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Ford, GM consider engine partnership

Alisa Roth Aug 4, 2008

Ford, GM consider engine partnership

Alisa Roth Aug 4, 2008


Kai Ryssdal: It’s old news by now that times are tough for the auto industry. GM announced more job cuts last week, as we told you. Ford is cutting back production of trucks and SUVs.

But maybe there’s power in numbers, because today the Detroit News reported that the two companies might be teaming up to develop new engines.

Marketeplace’s Alisa Roth reports.

Alisa Roth: Back in the day, auto companies were their own worlds. They owned the steel plants, the parts makers, the whole thing. Nowadays, though, just because you drive a Chevy doesn’t mean you’re sitting on Chevy seats. Different parts are made by different companies.

So the idea that Ford and GM would make an engine together isn’t inconceivable. In fact, they already collaborated on a six-speed transmission. But such a partnership does say something about the state of the industry today.

Bob Schulz follows autos for Standard and Poors.

Bob Schulz: You know, again, with the industry challenges, these companies are really considering everything if it makes sense to save costs or speed development.

There are plenty of other tie-ups between auto companies. What would make this deal unique is that Ford and GM are the two largest domestic carmakers and ostensibly life-long rivals. And it could give Ford access to GM’s Volt technology, a big help to Ford and a big cost-savings to GM.

Components like engines and transmissions are prime candidates for this kind of collaborative development. Greg Gardner is an analyst at Oliver Wyman.

Greg Gardner: These are very capital-intensive parts of the vehicle and in order to drive that cost down, they would spread their respective investments and also hopefully drive down the cost to the consumer because they would have potentially about twice as many customers.

The disadvantage would be if the two companies disagreed on the direction the new technology should take.

In New York, I’m Alisa Roth for Marketplace.

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