Ford lost $2.7 billion in the third quarter due to self-driving cars.
Ford is basically abandoning a project to develop the world's first fully driverless vehicle, a decision that will cost the company $2.7 billion.
According to those with direct knowledge of the situation, Argo AI, an autonomous car company that garnered $1 billion in financing in 2017, is shutting down its activities and redistributing part of the funds to major supporters Ford and VW.
At the company's annual general meeting on Wednesday, it was revealed to Argo AI staff, according to a number of insiders who wished to remain anonymous, that certain personnel had received offers from both automakers. How many employees Ford or Volkswagen would hire and which businesses would have access to Argo's technology were also unknowns.
Employees were informed that they would earn two distinct bonuses—an annual bonus and a bonus for signing a contract with Ford or VW—as well as severance money that would include insurance. A severance payout with health insurance will also be given to anyone who choose not to remain with Ford or Volkswagen.
According to many sources who talked with TechCrunch, the company's founder has spoken with more than 2,000 workers individually about this amazing offer.
"We have determined that Argo AI will cease to be a corporation after consulting with the shareholders. With autonomous driving technologies at Ford or Volkswagen, many people will be able to continue working, but for some, their jobs will unfortunately end "In a statement, Argo stated.
In its third-quarter financial report released on Wednesday, Ford stated that the firm has decided strategically to concentrate its efforts on creating enhanced driver support systems as opposed to technologies for autonomous or robotic cars. According to the business, its investment in Argo AI incurred a non-cash impairment charge in the third quarter of $2.7 billion before taxes, translating to a $827 million net loss.
This choice appears to be motivated by Argo's failure to draw in new investors. Jim Farley, the CEO of Ford, said that the business anticipates commercializing autonomous car technology by 2021.
The most precious resource in contemporary life is time, and Ford now has a fantastic chance to give millions of consumers their time back when they're in their cars, Farley added. Ford has to create outstanding and distinctive L2+ and L3 applications that increase driving security.
Farley also made a suggestion that Ford would purchase AV technology in the future rather of creating it itself. Although we're a long way from having completely driverless cars, he continued, "We're hopeful about the future of L4 ADAS, but we won't necessarily manufacture the technology ourselves."
Ford continued, "The company's ambitious near-term ambitions and its commitment to boosting efforts in these areas are justified by the emerging advantages of L2+ and L3 ADAS and consumer excitement."
VW, another significant funder of Argo, has also said that it will refocus its efforts and stop funding Argo's AI. The business said that it will work with Bosch and Horizon Robotics in the future to produce highly automated and autonomous driving in China using its Cariad software unit.
Lyft purchased a 2.5% ownership position in Argo while also playing a modest role. Lyft stated earlier this year that it will be putting at least 1,000 autonomous vehicles in its carpool network over the course of the next five years, beginning in Miami and Austin.
The ride-hailing business stated in a statement that Argo is a reliable partner and that the discovery has no bearing on Lyft's autonomous car plan.
A Lyft representative stated in an email that the company will "continue to collaborate with additional partners to enhance the safety and commercialization of AV technology." "Lyft is presently the top supplier of paid AV rides in North America, with over 100,000 rides. We are well-positioned to compete with AV thanks to the combination of our hybrid network, marketing engine, and fleet management capability."
Additionally, Lyft has partnered with Motio and Waymo.
In 2016, Bryan Salesky and Pete Rander established Argo. Ford's announcement in February 2017 that it will invest $1 billion in Argo over five years brought the firm out of the shadows. Since then, the business has collected more than $2.6 billion, primarily from Ford and Volkswagen, to create, test, and ultimately market its self-driving technology.
Ford's initial investment came at a crucial juncture for the rapidly developing autonomous car industry. Venture investors were making sizable offers to startups, many of which were established by early adopters of Google's autonomous driving initiative. A series of acquisitions then occurred: GM paid $1 billion for Cruise in 2016, Delphi, now Aptiv, paid $450 million for nuTonomy, and Amazon purchased Zoox.
Commercializing AV technologies turned out to be more challenging than anticipated. Firms have merged and been bought by other companies, including Apple, amid a wave of industrial consolidation. Others have gone to the public market in an effort to raise the money required to carry out their purpose, whether through a standard IPO like TuSimple or a merger with a business that specializes in selective acquisitions like Aurora.
In the previous year, Argo appeared to have gained popularity. The Ford Fusion and Ford Escape, the firm's self-driving hybrid cars, have been routinely spotted conducting tests on open roads in Austin, Detroit, Miami, Palo Alto, and Pittsburgh, where the business is based.
For its test programs in Hamburg and Munich, Argo used Volkswagen's all-electric I.D. Buzz in the EU. Argo has also run a number of trial projects with Lyft, Walmart, and 412 Food Rescue in Austin, Miami, and Pittsburgh.
The business launched an ecosystem of goods and services last month to enable business delivery services and autonomous taxi operations. The goods, which include high-resolution maps, data analytics, fleet management software, and cloud-based communication tools, go well beyond the autonomous driving technology that enables a car to drive itself through city streets. Argo appeared to announce its opening to the public.
In a press statement, Salesky and Rander remarked, "We are tremendously thankful for the devotion of the Argo AI team and very proud of our collaborative achievements.
The team has continuously performed well, and we anticipate everyone's success in the years to come, particularly the chances Ford and VW have highlighted for them to keep working on automated driving technologies.