GM and Ford to Develop Transmissions - Analyst Blog

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General Motors Company ( GM ) and its archrival Ford Motor Co. ( F ) have joined hands in developing nine- and ten-speed automatic transmissions in order to save development costs and meet fuel economy standard mandated by the U.S. government. Further, the collaboration will help both the companies quickly launch the transmissions into many of their new cars and trucks.

Transmissions with more gears are more fuel-efficient as they allow engines to do less work. However, they are much more complex to develop and require huge investment. As a result, the collaboration will save millions of dollars of development costs and the savings will be utilized for improving other aspects of the vehicles such as interiors and entertainment features making the companies' products much more competitive.

The collaboration will also help both the companies meet fuel-economy standard of 54.5 miles per gallon by 2025. A nine-speed transmission improves gas mileage by 5%-10% over a six-speed model.

This isn't the first time General Motors and Ford started working together on transmission systems. Earlier in 2002, the companies have started developing six-speed transmissions, which took nearly three years to complete. So far, GM and Ford have jointly produced 8 million transmissions.

  A Few days back, General Motors announced plans to invest $332 million in four plants in three Great Lakes states in order to develop fuel-efficient engines and transmission systems technologies.

The plants are located in Toledo, Ohio; Bedford, Ind.; and Flint and Bay City in Mich. The investment at the plant will help GM build a new V-6 engine, a new small motor and new eight-speed automatic transmissions.

Both General Motors and Ford have been desperately trying to catch up with its rivals in engines and transmissions technologies. Its competitors are already producing 10-speed transmissions when the automakers are lagging behind them providing only six-speed transmissions in vehicles.

Chrysler Group - controlled by Italy's Fiat SpA ( FIATY ) -already has the license to produce the 8HP eight-speed transmissions system (developed by Germany's ZF Friedrichshafen AG) at its Kokomo Transmission Plant and the Kokomo Casting plant, starting this year. This transmission system is used in many vehicles produced by Germany's Volkswagen AG ( VLKAY ).

Currently, both General Motors and Ford retain a Zacks Rank #3 (Hold).



FORD MOTOR CO (F): Free Stock Analysis Report

FIAT SPA (FIATY): Free Stock Analysis Report

GENERAL MOTORS (GM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: F , FIATY , GM , VLKAY

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