Ford Motor and Volkswagen officially announced the expansion of their global “collaboration” Friday morning, adding autonomous and electrified vehicles to the list of projects that began with January’s announcement of a joint venture covering commercial vehicles.
The expanded alliance now will add two of the most significant, albeit costly, technologies expected to dramatically reshape the global auto industry over the coming decades. The high costs involved in the development of self-driving and battery-electric vehicles already have fostered a series of joint ventures and other collaborations across the auto industry, often involving traditional competitors like General Motors and Honda, as well as BMW and Daimler.
Ford and VW will remain “independent and fiercely competitive in the marketplace,” the Detroit automaker’s CEO Jim Hackett said in a statement released ahead of a joint Friday morning news conference in New York City. However, Hackett added, “Unlocking the synergies across a range of areas allows us to showcase the power of our global alliance in this era of smart vehicles for a smart world.”
What one Ford official described as “the big deal” involves the development of autonomous vehicles, a technology proving more difficult to bring to market than many experts anticipated just a few years ago, said Sam Abuelsamid, a principle researcher with Navigant Research, a high-tech consulting company. It’s also proving far more costly than expected, according to a study by AlixPartners released last month that estimated industry-wide spending on self-driving vehicles will climb to $85 billion annually by 2025.
Ford has already invested billions by, among other things, setting up an outpost in Silicon Valley to tap that region’s know-how. In February 2017, it announced an investment of $1 billion in Pittsburgh-based Argo AI, a self-driving vehicle start-up.
Argo, which operates as an independent enterprise, focuses on what is known as “Level 4” autonomy, vehicles capable of operating without a driver, albeit in “geo-fenced” areas with well-marked roads and in reasonably good weather conditions. Argo already has test fleets operating in five U.S. cities, including Pittsburgh, Palo Alto, Detroit, Miami and Washington, D.C.
Volkswagen, according to a joint statement outlining the details of the expanded VW-Ford collaboration, “will invest $2.6 billion in Argo AI by committing $1 billion in funding and contributing its $1.6 billion Autonomous Intelligent Driving (AID) company.” That’s the automaker’s in-house autonomous vehicle development unit which currently has 200 employees. VW will also purchase $500 million in Argo shares over the next three years.
In turn, Argo will now set up operations in Europe that will include localized testing.
“This is a real validation of what Argo is doing,” said analyst Abuelsamid, since VW could have continued focusing on in-house development efforts. The German automaker recently ended its relationship with another self-driving start-up, Aurora.
Several senior executives who have discussed the Ford-VW plans in recent days said there were a number of potential advantages to the collaboration. Sharing costs is seen as a major plus, as is the scale of their combined operations which, in 2018, sold about 18 million vehicles worldwide.
There’s also the global footprint of the two companies, noted Argo CEO Bryan Salesky, who said in the joint statement his company’s “technology could one day reach nearly every market in North America and Europe, applied across multiple brands and to a multitude of vehicle architectures.”
Friday’s announcement also highlights the way Ford and Volkswagen plan to work together on the development of battery-electric vehicles, an area in which global automakers are expected to invest $225 billion from 2019 to 2023, according to the AlixPartners study.
VW so far has committed 9 billion euros, about $10 billion, to EV development. CEO Herbert Diess earlier this year upped his sales forecast for the coming decade from 15 million to 22 million battery-electric vehicles (BEV). The German company plans to have about 50 BEVs in production by 2025.
Ford, meanwhile, plans to invest $11 billion over the next five years, launching its first long-range BEV, a high-performance SUV, later this year. A mix of plug-in hybrids and all-electric models will follow. That now will include “at least one high-volume fully electric vehicle in Europe by 2023,” the joint statement noted, based on the modular MEB platform VW developed to underpin the majority of its future battery cars.
Abuelsamid said he believes that is “just the beginning,” and expects Ford will use the MEB “architecture” for still more products moving forward to gain even further economies of scale.
As is the case with so many of the current wave of auto industry joint ventures, alliances and other collaborations, the ones pairing Ford and VW won’t be monogamous. Ford, for one thing, will move forward with a separate partnership with Rivian, a suburban Detroit battery-electric vehicle start-up in which it announced in April a $500 million investment.
China may ban US officials from region with Muslim detainment camps
This photo taken on June 4, 2019 shows the Chinese flag flying over the Juma mosque in the restored old city area of Kashgar, in China’s western Xinjiang region.
Greg Baker | AFP | Getty Images
China might ban all U.S. diplomatic passport-holders from entering the country’s western Xinjiang autonomous region, Global Times Editor-in-Chief Hu Xijin said on Tuesday.
Hu said in a tweet that China is also considering visa restrictions against U.S. officials and lawmakers with “odious performance” on the Xinjiang issue, in retaliation to legislation being prepared by the U.S. Congress. He did not say how he had obtained the information.
