said the VW collaboration would not affect Ford's plans to launch two new electric vehicles in the United States, including a battery-powered version of the F-150 pickup and a new Mustang-inspired crossover vehicle that is expected to be called Mach E.

Suppliers familiar with Ford's plans say the No. 2 U.S. automaker is developing a broader portfolio of electric vehicles, most of them crossovers that will carry the Ford and Lincoln brands, for North America and China. Many of those models will be built on an updated version of Ford's C2 global compact platform, they said.

The broader Ford-VW alliance, which covers collaboration beyond joint investments in Argo AI, does not entail cross-ownership between the two companies.

Ford created Ford Autonomous Vehicles LLC in 2018, pledging to invest $4 billion until 2023 and has sought outside investors to help share the spiralling cost of developing autonomous vehicles.

Volkswagen will contribute its Autonomous Intelligent Driving (AID) company to Argo, which will boost the self-driving unit's employees to 700 from 500.

The two automakers will use Argo's self-driving technology to develop their own individual vehicles.

Ford CEO Jim Hackett said the automakers will share data generated from Argo's self-driving software.

VW will invest $2.6 billion in Argo AI, Ford's self-driving cars venture, and will buy $500 million worth of Argo shares from Ford, giving the two automakers equal stakes in the startup.

Although Ford CEO Jim Hackett has been criticized for being at times hyperbolic in his pronouncements, when he sat onstage in New York this morning, flanked on his right by Volkswagen CEO Dr. Herbert Diess and on his left by Argo AI CEO Bryan Salesky, and said that the auto industry is in the midst of “the biggest shift in transportation” since the time of Henry Ford, there was absolutely no exaggeration.

The announcement that Ford and Volkswagen AG are expanding their global alliance is one of the biggest events in the auto industry in modern times.


What makes this fundamentally different from, say, the original Renault-Nissan alliance: That deal allowed the continued existence of the two companies, but there was no substantive change in what the companies brought to market — the same sorts of cars, crossovers and commercial vehicles they’d long been producing, just with a bit more cost sharing.

The Renault-Nissan Alliance is not unlike the agreement that Ford and Volkswagen announced earlier this year regarding the collaboration on commercial vans and medium pickups for European and other markets.

Today’s announcement, however, is truly transformative in that Ford will be using the Volkswagen-developed electric vehicle platform — the Modular Electric Toolkit (MEB) — to produce some 600,000 vehicles in Europe over the next six years, a platform that Volkswagen intends to use for the production of some 15 million battery-electric vehicles on a global basis over the next 10 years.

What this part of the announcement underscores is that these two global automotive giants — the two companies combined had sales of 16.7 million vehicles in 2018 — are now creating something of a standard for an electric vehicle architecture.

As Diess explained, by opening up MEB to Ford, the companies can drive down production costs through scale economies. That leads to the ability to offer the vehicles to the consumer at a more attractive price. Which can conceivably increase demand, which, in turn, can further trim costs. And for the vehicle manufacturers, who are presently facing nothing but red ink regarding EVs, there can be, according to Diess, “sustainable and profitable growth.”

One could argue that this is simply a case of Ford buying the MEB from Volkswagen, sort of a straight-up purchase that has no further implication than in terms of a supplier-customer relationship.

But speaking of the development of the Ford electric vehicle for Europe that is to launch in 2023, Joe Hinrichs, Ford president, Automotive, said that it is helpful that the company has an advanced research and development center in Aachen, Germany, whose engineers can work with those of Volkswagen. “A lot of work goes on in developing a vehicle,” he said with understatement.

So here is a case where the two companies are going to be working together to develop and launch a product that is certainly non-traditional in the context of the vast majority of the aforementioned 16.7 million vehicles.

Then there is Argo AI, the company that is developing an autonomous vehicle platform, a startup that Ford invested in two years ago. The finances are a bit tricky, but the bottom line here is that Ford and Volkswagen will have an equal stake in Argo AI, which will account for a “substantial majority” of the privately held company. Volkswagen is putting in $1 billion in funding and wrapping in its Munich-based Autonomous Intelligent Driving (AID) company; AID will become Argo AI’s European operation.

Again, auto companies investing in autonomous vehicle companies is nothing new. In fact, Volkswagen had invested in Argo AI competitor Aurorauntil this past June; Aurora has investments by Hyundai-Kia and FCA.

But the difference here is that Volkswagen and Ford are looking to achieve a self-driving platform that can be scaled comparatively quickly. Argo AI’s Salesky emphasized that their objectives are to (1) build for scale, (2) architect the software to be production quality, (3) have automotive grade sensors and computers, and, perhaps most important, (4) fully integrate their product with OEMs.

Hackett said that one of the reasons Ford was initially interested in Argo AI was because of that company’s focus on working with a vehicle manufacturer to make its products appropriate for use.

This, too, is a play of a platform that can be scaled. Not only is this somewhat analogous to the MEB in terms of the ability to reduce costs through volume, but there is the additional benefit that by having an Argo AI system on many more vehicles — both Volkswagen Group products and those of Ford — the system, by obtaining data through daily operation, can get smarter and better.

If the future is electric and autonomous, the arrangement between Ford, Volkswagen and Argo AI will define that future and transform the industry.

As Hackett pointed out: If you look at what has happened in the technology sector — think Microsoft and Apple, Facebook and Google — “there will only be a few winners.” By setting de facto standards, Volkswagen and Ford are likely to be among the few.