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VW, Ford are said to mull self-drive tie-up as talks broaden

Potential cooperation on self-driving technology could result in significant cost sharing: sources

Washington

TALKS between Volkswagen and Ford Motor Co on forming an alliance have broadened to include potential collaboration on autonomous driving and arrangements to make vehicles for one another, according to sources.

The potential cooperation on self-driving technology could result in significant cost sharing, said the sources. Ford's chief financial officer separately told Bloomberg News in an interview that talks are open-ended.

"Collaboration isn't being limited in any way whatsoever, whether it's different types of technology, product segments or geography," Ford CFO Bob Shanks said Thursday. "We're having a very broad set of discussions about how we can help each other around the world."

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A more significant alliance between Volkswagen and Ford has the potential to be one of the more compelling tie-ups for the industry. VW is the world's largest carmaker and has been spending tens of billions of dollars cleaning up after a diesel emissions scandal. Ford is embarking on a costly and years-long global restructuring and just abandoned a profit margin target it had set for 2020. Partnering rivals is one way to lower costs and get new cars and technology to market faster.

A VW spokesman said talks with Ford are progressing well, but declined to elaborate on details.

When VW and Ford first announced they were exploring joint projects in June, the only area they specifically discussed was development of commercial vehicles. VW CEO Herbert Diess had told reporters in August that the German giant is generally open to expanding cooperation with Ford beyond light commercial vehicles and noted that previous joint projects worked out well.

Ford has been struggling to reverse losses in markets including Europe and South America. It's also in similar talks with Mahindra & Mahindra Ltd to broaden an alliance that began to develop models for India and other emerging markets, including sport utility vehicles and electric cars. Together with its self-driving partner Argo AI, Ford has also said it's open to outside investment, including providing autonomous technology to a second carmaker.

"With VW and Mahindra, we haven't put boundary conditions in terms of where we could collaborate," Mr Shanks said. "We're looking at the strengths and the gaps of each company on both sides of the table and trying to understand how we can help each other." Ford CEO Jim Hackett hinted that the partnerships were progressing when he spoke to analysts on the company's earnings call earlier last week.

"We look forward to sharing more about this global redesign of the company," said Mr Hackett, who is leading an US$11 billion restructuring of the company. "We are going to be coming to you more frequently, including we're going to talk about these strategic partnerships in the near future." A US$2 billion pretax profit in North America on the strength of sales of high-profit pickups and SUVs exceeded analysts' expectations and was early validation for the carmaker's controversial decision to abandon sedans in America.

Striking deals with VW and Mahindra could further improve Ford's outlook. Morgan Stanley analyst Adam Jonas predicts Ford will lose US$3.6 billion in Europe from 2019 to 2021, making it the least-profitable carmaker in that market.

In South America, where VW also operates, Ford has lost more than US$4 billion since 2012. Sharing costs to develop cars and new technology with another carmaker could help reverse those losses. WP