Ford and VW Agree to Share Costs of Self-Driving and Electric Cars

ImageThree chief executives — from left, Herbert Diess of Volkswagen, Bryan Salesky of Argo AI and Jim Hackett of Ford Motor — at a news conference in New York on Friday.
Three chief executives — from left, Herbert Diess of Volkswagen, Bryan Salesky of Argo AI and Jim Hackett of Ford Motor — at a news conference in New York on Friday.CreditCreditMichael Noble Jr. for The New York Times

Ford Motor and Volkswagen said Friday that they would team up to develop self-driving cars and share electric-car components. The move broadens an existing alliance and shows how automakers are putting aside rivalries to manage the cost of new technologies.

The agreement calls for Volkswagen to purchase a stake in a Ford-backed start-up that is developing self-driving technologies, and for Ford to use electric-car components developed by Volkswagen.

As auto sales slump around the world, hard-pressed carmakers have little choice but to join forces to fend off Silicon Valley challengers and avoid obsolescence.

“There’s only going to be a few winners who create the platforms for the future,” said Ford’s chief executive, Jim Hackett. “We cannot be late.”

Underscoring the financial challenges facing the industry, Daimler, the maker of Mercedes-Benz cars, warned Friday that it would report a pretax loss for the second quarter of 2019.

But Volkswagen and Ford, which already cooperate on commercial vehicles and pickups, must show that they can avoid the power struggles among managers and engineers that have doomed many other alliances.

Volkswagen, which sold more cars than any other company last year, is known for its insular, hierarchical culture and has little experience cooperating with rivals. An alliance with Suzuki ended in 2015 with bitter feelings on both sides.

“Autonomous driving is a very, very expensive technology,” Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen in Germany, said in an email. “One has to invest today in order to make the first sales in 2030, maybe. Therefore it makes a lot of sense for Ford and VW to work together.”

Mr. Dudenhöffer questioned whether Mr. Hackett and Herbert Diess, the chief executive of Volkswagen, could make the compromises necessary for the alliance to succeed. Both are “alpha wolves,” Mr. Dudenhöffer said.

It may help that Ford and Volkswagen are dividing the labor to take advantage of each company’s strength. Ford is ahead of Volkswagen in autonomous driving, while Volkswagen is more advanced than Ford in electric cars.

Volkswagen has agreed to invest $2.6 billion in cash and other resources in Argo AI, a Ford-backed start-up that is working on sensors, software and other technologies to enable cars to drive themselves. Volkswagen will fold its autonomous vehicle project, which is based in Munich, into Argo, including 200 employees. The agreement values Argo at $7 billion.

In 2021 Ford aims to put Argo’s systems in driverless taxis and delivery vehicles in the United States. Volkswagen plans to use self-driving technology in its Moia ride-sharing service, a fleet of six-seat, battery-powered vans already operating with human drivers in Hamburg and expected to be introduced in other European cities.

In a separate agreement, Ford plans to build electric cars based on motors, batteries and other standardized components that Volkswagen has developed and is using in a model called the ID.3, due next year. Volkswagen has said the car will sell for less than 30,000 euros in Europe, or $34,000, making battery-powered transportation more accessible to middle-income buyers.

ImageAn Argo AI test car equipped with self-driving technology. Volkswagen said Friday that it would join Ford Motor in investing in Argo.
An Argo AI test car equipped with self-driving technology. Volkswagen said Friday that it would join Ford Motor in investing in Argo.CreditKeith Srakocic/Associated Press

Mr. Diess said the company expected to sell 15 million electric vehicles in Europe over 10 years, starting in 2020. Ford plans to introduce a vehicle in Europe made from VW components in 2023, and to sell 600,000 electric cars over six years.

Ford said in April that it would invest $500 million in another start-up, Rivian, that is developing an electric pickup truck and sport utility vehicle. Ford also intends to use the underpinnings of Rivian’s vehicles to produce models of its own.

Automakers need to introduce electric vehicles to meet increasingly stringent emissions-reduction regulations in Europe and China. “We are still far away from meeting the 2021 target,” Mr. Diess said, referring to the European benchmark.

The need for companies to share the cost and risk of developing autonomous vehicles has become more urgent because car sales are slowing in all major markets, including China, the United States and Europe.

“The financial investment is immense, and yet we don’t know when they will be in the marketplace or how they will make money,” said Michelle Krebs, a senior analyst at Autotrader. “It’s not just the money. The talent pool for people developing these vehicles is small.”

Profits are falling across the industry. Daimler said Friday that it would report a pretax loss for the second quarter of €1.6 billion. A year earlier, Daimler reported a profit of €2.6 billion.

The company, based in Stuttgart, Germany, said the loss was caused by the need to set aside €1.6 billion related to investigations in the United States and other countries into whether Mercedes diesel cars were equipped with software to evade emissions standards. In addition, Daimler will set aside €1 billion to cover the cost of recalling cars with defective airbags made by Takata, a Japanese company.

Other big carmakers have already formed partnerships to develop cars that can drive themselves. Cruise, General Motors’ autonomous division, has received billions of dollars in financing from Honda and others. G.M. has put Cruise’s valuation at $19 billion.

Toyota has teamed up in autonomous vehicles with Uber, the ride-hailing service. The luxury carmakers Mercedes and BMW have pooled their self-driving efforts. Several large automotive suppliers are also working on autonomous technology.

They face competition from well-financed Silicon Valley companies. Waymo, which is owned by Google’s parent company, Alphabet, has been working in the field for a decade and operates a test fleet of 600 self-driving taxis in the Phoenix area that it hopes to expand.

Estimates vary on how quickly cars will be able to operate without any human intervention, from a year or two to decades. For now, most of the self-driving test vehicles operate on public roads with one or two safety drivers.

Founded in 2016, Argo has 500 employees and is operating test vehicles in Pittsburgh, where it is based, and Miami. Its chief executive, Bryan Salesky, was formerly part of the Google team working on self-driving cars. In 2017, Ford agreed to take an undisclosed stake in the company and invest $1 billion over five years.

Argo is trying to develop technology that, within a few years, would allow cars to drive themselves without human help, but only in a contained area where conditions are more predictable. Cars that can drive autonomously anywhere are “way in the future,” Mr. Salesky said.

For Ford and Argo, Volkswagen adds heft to the effort, said Mike Ramsey, a Gartner analyst. “Volkswagen is the world’s largest automaker by sales volume and has a huge global footprint,” he said. “The potential market for Argo technology is much bigger than with Ford alone.”

A version of this article appears in print on , Section B, Page 1 of the New York edition with the headline: Ford and VW To Cooperate On Technology. Order Reprints | Today’s Paper | Subscribe