Volkswagen to invest $2.6B in Ford's self-driving operations

VW to Invest in Ford Backed Argo AI at $7 Billion Valuation

In a joint statement issued by the companies, Volkswagen says it "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".

Volkswagen will invest in Ford Motor autonomous-car partner Argo AI at a valuation of about US$7 billion as two of the world's largest automakers expand an alliance formed earlier this year, according to people familiar with the matter. The companies said Volkswagen Chief Executive Herbert Diess and Ford CEO Jim Hackett would appear together tomorrow in NY, but provided no additional information in a news release. And sharing out the development costs with VW is a plus for Ford. It has sought outside investors to help share the spiraling cost of developing autonomous vehicle technology.

If VW agrees to allow Ford to license its electric-vehicle platform, it will help the German automaker hit 2020 earnings estimates by "guaranteeing" some profit from EVs next year, and also would likely provide VW with "an unassailable scale advantage in the market", said Angus Tweedie, a Citigroup analyst.

Ford will also sell electric cars in Europe based on its own platforms, including the Mustang-inspired Mach E SUV due out in 2021 and the electric F150 it has under development.

Details of the announcement expected on Friday were not immediately available.

With VW, the world's biggest automaker by sales volume past year, Argo is now aligned with a partner with substantial scale and resources.

Demand for passenger vehicles has flattened, and automotive and high-tech rivals have invested billions of dollars in self-driving auto research and development.

What we do know is that the investment values Argo AI at over $7 billion. Both sides reiterated on Friday the tie-up does not include entering equity ties between Ford and VW.

Fiat Chrysler in May made a merger proposal to France's Renault SA aimed at tackling the heavy costs of technological and regulatory changes in the industry, but ultimately abandoned the deal. Last month, Pittsburgh-based Argo AI announced that it had donated $15 million to Carnegie Mellon University for a new Center for Autonomous Vehicle Research.

Ford will build at least one mass-market battery auto in Europe starting in 2023 and deliver more than 600,000 European vehicles based on VW's platform, dubbed MEB, over six years.

VW chief executive Herbert Diess said the firms were continuing to look at other areas which they could collaborate on.