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VW to Invest Nearly $2 Billion In Ford Self-Driving Car Venture -Sources

DOW JONES & COMPANY, INC. 7:49 AM ET 2/26/2019

Symbol Last Price Change
VLKAF 176.62up 0 (0%)
F 8.76up 0 (0%)
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BERLIN -- Volkswagen AG(VLKAF) is planning to invest around $1.7 billion in a self-driving car venture with Ford Motor Co.'s(F) Argo subsidiary, according to people familiar with the matter.

After months of talks, the German and U.S. car makers have agreed to make Argo the nucleus of an equally held joint venture that could receive additional assets from Volkswagen(VLKAF) over time.

As the industry begins to transition away from polluting combustion engines and traditional models of car ownership, global auto makers have been exploring alliances and joint ventures to share the enormous investments needed to develop future fleets of electric and self-driving vehicles.

A VW-Ford deal would create allies of the world's biggest car maker by sales and the second-largest auto maker in the U.S. with combined global reach of about a fifth of new vehicle sales world-wide.

The agreement to create a self-driving vehicle joint venture is part of broader cooperation talks that have been under way since last year, beginning with an agreement to cooperate in manufacturing light commercial vehicles, such as utility vans and midsize pickup trucks.

The talks are complicated, but making good progress, the people said, adding that a final deal could still fail to materialize.

Under the structure as currently envisaged, Volkswagen(VLKAF) would provide nearly $600 million as an equity investment in Ford's Argo venture, about half of what Ford initially sought from its future partner. Volkswagen(VLKAF) will provide around $ 1.1 billion in working capital for the venture's research and development. The two companies will both own half of the entity.

Volkswagen (VLKAF) could also link additional assets to the venture such as Audi AG's Munich-based technology group Autonomous Intelligent Driving and Moia, VW's Berlin-based mobility-services business. But initially AID and Moia won't be fully integrated into Argo.

"It's my opinion that you can't do this alone," Ford Chief Executive Jim Hackett said last month when detailing the company's VW alliance, which he described as a "foundational framework."

Ford has said it's spending $11 billion to develop electric vehicles over a seven-year stretch ending in 2022. The company also said it would spend an average of around $800 million through 2023 on self-driving-car technology.

The No. 2 U.S. auto maker by sales has been seeking an infusion of capital to help fund its autonomous vehicle efforts. Last summer, it carved out its self-driving car division as a separate entity to attract outside funding. Rival General Motors Co. last year received commitments for more than $5 billion total for its autonomous business, Cruise, in separate deals with Honda Motor Co. and Japan's SoftBank Group Corp.

Volkswagen (VLKAF) has embarked on an ambitious drive to invest as much as $150 billion over the next five years to develop electric cars and self-driving car technology. The company is planning to expand its Chattanooga, Tenn. manufacturing plant to build electric cars in the U.S., one of 16 electric car plants that the company plans to build world-wide in the next few years.

Ford and VW are discussing licensing VW's new electric-vehicle technology, a standardized system of building-block technology called MEB that allows VW to build a variety of fully electric models across its passenger car brands VW, Audi, Skoda and Seat.

Under the initial agreement that Ford and VW announced in January, Ford will produce light commercial vehicles and medium-size pickup trucks for both companies, expecting to launch the first vehicles by early 2022. VW will in turn produce city vans for the venture.

"Over the course of negotiations we constantly broadened the scope of discussions," Mr. Diess told reporters at the time. "We believe we can explore further collaboration opportunities in exactly those fields that will be pivotal for future success in the auto industry."

Write to William Boston at [e-mail] and Mike Colias at [e-mail]


(END) Dow Jones Newswires
02-26-190749ET
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