Volkswagen-Ford alliance plan underwhelming – report

Investors weren’t pleased when presented with Volkswagen and Ford’s alliance plan, viewing it as too defensive and lacking ambition, Forbes reports.

Details of the partnership were announced during the 2019 North American International Auto Show (NAIAS) in Detroit, which covered efforts to jointly develop vans and pick-up trucks, as well as electric and autonomous vehicles. However, both parties did not reveal any plans for a merger or equity swap.

Despite these planned efforts, investors felt the plan was underwhelming at a time when the global automotive industry is facing numerous issues. These include weakening sales in China, one of the world’s largest markets, along with the possibility of a worldwide recession.

Additionally, new startup companies flush with cash and technology pose a threat to automotive companies as consumers opt to forgo conventional car ownership for new methods of transportation like car sharing.

Analysts and investment houses shared their views on the matter, with S&P Global Ratings saying, “the alliance appears to be a strategically defensive move to share vehicle architecture-related expenses in an attempt to offset the intensifying competitive pressures and escalating costs facing the auto industry over the next decade.”

Meanwhile, Morgan Stanley was a little harsher in its assessment, stating, “this was disappointing versus rising market expectations for an expansive alliance that could transform the industry. While the Ford/VW relationship may bear greater significance and value for shareholders over time, we struggle to see a material benefit from the (plan).”

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