U.N. experts and activists say at least 1 million Uighurs, and members of other largely Muslim minority groups, have been detained in camps in the remote Xinjiang region. Top U.S. officials including Secretary of State Mike Pompeo have criticized China publicly on the situation there.
China has denied mistreatment at the camps, which Beijing says provide vocational training to help eliminate religious extremism and teach new skills to people of the region. It has repeatedly demanded that U.S. and other foreign states critical of its policies in Xinjiang end their interference in China’s domestic affairs.
Chile announces $5.5 billion economic recovery plan
Thousands of people attend a demonstration to request the resignation of Chilean President Sebastian Pinera in the area surrounding Plaza Italia in Santiago, Chile on October 25, 2019.
Muhammed Emin Canik | Anadolu Agency via Getty Images
The Chilean government announced plans on Monday to roll out a $5.5 billion economic recovery plan and issue more debt in foreign currencies after rioting and protests triggered the worst monthly contraction in a decade.
Finance Minister Ignacio Briones slashed the official forecast for economic growth this year to 1.4% from 2% just a month ago, and he put next year’s expansion at 1% to 1.5% instead of its 2.3% estimate previously.
“These aren’t just numbers. This means thousands of companies and jobs today are at risk,” Briones told a news conference. “The violence, the looting and the destruction have halted the economy with enormous costs for Chileans.”
Riots in Chile began on Oct. 18 over a hike in metro fares but quickly spiraled into mass protests, arson and looting that have left 26 dead and upwards of $1.5 billion in losses for businesses. The peso has plummeted to a historic low, prompting multiple central bank interventions.
Briones said the government will invest $2.4 billion in infrastructure as part of its recovery plan, which also aims to stave off job losses and help small businesses.
Government spending will rise 9.8% next year and the fiscal deficit will widen to 4.4% of gross domestic product. The government plans to sell some $3.5 billion in foreign currency bonds next year to help meet financing needs, more than in previous years, Briones said.
Earlier on Monday, the central bank said the economy shrank 3.4% in October from the same month a year ago, marking the worst contraction in a decade. The IMACEC economic activity index, proxy for gross domestic product tallied on a monthly basis, fell 5.4% from September.
Scotiabank labeled it the “beginning of the bad news” in a note to investors.
Non-mining activity fell 4%, the bank said, marked by a sharp drop in education, transportation, business services and the hotel and restaurant sector.
Much of Santiago, Chile’s capital, was shut near the end of October as riots and looting closed streets, squares and many small businesses. Violence spiked again last week, prompting President Sebastian Pinera to renew calls for deeper reforms and a crackdown on lawlessness.
Mining activity in the world’s top copper producer nonetheless grew 2.0% year-on-year, as new production from Codelco’s Chuquicamata mine ramped up. Chile’s copper mines have mostly maintained production and kept operations running normally in the face of the unrest.
Hong Kong tourism, retail sales may not improve in November: Economist
Pedestrians cross Russell Street in front of the Times Square shopping mall, operated by Wharf (Holdings) Ltd., in the Causeway Bay shopping district of Hong Kong, China.
Xaume Olleros | Bloomberg | Getty Images
“It’s very hard to imagine that the retail sales numbers and tourist arrival numbers will be any better in November given how much of a step-up in protest and violence that happened during that time,” said Martin Rasmussen, China economist at Capital Economics.
Hong Kong, a former British colony that returned to Chinese rule in 1997, has seen widespread demonstrations since June, some of which have led to violent clashes between protesters and the police. The protests were initially sparked by a proposed law that would have allowed extradition to mainland China, but the unrest later morphed into broader anti-government demonstrations that include demands such as greater democracy and universal suffrage.
In October, retail sales fell 24.3% from a year ago, according to preliminary Hong Kong government data. The city’s government said that slump is the worst on record.
Tourist arrivals slumped 43.7% in October from year ago to 3.31 million, according to the Hong Kong Tourism Board. That’s a sharper drop than the 34.2% decline in September. Mainland Chinese visitors fell 45.9% in October from a year ago.
“The Chinese tourists, we don’t think that they will feel welcomed in the city again anytime soon especially given the big step-up in state media on the mainland regarding the Hong Kong situation,” Rasmussen told CNBC’s “Squawk Box.”
The Hong Kong government has pushed out stimulus to support the city’s economy. But the Hong Kong dollar is pegged to the U.S. dollar, which Rasmussen said leaves little space for the government to adjust monetary conditions, although they could step up fiscal spending to boost the economy.
Last week, U.S. President Donald Trump signed into law two bills supporting Hong Kong protesters. China subsequently suspended U.S. military visits to Hong Kong and sanctioned several U.S. non-government organizations.
Rasmussen said, however, the upside of that development is that Beijing appears to want to contain the fallout of the act to Hong Kong and not link it to trade talks — a positive for the U.S.-China relationship.
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