Earlier this year, we reported about talks between Volkswagen and Ford to develop and produce vehicles together in an effort to share costs. The partnership was to start with commercial vans, but the collaboration could expand to "a number of areas." Now, a new report from the Detroit Free Press suggests that talks between the American and German automakers could lead to a much larger and closer partnership — perhaps something even closer to a merger.

The two companies are strong in separate markets, and their product portfolios overlap very little. Ford has profitable pickups, while Volkswagen will soon have a lineup of electric vehicles. VW does well in China but is weak in the U.S., while essentially the opposite is true for Ford.

In the Free Press report, a number of analysts note that both automakers could save millions of dollars through close collaboration. As Autoline's John McElroy said, "we need a lot of consolidation in the industry. There are too many car companies with too many brands making too many models." He notes that they could share platforms and powertrains without much complaint from customers.

When asked, VW chairman of the board of management, Thomas Sedran, told a German newspaper in August that the possibility of producing vehicles together "is part of the talks," adding, "I must ask for some patience here." Both VW and Ford have said that they would have more to say publicly in the near future.

There is some skepticism among analysts, however, with some referring to the difficult breakup between Daimler and Chrysler. Automotive supply chain consultant and founder of Advanced Purchasing Dynamics Jeoff Burris told the Free Press, "Where it falls apart is culturally. Stoic Germans with freewheeling Americans." Still, there are many reasons analysts find that a Ford-VW collaboration could allow the duo to essentially dominate the auto industry. Read more from the Detroit Free Press.

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