Can Volkswagen Help Save Ford?

By Douglas A. McIntyre Updated Jan 11, 10:08PM EST · Published Jun 20, 6:30AM EDT

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Can Volkswagen Help Save Ford? — © courtesy of Volkswagen of America Inc.

Ford Motor Co. (NYSE: F) has been heavily criticized for its product mix, its plans to reinvent the company for the self-driving and electric car future, and its modest presence overseas. Investors have suffered in the process. Ford has just announced the chance it will develop cars with Volkswagen, which is by many measures the largest car manufacturer in the world.

Ford’s shares have been banged like a drum in the past year. It is up 7% to $12, while the S&P 500 is up 25% over the same period and larger rival General Motors Co.’s (NYSE: GM) share is up 23%. Most of Ford’s performance has been put at the feet of new CEO James Hackett, who has been chief executive since last May. Investors liked his two predecessors, Mark Fields and Alan Mulally, better. Hackett has laid out plans to cut legacy costs and advance Ford’s technology, but Wall Street has not been impressed.

VW has trouble of its own. A diesel engine scandal has crippled company management for over two years, although its operating results have not been damaged much. It has had to take huge reserves for repairs and litigation. The CEO of Audi recently stepped down after being arrested. His part in the scandal is not entirely known, but concrete evidence was certainly the catalyst for his downfall.

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Ford made the odd decision to announce the VW deal, although there is no deal at all. Management wrote:

Volkswagen AG and Ford Motor Company today announce they have signed a Memorandum of Understanding and are exploring a strategic alliance designed to strengthen each company’s competitiveness and better serve customers globally.

The companies are exploring potential projects across a number of areas – including developing a range of commercial vehicles together to better serve the evolving needs of customers. The potential alliance would not involve equity arrangements, including cross ownership stakes.

The companies said they will make comments later if anything happens.

Ford will continue to look for alliances. It needs them to advance its production of future vehicles, particularly on the expensive and research-intensive path toward self-driving cars and electric vehicles. There is nothing in the announcement that says the potential partnership will help VW move in a direction to solve its problems.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.