Ford and VW will deepen their relationship with production and component parts, say Reuters, quoting companies spokesmen.
Ford stock has sunk 24% this year and is now trading at a near six-year low as a new CEO Jim Hackett was brought in to make strategic cuts and changes including working more closely with VW in Europe and Mahindra of India.
VW has told German Government it will make hardware changes to older models and offer incentives to drivers to swap models which cannot be made to comply with emissions regulations.
It has ruled out buying back older models as it did in the USA while in Germany cities are facing court action from green groups to clean up their air or face fines, and this is leading to diesel engine bans in affected areas being considered.