VW says it might use Ford manufacturing capacity in U.S.; White House meeting concludes

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VW CEO Herbert Diess on Tuesday: "We need extra capacity here in the United States, we need an extra car plant for VW and Audi combined." Photo credit: REUTERS

UPDATED: 14-12-2016 16:20 ET – adds UAW answer

WASHINGTON – Volkswagen director said Tuesday after a meeting in the White House that the German car manufacturer was building an alliance with Ford Motor Co. and that they could use the factories of the American car manufacturer to build cars.

VW CEO Herbert Diess said the company was also considering building a second car plant, adding: "We are in fairly advanced negotiations and dialogue with Ford to truly build a global automotive alliance, including the American car. industry would strengthen. "

Ford and VW said they would explore a strategic alliance on 19 June and agreed to a memorandum of understanding. The talks were further intensified in the fall, the automakers said in October.

"Our MOU with VW deals with discussions about possible partnerships in a number of areas," a Ford spokeswoman said in a statement by e-mail. "It is premature to share additional details at this time."

The car manufacturers have said before that they talk about possible partnerships in a number of areas.

VW has an assembly plant in Chattanooga, Tennessee. From the need for a new factory, Diess said that the company is in relatively advanced negotiations in Tennessee but there may also be other options.

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According to Diess, VW would not take equity interests in Ford as part of its alliance. "We are building an alliance with Ford that will strengthen Ford's position in Europe because we will share platforms," ​​he said. "We can use Ford's capacity here in the US to build cars for us."

According to Diess, VW was planning to talk more about the Ford alliance in January.

"We need extra capacity here in the United States, we need an extra car plant for VW and Audi," Diess told reporters in Washington after meeting President Donald Trump and trade officials.

Ford and VW have been talking for over a year about the German automaker investing in Argo AI, the self-driving technology partner of the American car manufacturer, to jointly develop cars, according to people familiar with the discussions. The two car manufacturers are also considering links to produce electric vehicles and share production in regions around the world, according to the people.

"We have a very wide range of discussions about how we can help each other around the world," said Bob Shanks, Ford's Chief Financial Officer, in an interview in October. "Cooperation is not limited in any way."

Daimler CEO Dieter Zetsche: "We were not here as a trade delegation." Photo credit: REUTERS

Discussions with Trump

Diess also said that VW is in advanced negotiations in Tennessee, where the company already has a factory, about increasing US capacity, but that there may be other options. A decision could be taken early in 2019, he said.

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Every appointment for VW to use Ford factories for production would presumably require negotiations with the UAW, which tried unsuccessfully to organize the VW factory in Chattanooga.

UAW Ford Vice President Rory Gamble, through a spokesperson, told Automotive News that he would like to comment on this topic "until he has had formal discussions with Ford."

Diess was accompanied at the meeting by his counterparty at Daimler AG, Dieter Zetsche, and BMW Chief Financial Officer Nicolas Peter.

The car manufacturers have been in trouble because Trump uses higher rates as a mockery to rebalance trade in China and the European Union. BMW and Daimler are the largest auto exporters in the US to China, while VW's two most profitable brands, Porsche and Audi, would be hammered if Trump had a potential 25 per cent levy on imports from the EU.

"That is actually why we are here, to avoid the extra rates and I think we are behaving in a good way," Diess said.

The three car manufacturers do not have an official role in the general trade discussions between US and EU trade officials, and stressed that at the end of their meetings. The companies try to prevent them from becoming entangled in the discussions, but they accepted the invitation that was received by a Trump administration who wanted to make progress with the highest priorities.

"We were not here as a trade delegation," said Zetsche.

"We said in general terms that our planned additional investments here that are not commercially responsible should naturally be part of a larger understanding and therefore the conditions under which we operate can not change, which was very well understood," said Zetsche.

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Trade deficit

The White House wants to reduce an automotive trade deficit of $ 30 billion with Germany with increased production in the US, said trade agent Secretary Wilbur Ross prior to meeting with automakers in Washington Tuesday. It remains the largest part of a global trade deficit of 65 billion dollars with the EU.

All three car manufacturers met with Trump's main lieutenants separately, including Ross, US sales representative Robert Lighthizer and economic adviser Larry Kudlow, before a joint meeting that followed. Then they met Trump in the Oval Office.

"The president shared his views on all car manufacturers that produce in the United States and creating a friendlier business climate," said Lindsay Walters, a spokesperson for the White House.

Daimler, the maker of luxury cars from Mercedes-Benz, produces vehicles in Tuscaloosa, Ala., With which many of its SUVs are shipped to China. Daimler employs approximately 3,700 employees at the US site, which can produce more than 280,000 vehicles per year, including GLE and GLS SUVs for global markets and C-class sedans for North America.

Bloomberg employees and Automotive News contributed to this report.