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Ford, Volkswagen Ink Major Joint Project Agreement, Includes New Electric Vehicle

Ford Motor (F) and Volkswagen (VWAGY) have signed a major joint project agreement to expand their global alliance and leverage their complementary strengths in midsize pickup trucks and commercial and electric vehicles.

Together the companies will now produce: a medium pickup truck engineered and built by Ford, for sale by Volkswagen starting in 2022; a city delivery van based on the latest Caddy model, developed and built by Volkswagen Commercial Vehicles and later a 1-ton cargo van created by Ford; and a new Ford electric vehicle for Europe by 2023 built on Volkswagen’s Modular Electric Drive toolkit.

During the lifecycles of the products, the companies expect to produce up to a combined 8 million of the medium pickup truck and both commercial vans.

Over several years starting in 2023, Ford could deliver 600,000 electric vehicles using the MEB architecture, the companies revealed. Both F and Volkswagen plan to explore additional ways to cooperate on electric vehicles.

“In light of the Covid-19 pandemic and its impacts on the global economy, more than ever it is vital to set up resilient alliances between strong companies,” said Volkswagen Group CEO Dr. Herbert Diess. “This collaboration will efficiently drive down development costs, allowing broader global distribution of electric and commercial vehicles, and enhance the positions of both companies.”

Additionally, Ford and Volkswagen will both work with Argo AI to form distinct autonomous-vehicle businesses based on Argo AI’s self-driving technology. Last week, Volkswagen closed its previously announced investment in Argo AI, the Pittsburgh-based company in which Ford already had ownership and development interests.

The alliance does not include cross-ownership between the companies, which will remain competitors in the marketplace.

Shares in F have plunged 22% so far year-to-date, and analysts have a cautious Hold rating on the stock’s outlook. That comes with an average analyst price target of $5, indicating 30% further downside potential lies ahead. (See F stock analysis on TipRanks).

“Ford secured enough liquidity to manage through the COVID-19 crisis, but cash flow outlook still mired and “surviving” came at cost to equity” comments RBC Capital analyst Joseph Spak.

He has a hold rating on the stock and $5 price target, adding “recent debt raise seems to be a mid-term permanent part of cap structure, eating away at cash flow and taking away from equity value.”

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