VW says it might use Ford manufacturing capacity in U.S.; White House meeting concludes


December 4, 2018 7:35 pm

VW CEO Herbert Diess in Washington on Tuesday: “We need additional capacity here in the United States, we need an additional car plant for VW and Audi combined.” Photo credit: REUTERS

UPDATED: 12/4/18 6:215 pm ET – adds Bill Ford comment

WASHINGTON — Volkswagen’s CEO said on Tuesday after a meeting at the White House that the German automaker was building an alliance with Ford Motor Co. and that they might use the U.S. automaker’s plants to build cars.

VW CEO Herbert Diess said the company was also “considering building a second car plant,” adding, “We are in quite advanced negotiations and dialog with Ford to really build up a global automotive alliance, which also would strengthen the American automotive industry.” 

Ford and VW said on June 19 they would explore a strategic alliance and they agreed to a memorandum of understanding at the time. Talks further intensified this fall, the automakers said in October.

Bill Ford, executive chairman of Ford, on Tuesday said: “We haven’t gotten that granular in our talks yet, but clearly we are talking with them.”

He said the talks were going “really well” and that “the culture fit is good.”

The automakers have said previously they are talking about potential collaborations across a number of areas.

VW has an assembly plant in Chattanooga, Tenn. Of the need for a new plant, Diess said the company is in “quite advanced negotiations in Tennessee but there might be other options as well.”

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Diess said VW would not take an equity stake in Ford as part of its alliance. “We are building an alliance with Ford which will strengthen Ford’s position in Europe because we will share platforms,” he said. “We might use Ford capacity here in the U.S. to build cars for us.”

Diess said VW planned to talk more about the Ford alliance in January.

“We need additional capacity here in the United States, we need an additional car plant for VW and Audi combined,” Diess told reporters in Washington after meeting with President Donald Trump and trade officials.

Ford and VW have been in talks for more than a year about the German automaker investing in Argo AI, the American automaker’s self-driving technology partner, to jointly develop autonomous cars, according to people familiar with the discussions. The two automakers also are considering tie-ups to produce electric vehicles and share manufacturing in regions around the world, the people have said. 

“We’re having a very broad set of discussions about how we can help each other around the world,” Bob Shanks, Ford’s CFO, said in an October interview. “Collaboration isn’t being limited in any way whatsoever.”

Daimler CEO Dieter Zetsche: “We weren’t here as a trade delegation.” Photo credit: REUTERS

Discussions with Trump

Diess also said VW is in advanced negotiations in Tennessee, where the company already has a plant, about boosting its U.S. capacity, but that there could be other options. A decision could be made in early 2019, he said. 

Any agreement for VW to use Ford plants for production would presumably require negotiations with the UAW, which has been trying unsuccessfully to organize VW’s plant in Chattanooga. 

UAW Ford Vice President Rory Gamble, through a spokesman, told Automotive News he would reserve comment on this issue “until he has formal discussions with Ford.”

Diess was joined at the meeting by his counterpart at Daimler AG, Dieter Zetsche, and BMW Chief Financial Officer Nicolas Peter.

The carmakers have found themselves in harm’s way as Trump wields higher tariffs as a cudgel to rebalance trade with both China and the European Union. BMW and Daimler are the biggest car exporters from the U.S. to China, while VW’s two most profitable brands, Porsche and Audi, would get hammered if Trump follows through with a potential 25 percent levy on imports from the EU.

“That’s basically why we are here, to avoid the additional tariffs and I think we’re in a good way,” Diess said.

The three carmakers have no official role in the overall trade talks between U.S. and EU trade officials, and stressed that at the end of their meetings. The companies are trying to avoid becoming entangled in the talks but they accepted the invitation extended by a Trump administration eager to jump-start progress on its highest priorities. 

“We weren’t here as a trade delegation,” Zetsche said.

“We said in general terms that our planned additional investments here that are not commercially sensible per se of course would have to be part of a larger understanding and for that the conditions under which we operate cannot change. That was very well understood,” Zetsche said.

Trade deficit 

The White House is looking to whittle down a $30 billion automotive trade deficit with Germany with increased production in the U.S., Commerce Secretary Wilbur Ross said ahead of a meeting with automakers in Washington Tuesday. It remains the biggest single chunk of an overall $65 billion trade deficit with the EU.

All three carmakers met separately with Trump’s key lieutenants on trade, including Ross, U.S. Trade Representative Robert Lighthizer and economic adviser Larry Kudlow, before a joint meeting that followed. They then met with Trump in the Oval Office.

“The president shared his vision of all automakers producing in the United States and creating a more friendly business environment,” Lindsay Walters, a White House spokeswoman, said.

Daimler, the maker of Mercedes-Benz luxury cars produces vehicles in Tuscaloosa, Ala., shipping many of its SUVs made there to China. Daimler employs some 3,700 workers at the U.S. site, which can churn out more than 280,000 vehicles per year, including GLE and GLS SUVs for global markets and C-class sedans for North America.

Bloomberg and Automotive News staff contributed to this report.

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