24 June 2019

Volkswagen - the Group is re-grouping?

As the Volkswagen Group nears a deal to cooperate with Ford Motor on electric-car technology and self-driving vehicles, it is a good time to reflect on how the might German carmaker is re-aligning its business.

It would seem that the ‘dieselgate’ scandal has prompted VW’s management to adopt a more open frame of mind where collaboration with other OEMs is concerned. For example, VW and Ford signed a deal in March to develop a pickup truck and have been in talks about extending the alliance to include autonomous driving and mobility services. The pickup deal is perhaps the most telling - VW went out on its own in developing the Amarok pick-up where rivals Daimler have used a Nissan base for its truck.

VW’s tie-up with Ford is also likely to include an investment in Ford’s autonomous affiliate Argo AI. This deal is expected by many industry observers to be moving apace and could be signed within the next month, creating a partnership that could rival General Motors' Cruise initiative and Google’s partner Waymo in size and reach.

This comes as VW announced the end of its partnership with self-driving car software firm Aurora, a move which came soon after Aurora said that it would build autonomous platforms for commercial vehicles with Fiat Chrysler Automobiles.

Other moves at the VW Group are evidence of its conscious effort to reduce its dependence on China - the carmaker’s largest sales region. In the last 15 years, the Group has built plants in China at a dizzying pace - sometimes one every three months - and with the downturn in consumer spending in the region, VW’s management board has said that it will concentrate on its weakest region - the US. The board’s spirits may be buoyed by the results of the latest workers’ vote at its Chattanooga, US plant on whether to join the United Auto Workers (UAW) union. For the second time in five years, a majority of hourly workers at Volkswagen's eight-year-old plant has rejected a bid to unionise under the UAW, continuing an almost blanket non-union culture in the southern US states’ automotive manufacturing region.

For me, the VW Group’s activities are symptomatic of a wider trend in the global auto industry; as the as yet unknown cost of moving a large part of its fleet to electric and hybrid, at a rapidly accelerating pace, the traditional rivalries between carmakers must be put to one side. Moving to many more battery electric and other new mobility concepts requires economies of scale that are best achieved through intelligent partnerships. It is time to put aside differences, to meet the challenges of what looks like being a true industrial revolution in the global automotive industry.

Simon Duval Smith

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