File photo/Zhang Jian

Jan. 16 (NBD) – Ford and Volkswagen (VW) have formed a strategic alliance to jointly develop and manufacture cars, announced the two automobile giants Tuesday, as they expect the cooperation will cut costs and improve efficiency.

According to the announcement, Ford will be responsible for manufacturing medium-sized pick-up trucks which will be out in 2022, and large commercial vans for the European market. VW will develop and manufacture multiple-purpose vehicles.

The two also plans to explore potential cooperation in self-driving, electric vehicles, and other new technologies with the signing of a memorandum of understanding.

The alliance does not involve any change to their shareholding structure.

Ford had a rough year in 2018, suffering a loss of 387 million U.S. dollar in China, 245 million U.S. dollar in Europe, and 152 million U.S. dollars in South America for the third quarter of 2018, the company's financial report revealed.

Morgan Stanley predicted that Ford's loss in Europe will continue from 2019 to 2021, and suggested the American automaker completely halt its business in Europe.

Ford has been actively seeking measures to address the challenges. In October last year, Ford announced a plan to lay off 70,000 employees as part of its 11-billion-U.S.-dollar restructuring scheme. It also will cut 25.5-billion-U.S.-dollar costs in the next five years.

Moreover, Ford revealed plan to quit most of its sedan business in North America in the next four years, and focus on pick-up trucks and SUVs. According to Ford, global demand for medium-sized trucks and commercial vans will continue to increase for the next five years.

Industry observer commented the alliance can effectively address Ford's overcapacity, as well as boost its performance in Europe aided by VW's longtime experience in this region.

For VW, the cooperation is expected to boost its sales in the U.S., the second largest automobile market where VW has a mere 4 percent market share.

On January 7, Herbert Diess, CEO of VW, said to NBD that compared with VW's 20 percent market share in China, its presence in the U.S. is much weaker, thus the cooperation with Ford will focus on light commercial vans to ensure rapid sales improvement in the U.S.

Some connected the sluggish performance of VW in the U.S. to its car models. American consumers prefer pick-up trucks and large-sized SUVs, but VM offers only several SUV models and no pick-up trucks in the country. 

More importantly, manufacturing cars in the U.S. can help VW save the high costs and tariffs resulting from exporting vehicles from Europe.

Email: limenglin@nbd.com.cn