Move marks Ford’s biggest effort to move into self-driving car research
The Ford Motor Co. (NYSE: F), one of the automobile majors making up the “Detroit 3”, is investing $1 billion over the next five years in Argo AI, an artificial intelligence (AI) startup formed in December 2016 and focused on developing autonomous vehicle technology, as reported by Bloomberg on February 11th, 2017. The move marks Ford’s biggest effort to move into self-driving car research. The investment is also a way forward for Ford, which is more than century old, to tap into Silicon Valley talent and make headway in a fiercely competitive autonomous car space that includes path-breaking research being conducted by General Motors Company (NYSE: GM), Fiat Chrysler Automobiles N.V. (NYSE: FCAU), Uber Technologies Inc. and Alphabet Inc.’s (NASDAQ: GOOG) Google.
Mark Fields, Ford’s president and CEO, stated:
“The next decade will be defined by the automation of the automobile, and autonomous vehicles will have as significant an impact on society as Ford’s moving assembly line did 100 years ago. As Ford expands to be an auto and a mobility company, we believe that investing in Argo AI will create significant value for our shareholders by strengthening Ford’s leadership in bringing self-driving vehicles to market in the near term and by creating technology that could be licensed to others in the future.”
Self-driving or autonomous cars use sensors, GPS and onboard computing technology to recognize their environments and travel to destinations. Almost every major automaker is developing this technology, while the National Highway Transportation Safety Administration has been supporting it as a means of reducing the 32,500 fatalities that occur on US roads every year. Ford Chief Technical Officer Raj Nair pointed out that Ford will concentrate on building the hardware platform, the physical car, and use its expertise to develop toward large-scale manufacturing. The Pittsburgh-based Argo AI will focus on the software side and develop the virtual driver system for the fully autonomous vehicles Ford has promised to bring to market in 2021. Argo AI will develop the technology exclusively for Ford at first, and then plans to license its technology to others.
Argo AI’s self-driving technologists will lead the effort out of Pittsburgh, a hub for robotics and autonomous vehicle research, and satellite offices will be in place in the San Francisco Bay Area and southeastern Michigan. As part of Ford’s continued development of autonomous vehicles, the automaker’s team responsible for developing a virtual driver system will be combined with Argo AI. The combined development team will then be charged of creating SAE level 4 self-driving cars. Ford, however, will continue to be in charge of developing vehicle platforms, systems integration, exterior and interior designs, manufacturing, and managing regulatory policies related to autonomous cars.
About Argo AI
Argo AI’s co-founders Bryan Salesky and Peter Rander are former leaders of the self-driving car teams at Uber and Alphabet’s car division, Waymo, respectively. Bryan Salesky and Peter Rander were both previously at Carnegie Mellon’s robotics institute and set up Argo AI in December 2016. Peter Rander, Argo’s COO, left Uber in September 2016, to join the new company along with two other top self-driving engineers — mapping head Brett Browning and autonomy head Drew Bagnell. Rander’s departure came in the wake of Uber’s acquisition of Otto, a startup co-founded by former Google engineer Anthony Levandowski.
CEO Bryan Salesky said that Argo AI was looking to hire 200 employees by the end of this year between its headquarters in Pittsburgh and offices in Southeast Michigan and the San Francisco Bay Area. Argo AI will function as a subsidiary of Dearborn, Michigan-based Ford, which will hold a majority stake in the company. Argo will largely operate and hire independently and offer equity to engineers, said Raj Nair, Ford’s executive vice president of global product development and its chief technical officer.
Salesky will manage the Argo AI team and report to a five-member board of directors, two from Ford, two from Argo AI, and one independent director. Ford plans to install Raj Nair and Vice President John Casea to Argo’s board.
The initial focus for Argo AI will be to support Ford’s autonomous vehicle development and production and use its expertise in AI to develop software for self-driving vehicles. The company could license its technology to other companies and sectors looking for autonomous capability in the future.
Ford seeks emerging opportunities in autonomy and mobility
To expand its business model, Ford is aggressively pursuing emerging opportunities with investments in electrification, autonomy and mobility. Ford announced its intention to offer a high-volume, fully autonomous SAE level 4-capable vehicle in commercial operation in 2021 in a ride-hailing or ride-sharing service. As part of these plans, in 2016, the automaker splurged about $1 billion to acquire Chariot, a San Francisco-based crowd-sourced shuttle service that serves as the foundation to grow Ford’s dynamic shuttle services globally. In Q4 FY16, Chariot expanded to Austin, Texas and will expand to eight cities by the end of 2017, including at least one global city.
