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Ford and VW announce agreement to invest billions of dollars in autonomous and electric vehicles

Ford and Volkswagen plan to announce Friday new joint ventures on autonomous and electric vehicles, two technologies considered essential for the future of the automotive industry.

The agreement calls for "billion dollar" investments and will allow companies to share both intellectual property and computer equipment, according to their executives with direct knowledge of the negotiations.

The companies scheduled a joint press conference in New York on Friday at 8:00 am (EST), stating that they "would provide an update to their global alliance" and "share the details of new collaborations also aimed at better serving their customers." customers while improving the competitiveness and capital of each company Efficiency. "

The companies refused to provide more details about their announcement.

But the leaders, who asked not to be identified because the agreement was not yet public, say that Volkswagen will give Ford access to the underlying platform that will anchor dozens of electric vehicles that the manufacturer German plans to market by mid-decade.

VW will also become an investor in Argo AI, a Pittsburgh-based research firm specializing in the development of autonomous vehicles, officials said. Ford became a lead investor in Argo in 2017 with an initial investment of $ 1 billion.

For more than a year, Ford and VW have been discussing ways to partner with a variety of businesses. In January, they announced their first partnership, a commercial vehicle-focused joint venture, such as the Ford Transit van.

At the time, representatives of both companies confirmed that they were considering other possibilities.

"In these [a competitive] environment, it makes sense to share investments, pool innovation capabilities and create clearly defined scale effects, "said Herbert Diess, CEO of Volkswagen.

The scale will be one of the benefits that both manufacturers hope to derive from their joint ventures, which are both presented to Ford and VW's boards for final approval on Thursday, officials said. Together, automakers produced about 18 million vehicles in 2018, or about 20 percent of the global market for new vehicles.

As part of the new joint venture, Volkswagen will also invest in Argo, an independent company. One of the leaders said that VW's investment in Argo "would amount to billions," reflecting the sharp increase in the value of the technology company since Ford took its stake there is more than two years.

The collaboration on autonomous and electric vehicles has taken longer than expected, according to some observers, with some predicting that the extension of the alliance would take place from early to mid-spring.

It turned out that there were a number of potential roadblocks. Among other things, Ford President Jim Farley told CNBC earlier this year that synchronization of separate EV programs managed by the two automakers had not been synchronized in the first place.

Dozens of global automakers, as well as technology companies like Waymo and the Chinese group Pony.ai. have started the race for autonomous vehicles. A study released by AlixPartners last month estimated that annual industry spending on self – driving and electric vehicles is expected to reach $ 85 billion and $ 225 billion, respectively, by 2025.

That's something that will weigh on corporate budgets, reduce profits and create even more joint ventures like the one announced by Ford and VW, "said Mark Wakefield, automotive practices manager of the consulting firm.

It could also lead to "a consolidation that will occur in the coming years," said James Peng, co-founder and CEO of Pony.ai, in an interview broadcast Wednesday on CNBC.

Volkswagen has committed up to 9 billion euros, or more than 10 billion dollars, in its "electrification" program. This includes hybrids, plug-ins and pure battery electric vehicles, or BEVs, with nearly 50 hybrid and electric vehicles by 2025 across its various brands, including its flagship VW, as well as Porsche , Audi and Bentley.

In March, CEO Diess increased BEP sales estimate from 15 million to 22 million euros over the next decade, stating that "the supertanker is gaining momentum".

The current joint venture is asking VW to provide Ford with access to its SEM platform, which serves as the basis for ID.3, the first full-range Volkswagen all-electric model, as well as the latest model. to a range of other products for sale by brands such as Audi. The deal should not give Ford access to a more sophisticated electric vehicle platform that will be used for VW's high-end models, such as the Audi e-tron GT, which will go on sale in the UK. a few years.

Argo AI will establish its first office in Europe to work closely with VW, said one of the leaders. The company is currently testing modified Ford products in 5 US cities and will add similar programs in Europe.

Ford, which has committed $ 11 billion in the development of battery-powered cars, will share some of its know-how, but not everything. The US manufacturer is developing its own long-range BEV platform, which will debut later this year in a high-performance SUV inspired by the Mustangs. And VW will not participate in the new joint venture between Ford and Rivian, a battery-powered electric vehicle start-up based in the suburbs of Detroit.

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