December 4, 2018 / 7:35 PM / 11 days ago

Volkswagen may use Ford's U.S. plants to build cars, deepening alliance

WASHINGTON (Reuters) - Volkswagen AG’s (VOWG_p.DE) chief executive said on Tuesday after a meeting at the White House that the German automaker was building an alliance with Ford Motor Co (F.N) and might use the U.S. automaker’s plants to build cars.

VW CEO Herbert Diess said the company was also “considering building a second car plant” in the United States, adding, “We are in quite advanced negotiations and dialog with Ford Corporation to really build up a global automotive alliance, which also would strengthen the American automotive industry.”

Ford Executive Chairman Bill Ford Jr told reporters at an event near Detroit on Tuesday that talks with Volkswagen about an alliance are going “very well.”

Asked about Diess’ comments that VW could use some of Ford’s unused capacity for car production, Bill Ford said the companies “haven’t gotten that granular in our talks yet.”

He said he did not want to say much about a VW alliance until the automaker had “a lot of definitive things to talk about.”

The proposed alliance between Volkswagen and Ford suggests the days of carmakers going it alone are over, as tariffs, new technology and tougher emissions rules fragment markets that were once global, Reuters reported last week.

Firms that once sought vehicles with universal global appeal to create economies of scale are now seeking advantages in specific market segments like hybrid SUVs, North American pickup trucks or European city cars.

RBC Capital Markets analyst Joseph Spak said in a research note on Tuesday that said Diess’ comments raised the chances that VW would use some of Ford’s unused capacity as part of a broader partnership. Spak also said that a European or Asian automaker could seek to acquire some of General Motors Co’s (GM.N) unused capacity. GM announced last week it plans to idle five North American plants.

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“VW may have a little negotiating power as some of the GM facilities could be bought (although this could impact their broader intentions with Ford),” Spak wrote.

VW has an assembly plant in Chattanooga, Tennessee. Of the need for a new plant, Diess said the company is in “quite advanced negotiations in Tennessee but there might be other options as well.”

Diess said VW would not take an equity stake in Ford as part of its alliance. “We are building an alliance with Ford which will strengthen Ford’s position in Europe because we will share platforms,” he said. “We might use Ford capacity here in the U.S. to build cars for us.”

Reporting by David Shepardson; additional reporting by Chris Sanders in Washington and Ben Klayman in Redford Township, Michigan; Editing by Lisa Shumaker and Matthew Lewis

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