Thursday , December 13 2018

VW may use Ford’s plants for US expansion, says CEO

Bloomberg

Volkswagen AG, trying to win over German car-bashing President Donald Trump at the White House, dangled ideas to expand US auto production and said it may tap Ford Motor Co to help build its cars in America.
Chief Executive Officer Herbert Diess said VW has considered adding a second plant in the US, even though the company isn’t fully utilising its existing factory in Tennessee. He dropped the hint about VW’s burgeoning collaboration with Ford after emerging from White House meetings with peers BMW AG and Daimler AG that were aimed at talking the Trump administration out of raising auto tariffs.
“We need additional capacity here in the United States,” Diess told reporters, adding that the company could use a factory making both VW- and Audi-branded vehicles. “We might use Ford capacity here in the US to build cars for us.”
The White House is looking to whittle down a $30 billion automotive-trade deficit with Germany by increasing production in the US, the biggest chunk of an overall $65 billion trade deficit with the European Union. Trump also is smarting from General Motors Co’s decision last week to close four US plants and cut thousands of jobs, af-
ter he’s repeatedly demanded that car companies build more vehicles in America.
Ford Chairman Bill Ford stopped short of confirming Diess’s comments, saying talks with VW are going well but “haven’t gotten that granular.” Because of the nature of the German auto leaders’ visit to the White House, Diess was trying to show VW’s contributions to the US economy, Ford said.
“He was sort of on the spot,” Ford said. “I probably would have done the same thing if I was in his situation.”

TRUMP’S CUDGEL
Diess was joined at the meeting by his counterpart at Daimler, Dieter Zetsche, and BMW Chief Financial Officer Nicolas Peter. The carmakers have found themselves in harm’s way, with Trump wielding higher tariffs as a cudgel to re-balance trade with both China and the EU. BMW and Daimler are the biggest car exporters from the US 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. Shares of Volkswagen and Daimler were each down 0.8 percent at 9:02 am on Wednesday in Frankfurt. BMW dropped 1 percent.
Before the White House visit, VW executives had floated the possibility that it could build an electric-vehicle plant in the US. But that would be a big risk, given the low market share that both the company and EVs have in the country.
“You would need some indication that demand is going to skyrocket,” Kevin Tynan, an analyst at Bloomberg Intelligence, said by phone. “So maybe they believe that, but I’m not sure you can be completely confident in that forecast just yet. It’s a big commitment for a reasonable amount of demand uncertainty.”
Ford and VW have been in talks about the German automaker potentially 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 EVs and share manufacturing in regions around the world, the people have said.

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