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Why Are Ford and GM Working Together?

The new Ford Fusion uses a transmission developed jointly with GM. Photo source: Ford Motor Co.

Dogs and cats engineering together?

Ancient rivals General Motors (NYSE: GM  ) and Ford (NYSE: F  ) announced on Monday that they will develop – together – a new line of transmissions.

These aren't just ordinary transmissions. Continuing a trend of adding ever more gears in pursuit of ever more fuel economy, the two automakers say they are planning a series of nine- and 10-speed automatic transmissions.

The new gearboxes will be built in front- and rear-wheel-drive versions, for use in cars, SUVs, and pickups. Both automakers hope that the new transmissions will help them keep pace with fuel economy regulations, which are set to get tighter and tighter in coming years.

And both automakers obviously hope that the higher-tech transmissions will help them keep pace with global competitors.

But speaking of competition, Ford and GM are among the fiercest of rivals: Why would they collaborate on something like this?

Sometimes, working with your enemy makes good business sense
Collaborations like this may sound unusual, but they aren't unheard-of, even in the hyper-competitive global auto business. Ford is working with Toyota (NYSE: TM  ) on a hybrid powertrain for future pickups and SUVs, for instance, and there are plenty of other examples.

This is actually the third time in the last decade that Ford and GM have collaborated on transmission development. Prior efforts have yielded some good units, like the six-speed automatic transmission that Ford currently uses in its hot-selling Fusion sedan, pictured above.

But why develop them jointly? Transmissions are complex, high-tech units that are important to a vehicle's performance but not really part of its unique brand character for the most part (unless they don't work well, but that's another story). As such, it's not a big deal to share costs and efforts with a rival, because it makes sense to get the broadest possible economies of scale for the units – and to join forces to reduce development time of new high-tech versions.

There will still be differences, of course. Each company will develop its own control software, the "special sauce" that determines exactly how the transmission will operate in a given car or truck. And each company will build its own transmissions in its own factories.

But the two automakers say that they will seek to keep the internal mechanical parts identical between both companies' versions, so as to keep costs down by maximizing economies of scale. That will give both automakers a competitive advantage in markets around the world: Better technology, faster and cheaper.

The upshot: Higher tech, sooner
Long story short, by joining forces, Ford and GM both get the new high-tech transmissions that they'll need to keep pace with tightening fuel economy regulations around the world. They'll get them faster, which could be an advantage as global competition continues to tighten. And they'll get them for less money, which will help them keep costs down at a moment when both are looking for ways to improve profit margins.

I don't see any downside here. Do you? Scroll down to leave a comment and let me know.

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  • Report this Comment On April 15, 2013, at 8:59 PM, RobertPhoenix wrote:

    The only thing that doesn't seem to make sense is this statement.

    "Each company will develop its own control software, the "special sauce" that determines exactly how the transmission will operate in a given car or truck."

    Hasn't the software become the main factor in performance, and won't it cost more to develop than the mechanical parts ? Isn't there an intimate relationship between the design of the mechanics and what can be done with the software ?

  • Report this Comment On April 15, 2013, at 11:21 PM, luckyagain wrote:

    Obviously Ford and GM have done a cost analyst of developing transmission and have come to the conclusion that it is the best way to do it. It is not that unusual since GM and Toyota even built a car together: Chevrolet Nova and Toyota Corolla back in the 1980s.

    Anything that leads to better fuel economy is a definite plus for Ford, GM and the US economy as a whole. The less oil that the US uses, the better for the US economy.

  • Report this Comment On April 16, 2013, at 6:51 AM, TMFMarlowe wrote:

    @RobertPhoenix: Not quite. Remember that software doesn't have to be manufactured like hard parts do. The transmissions will be used in many different vehicles. The software will be -- at least to some extent -- unique to each vehicle, and probably to each engine offered in each vehicle.

    Thanks for reading.

    John Rosevear

  • Report this Comment On April 16, 2013, at 11:41 AM, WhiteHatBobby wrote:

    We've seen this "bipartisan" gearbox for years on current front-wheel drive cars. The next generation bipartisan is here.

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