Ford, GM considering engine development tie-up

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General Motors Corp. and Ford Motor Co. are discussing a possible collaboration to develop new engines and other powertrain technologies, according to sources at both companies.



The rival automakers are keen to find ways to reduce research-and-development costs even as they struggle to respond to a dramatic shift in consumer demand from big trucks and sport utility vehicles toward smaller, more economical cars and crossovers.

A deal could give Ford access to GM's Volt technology -- if it becomes commercially viable. It could also help GM offset cuts to its product development budget.

GM first approached Ford more than a month ago, two sources familiar with the situation said. GM told Ford that it was willing to discuss a wide range of possible collaborations.

GM's overture drew a mixed reaction inside Ford. Some executives felt that previous joint projects had benefited GM more than they had Ford, but others -- including Ford's global product development chief, Derrick Kuzak -- saw it as an opportunity to leverage some of GM's technology while at the same time reducing Ford's own development costs.

The matter went to Ford's board of directors last month, which voted to authorize negotiations with GM.

Since then, there have been at least three meetings between the two companies involving Barb Samardzich, Ford's head of powertrain operations, and her counterpart at GM. No agreements have been reached, but the talks were characterized as promising.

Neither company would confirm or deny the reports. GM spokesman Tom Wilkinson said his company does "not comment on speculation about future products or product development."

Ford spokesman Said Deep said Ford is concentrating on bringing its fuel-efficient European platforms to North America, but did not rule out working with another manufacturer.

"Our focus and greatest opportunity is to create 'One Ford,' and we're doing that leveraging our own global assets," he said. "(But) we're always open to talking to others in the industry. Beyond that, we're not going to comment."

Success worth replicating

Powertrains are the logical focus of any collaboration, say insiders in both companies.

Engines and transmissions represent a huge portion of the development cost of a new car or truck, yet they are not immediately obvious to the consumer in the way that a new navigation system or body design is. Developing an entirely new engine can cost $1 billion. Splitting those costs with another car company can save an automaker $500 million. A new transmission can easily cost $800 million -- or $400 million if the development costs are split.

Moreover, the onboard computers that control these components have a lot to do with how they operate, controlling things like shift timing and acceleration. Each automaker could create distinctive driving experiences using the same underlying components.

Such a move would not be unprecedented.

Ford and GM successfully collaborated on the development of a fuel-saving six-speed transmission that is rapidly becoming the backbone of both companies' powertrain lineup. Kuzak has pointed to the success of that program internally as something worth replicating.

Word of a possible collaboration between GM and Ford came as little surprise to analyst Jim Hall of 2953 Analytics LLP. Following the completion of the six-speed transmission tie-up two years ago, he gave GM CEO Rick Wagoner and other senior executives a presentation demonstrating the benefits of working with Ford on other powertrain technologies. He remains convinced that it represents a real opportunity for both companies to control research-and-development costs while accelerating the introduction of new, more fuel-efficient cars and trucks.

"The transmission deal has worked well for both companies," Hall said. "I told them, 'Don't stop there.'"

He said GM is ahead of Ford on four-cylinder engine development, but added that GM could learn a lot from Ford about combining turbo-charging and direct injection -- the technologies behind its EcoBoost technology, which promises to deliver more power and better fuel economy.

Electric technology useful

Then there is Volt, GM's promised vehicle that runs primarily on electricity.

While it remains to be seen whether GM will succeed in bringing it to market, Ford is reportedly keen on getting access to the technology if it does. And Hall said that is something GM should welcome.

"I would think that would be part of it and, if GM is smart, they will proliferate Volt technology," he said.

Doing so would provide GM with much needed revenue while at the same time reducing its own piece-cost for Volt components. It would be a way for GM to create economies of scale not possible with its own products alone, and would ultimately reduce the cost of such technology for consumers.

"Ford has more experience in getting the costs down, and that could really help GM," Hall said.

[Source : Detroit News]