Ford to strengthen partnership with Volkswagen, Mahindra to cut costs

In response to Ford Motor Company’s stock dropping to a six year low in August, plans are in motion to restructure its business in order to cut costs and open up doors for future partnerships. Ford Motor Company CEO Jim Hackett called for a global leadership meeting, bringing in 300 executives to Michigan.

A big part of this new plan is to strengthen partnerships with other manufacturers around the world and share production capacity to develop vehicles together. More specifically, Ford has been engaging in talks with Volkswagen AG and Mahindra about these key points.

Ford and Volkswagen are focusing on expanding a commercial vehicle partnership, with collaboration including Ford’s toughest markets, South America and Europe. The plan is to co-develop new types of vehicles, and the expanded alliance should give Volkswagen access to Ford’s Transit vans and Ranger compact pickups. Volkswagen could also supplement Ford’s production capabilities in hard-to-sell markets, a big help in reducing costs across the board. Talks between these two brands have been going on since June, and it looks like there are more concrete plans to move forward.

Ford and Mahindra have also begun product sharing talks, with a shared vehicle platform to be released in 2020. The use of Mahindra’s industrial capacity as a benchmark can also help reduce costs in the region.

All this leveraging of strengths from different manufacturers comes at a time where Ford has outlined an $11-billion restructuring move over the next three to five years. Profitability is the main goal here, as Ford has been investing billions of dollars to develop self-driving and electric vehicles, and launching major products over the next few years. If all goes well, Ford will be able to hit its goal of doubling its global profit margins to 8% by the year 2020, a rise from 4.3% in the second quarter of this year.