Ford, VW tie-up on EVs, self-driving cars creates formidable alliance

A partnership announced Friday between Ford Motor Co., Volkswagen AG and self-driving software company Argo AI creates a formidable new alliance as the auto industry heads into an uncertain and expensive future.

The companies plan to share electric-vehicle platforms and autonomous-vehicle software, potentially saving the carmakers hundreds of millions of dollars and laying the groundwork for more partnerships on vehicles of the future.

The moves "instantaneously" create one of the largest partnerships on electrification and self-driving technology, Ford CEO Jim Hackett said Friday in New York. In doing so, it shakes up the present-day electric and autonomous-vehicle landscape.

"This feels like a watershed moment for both Ford and VW," Jessica Caldwell, executive director of insights for Edmunds, said Friday. "The combination of these two massive automakers is exactly what needs to happen to accelerate the adoption of AV and EV technology. Convincing car shoppers to go electric en masse is not an easy code to crack, but having two companies the size of VW and Ford working together to solve the puzzle could speed up the process."

Ford's self-driving vehicle partner Argo AI was a big bargaining chip in negotiations. The agreement announced Friday builds on one announced earlier this year that would have the automakers partnering to build commercial vehicles and midsize trucks outside the U.S. As The Detroit News reported Wednesday, VW takes a minority stake in Argo AI to partner on the development of autonomous vehicle technology.

Ford, in turn, gets access to VW's electric vehicle architecture to build "at least one high-volume fully electric vehicle" in Europe to be launched in 2023 with the possibility of launching a second model. Joe Hinrichs, Ford president of automotive, said the first model launched on that platform will be a passenger vehicle, rather than a commercial vehicle.

The partnership adds weight to Ford's ongoing self-driving and EV efforts, said Garrett Nelson, senior analyst with CFRA Research.

"We think the expanded partnership makes sense for both companies given the high R&D costs of developing such technologies and the recent slowdown in global auto sales, which we expect to continue to pressure top-line results for major automakers," Nelson wrote in a note to investors Friday.

Ford's share price rose 2.9% Friday.

The automakers stressed the partnerships do not involve cross-ownership between the companies. Hackett said Friday that Ford and VW could partner further on aspects of electric or autonomous vehicles that are expected to be commodities, like software.

Pending regulatory approval, VW will fold 200 employees of its Munich-based Autonomous Intelligent Driving company into Argo AI. That gives Argo a new European headquarters and its first presence in Europe, with more than 700 employees and the largest geographic reach of any autonomous technology company currently partnering with automakers.

The VW investment in Argo is valued at $2.6 billion, which includes $1 billion in funding and a $1.6 billion valuation of Autonomous Intelligent Driving. The new partnership brings Argo's valuation up to more than $7 billion, the company said. That compares to the $14.6 billion valuation that rival GM's autonomy company Cruise Automation got in October when Honda invested $750 million in the company.

Ford, which was the Pittsburgh-based start-up's first major investor, will sell some of its Argo shares to VW for $500 million over three years as part of the deal. Both automakers would be minority stake holders in Argo, and get seats on the board.

The moves effectively pit Ford, VW and Argo against GM and Honda — as well as technology companies like Alphabet Inc.'s Waymo — in self-driving car development. 

Argo officials stressed the company is open to partnering with more automakers.

"Argo AI was set up to be agile — to be able to quickly iterate software and hardware," Argo CEO and Founder Bryan Salesky said in a statement. "That agility, bolstered by the scale and capability of Ford and Volkswagen, is a powerful combination."

Salesky called the VW partnership a "meaningful commitment to deployment," rather than a shallow agreement to look into a partnership like many automakers have signed with technology start-ups in recent years.

Volkswagen CEO Herbert Diess said VW thoroughly vetted partnership opportunities with several self-driving technology companies, and found Argo was the best positioned. The company's "naturalistic" driving system, which focuses in development on driving like others on the road in a given city, sets it apart from others. The automakers will contribute data through testing to Argo, Diess said. 

Both companies will then share investment in the development of the new technology, possibly co-create autonomous vehicle platforms and share costs.

Hackett added the automakers will "remain competitors" on autonomous vehicles. "We each will deliver unique experiences for our customers," he said. 

Ford plans to launch its first fleet of fully autonomous vehicles in 2021. Diess said Friday that VW would launch on Argo's software in the early 2020s.

Meantime, Ford would be the first additional automaker to use VW's Modular Electric Toolkit, or MEB, platform to build a high-volume electric vehicle for Europe. Ford plans to build more than 600,000 vehicles over six years starting in 2023 using that platform. VW currently plans to use that platform to build 15 million cars "in the next decade."

Ford recently partnered with Plymouth-based start-up Rivian Automotive LLC to build an electric vehicle using Rivian's platform. The automaker under CEO Jim Hackett plans to spend $11.5 billion worldwide to beef up its electric vehicle offerings. It plans to unveil its first-ever fully electric crossover later this year; an electric F-150 is planned.

The companies said Friday the previously-announced plan to build commercial vehicles and midsize pickups was on schedule. The Ford-built trucks should hit the market in Europe, Africa, Middle East, Asia and South America as early as 2022. The commercial vans should arrive around that same time.

Hackett said the partnership is further proof that Ford and Argo are approaching self-driving vehicles in a way that distinguishes them from other companies, and nets results others can't boast. Salesky said Argo currently tests in more urban environments that its competitors, which favor suburban testing in warmer climates.

"I don't think we're behind anyone," Hackett said. "When you see the way we're approaching the design problem, you see we're thinking about it the right way."

ithibodeau@detroitnews.com

Twitter: @Ian_Thibodeau