Volkswagen Phasing Out Conventional Vehicles, May Build Cars At Ford Factories In US

If you had any doubt that the world of manufacturing automobiles is changing, the latest news from Volkswagen should remove any remaining doubts. This week, the company said it is working on the last generation of conventional cars with internal combustion engines. It also hinted it may manufacture some cars jointly with Ford in that company’s US factories.

The End Of The Line For Gasmobiles

At an industry conference in Germany this week, Michael Jost, strategy chief for Volkswagen, told the press, “Our colleagues are working on the last platform for vehicles that aren’t CO2 neutral. We’re gradually fading out combustion engines to the absolute minimum.”

Don’t go thinking the folks in Wolfsburg have decided to make all their cars battery electrics. “CO2 neutral” is probably code for a mix of hybrids, plug-in hybrids, and fully electric cars. There may even be room in there for fuel cell cars. What Jost is saying is that all future Volkswagens will feature an electric motor as part of the drivetrain. They really have no choice if they hope to meet emissions standards that are getting more stringent in every  country around the world (except the US, of course.)

It usually takes 3 to 5 years to design a new generation of cars and the normal time span between generations is 5 to 7 years. That suggests it could be up to 12 years from now before VW transitions to building all carbon neutral cars. Also keep in mind that automobiles today typically have a useful life of 20 years, so it could be more than three decades before the world sees the last of Volkswagens powered by conventional gasoline or diesel engines.

A Partnership With Ford?

Last week at the Los Angeles auto show, Scott Keogh, Volkswagen’s head of operations in North America, told the press, “We are 100 percent deep in the process of ‘We will need an electric car plant in North America,’ and we’re holding those conversations now. We are in quite advanced negotiations in Tennessee, but there might be other options as well.” Volkswagen already has a manufacturing facility in Chattanooga, Tennessee.

Diess said his company has a new electric car coming for the US market that will sell for between $30,000 and $40,000. That car — probably the ID Crozz — will go into production in 2020 but it is unlikely the company will have a US factory built by then.

Executives from Volkswagen, BMW, and Mercedes had a meeting at the White House recently during which they were “encouraged” to build more of their vehicles in the US or face increased tariffs on the cars they import. Following the meeting, VW CEO Herbert Diess told reporters, “The president has a point in trying to convince us to invest more into America, and we are prepared to invest more. We might use Ford capacity here in the U.S. to build cars for us.”

For its part, Ford soft pedaled the news, saying its memorandum of understanding “covers conversations about potential collaborations across a number of areas” but “it is premature to share additional details at this time.” Like General Motors, Ford is backing out of passenger car manufacturing in America and has excess capacity available in its US factories.

USA Today reports Morgan Stanley has predicted Ford will cut up to 25,000 jobs in coming months. Making cars for Volkswagen could help it trim some of those job loses.

Just the fact that Volkswagen and Ford are holding talks illustrates the changing face of vehicle manufacturing. Many industry observers believe there will be no more than half a dozen global automakers within 10 years. Will Ford be one of the existing companies that gets absorbed?

While Volkswagen has committed more than $50 billion to the electric vehicle transition, Ford is investing far less than that in building electric cars. There’s a possibility the Blue Oval could disappear before the last Volkswagen Golf comes off the assembly line in a few years.