Home / Business / Rough reality forces automakers to compete with VW and Ford at center stage

Rough reality forces automakers to compete with VW and Ford at center stage

(Bloomberg) – To understand how the world's largest automakers are grappling with the enigma of the era of electric and autonomous vehicles, listen to them.

"Your company would not do that," said Jim Hackett, president and CEO of Ford Motor Co., in an interview with Bloomberg Television on Friday. This surprising admission came as he had just signed a massive deal with his German rival, Volkswagen AG, to join forces to develop electric and autonomous cars.

The auto industry is disrupted by increasingly stringent environmental regulations imposing the use of electric cars, while technological advances in driverless technology can potentially upset the behavior of humankind. This forces builders to balance rivalry with survival.

"Your leadership role requires you to do it," Hackett said of his partnership with the competition. "You have to invest in uncertain things before they are ready because you can not catch up with them when they are ready."

The collaboration commits Ford to build battery cars on a VW platform, while the German automaker is investing $ 2.6 billion in the company's US arm, Argo AI. That gives the startup a dazzling $ 7.25 billion – and the commercial launch of its robot launches is two years away.

"This game is going to change, so the economies of scale will be important," VW General Manager Herbert Diess said Friday at a press conference, announcing the strengthening of its partnership with Ford. "The sharing of technology and the use of standards will be important to succeed in the future."

Ford's dominance with VW dates back several decades – from the founding of the German automaker in the pre-World War II period to the link between America and the hippie era with the Ladybug and the Rabbit model for petrol consumption reduced in the era of the oil shock. trade wars that threaten to further politicize commercial battles.

But the shift to battery – powered cars and autonomous driving will require tools different from those used by automakers for nearly a century. It's not just about building more and more powerful engines and carving the exterior sheet.

The Ford-VW deal is a bet on the upcoming era of robotic robots to electricity that will adopt new approaches to competition, marketing and planning. And that will take money.

The agreement will lead to a new Ford electric passenger vehicle in 2023 and the merger between Argo and the Audi autonomous operation of the VW brand to deploy self-test vehicles in Europe next year, but This is really about ensuring each company's survival well in the future.

"They are considering the long term," said Stephanie Brinley, automotive analyst at IHS Markit. "These changes do not affect the 2025 horizon, they aim for these companies to strive to be fully ready and able for 2030 and 2040 and take the necessary steps to go this far."

Electrification will cost car makers $ 225 billion by 2023, roughly the annual total for investment, research and development, according to consultant AlixPartners. The autonomous cars will absorb an additional 85 billion dollars by 2025.

The partnership between Ford and VW shows that some companies are tackling the task faster than others.

So far, buyers are not really invaded by showrooms to buy electric cars. High prices, uneven charging infrastructure and, with the exception of the elegant models of Tesla Inc., an unorthodox style made it a difficult sell.

Similarly, autonomous driving technology has positive spin-offs in many years and drivers are reluctant to hand over the steering wheel to a robot. But consumer habits are changing as users are less dependent on ownership and are turning to sharing apps, e-bikes and scooters to meet their transportation needs.

Cash-rich giants such as Alphabet Inc., Amazon.com Inc., and Apple Inc. have turned the industry around, from phones to cameras to television. The automotive industry executives fear being the following as cars become more and more software dependent.

"OEMs need to invest in this valley to move on the other side," said last month Mark Wakefield, general manager of AlixPartners. "But investing – or creating a partnership to invest – to overcome this difficulty is a way to cover the generational path."

Jim Farley, president of Ford's new business, technology and strategy, said the partnership with VW was not just about cutting costs. This collaboration could expedite each builder's journey through the desert of profit that Wakefield warns.

"This is not just a game of capital efficiency," Farley said in an interview. "It's a decisive lever for our margins, especially in a country like Europe".

Other builders are also reinventing themselves. The acquisition of Autoship Cruise in 2016 by General Motors Co., for $ 581 million, was detrimental. The automaker has since attracted three major foreign investments totaling $ 6.15 billion. As of May, GM Cruise stood at $ 19 billion when T. Rowe Price Associates Inc. joined previous lenders, Honda Motor Co. and SoftBank Vision Fund. VW's support of Argo AI – $ 1 billion in cash and an additional $ 1.6 billion from its Smart Autonomous Driving Unit to which it contributes – should allow this self-driven start-up to attract foreign investment.

"An evaluation has now been established and the potential of this relationship has prepared us well," said Bryan Salesky, co-founder and CEO of Argo, a veteran of Google's autonomous driving program. "I'm sure this will prepare for the future." At the same time, Fiat Chrysler Automobiles NV tried – although it was a failure – to develop its capabilities and access the electric car technology through a merger with Renault SA. compensate for its shortage of battery-powered cars. President John Elkann told the Italian newspaper La Stampa this week that the attempt was "an act of courage" and would have allowed him to make better use of capital and more cars. In contrast, is the Renault-Nissan-Mitsubishi alliance. where tensions threaten to tear apart two decades of cooperation when we need it most.

The lack of a decisive strategy for electric cars this month also cost BMW AG chief executive Harald Krueger a second term after he could not convene a confrontation committee behind him. And the new CEO of Daimler AG, Ola Kaellenius, will have to deepen his leadership skills to guide the Mercedes-Benz automaker who has undergone four profit warnings in just over a year. These two German builders have teamed up on a self-driving project that they had promised earlier this month: cars driven by robots on highways by 2024.

Building a stack of software for autonomous vehicles can cost a few billion dollars, while it would cost billions more every year, said VW's Diess in a joint interview with Ford's CEO. "The times we face, we are going to have resource problems" without the help of partnerships, he said. "Because it's getting really, really expensive."

– With the help of Chester Dawson and David Westin.

To contact the reporters on this story: Keith Naughton in Southfield, Michigan at knaughton3@bloomberg.net, Elisabeth Behrmann in Munich at ebehrmann1@bloomberg.net, Christoph Rauwald in Frankfurt at crauwald@bloomberg.net

To contact the editors in charge of this story: Anthony Palazzo at apalazzo@bloomberg.net, Craig Trudell at ctrudell1@bloomberg.net, Chester Dawson

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