Ford also invested in Velodyne, a maker of Lidar technology, and in Civil Maps, which is developing 3D mapping technology that can be used by self-driving cars. In August 2016, Ford acquired SAIPS, an Israeli company developing machine learning and computer-vision technology.
Ford’s investment in Argo comes at a time when other automakers are moving in the same direction. It also reflects the heating up of the autonomous vehicles space, which is witnessing other seismic shifts in electrification and ride-sharing. Ford’s rival General Motors announced in March 2016 that it plans to buy Cruise Automation, a maker of sensors and other gear that can enable conventional automobiles to drive themselves on highways, for about $581 million. General Motors has invested $500 million in Lyft Inc., a ride-hailing service and main rival of Uber. In April 2016, Uber acquired Otto, a self-driving truck startup that had been founded seven months earlier, in a deal worth as much as $680 million.
Toyota Motor Corp. invested $1 billion investment over five years toward creating its own robotics and artificial intelligence research division. Toyota Research Institute was established more than a year ago and is being led by Gill Pratt, the former top robotics engineer for a U.S. military agency.
More recently, Google redefined futuristic mobility with the launch of its latest self-driving system in Chrysler Pacifica minivans during the North American International Auto Show in Detroit on January 08th, 2017. Waymo, the company formed from Alphabet’s Google Self-driving Car research project, is designing and building all the sensors, radar and computers used in its automated test vehicles, along with the AI programs that control everything.
Alphabet has a partnership with Fiat Chrysler to develop and install the company’s autonomous driving technology into real cars. Alphabet unveiled a latest set of self-driving hardware and software that incorporates a new array of sensors, including an enhanced vision system, improved radar and laser-based Lidar, all developed and built in-house. Waymo is using the new hardware and software in Chrysler Pacifica minivans that begin road tests in January 2017.
Ford positions itself as a mobility services provider
Ford is seeking to position itself as not just a manufacturer of cars, but as a provider of mobility services, enabling people to travel without actually owning cars. That is especially important as companies like Uber and Lyft, ride-hailing services popular in urban areas, have reduced the need for people to have their own vehicles. Ford sees mobility services as potentially more profitable than its traditional business of making and selling cars. Manufacturing vehicles requires billions of dollars in investments in plants and engineering, costs that are often difficult to recoup. Company executives have said mobility services could generate returns of around 20% compared to 8% it earns on making vehicles.
As part of its strategy to grow roots in Silicon Valley and acquire expertise in autonomous-driving technologies and related areas, Ford opened a research center in Palo Alto, California, in 2016. Ford is also remaking its headquarters and main development center in Dearborn, Michigan, just outside Detroit, into two sprawling, high-tech campuses of energy-efficient buildings. The automaker envisions the new campuses, which will take 10 years to complete, as places that will showcase autonomous shuttles as well as electric bikes and other green modes of transportation. Like Ford, General Motors also has a Silicon Valley tech center, and it is spending $1 billion to renovate its main big development campus in Warren, Michigan.
Ford earlier also signed a deal with BlackBerry Ltd (NASDAQ: BBRY) to expand the use of BlackBerry’s QNX secure operating system in its driverless automated vehicles. The deal with Ford is the first BlackBerry has done directly with a major automaker, though it currently sells its technology to auto industry suppliers. Panasonic Automotive currently uses QNX software in the Sync 3 infotainment console that it supplies to Ford. QNX software is certified for use in autonomous driving and active safety systems.
In December 2016, Ford launched the next-generation Fusion Hybrid Autonomous Development Vehicle, bringing its test fleet size to 30 vehicles making it one of the largest in the auto industry. In 2017, the company plans to triple the size of the fleet for a total of about 90 vehicles.
In its most recent investment, Argo is expected to bring in the AI component and robotics depth, leaving Ford to bring in its expertise with all other components that are needed to bring a product to market, including design, business, regulatory and strategic product thinking. It remains to be seen if Ford will reinvent itself and gain foothold in the hotly contested self-driving car market.
Ford’s stock finished the day at $12.65, gaining 0.72%, at the close on Tuesday, February 14th, 2017, having vacillated between an intraday high of $12.70 and a low of $12.59 during the session. The stock’s trading volume was at 28,345,647 for the day. The Company’s market cap was at $49.75 billion as of Tuesday’s close.