Volkswagen closes $2.6 billion deal with Argo AI

Ford President and CEO Jim Hackett, Argo AI CEO Bryan Salesky and VW CEO Dr. Herbert Diess are all smiles after a new deal between the three last summer.

The battle to develop the first viable self-driving vehicle just got a little more intense with the announcement Volkswagen and Argo AI closed a $2.6 billion deal to develop autonomous vehicle technologies.

The partnership is part of larger alliance involving Ford Motor Co., which was revealed nearly a year ago. Ford has already invested $1 billion in Argo, a self-driving software developer, a few years ago. The two companies are already testing the software in Ford vehicles in several cities in the U.S.

VW will now become part of that development program with the closing of the deal, which calls for $1 billion cash infusion into Argo, which operates as an independent company, as well as the merging of the German automaker’s autonomous intelligent driving team with Argo, currently valued at about $1.6 billion.

(Ford, VW open to further collaboration — and more partners.)

The Munich-based operations of VW’s former autonomous development team will now become Argo’s European headquarters, dubbed Argo Munich. The deal gives VW and Ford minority stakes in the Pittsburgh-based company.

Austin, Texas is the third city that Ford and its mobility partner, Argo AI, will test autonomous vehicles.

“Today, with the close of Volkswagen AG’s investment, we become a global company and welcome new teammates to the Argo AI family,” Argo CEO Bryan Salesky and Argo Munich Vice President Reinhard Stolle said in a statement.

“This news not only solidifies our well-capitalized position, but differentiates us as the only self-driving technology platform company with partnerships and commercial agreements for deployments across the U.S. andEurope.”

In addition to the new European locale, Argo has engineering centers in metro Detroit, Palo Alto, California and Cranbury, New Jersey, as well as testing fleets in Miami, Washington, D.C. and Austin, Texas.

(Ford and VW Formally Unveil “Collaboration” on Electric and Autonomous Vehicles.)

The deal is just the latest move by an automaker to team up with tech firm to help speed the development of autonomous vehicles. General Motors invested heavily in Cruise L.L.C. and Honda later joined that partnership. BMW and Daimler are also working together.

Working with other automakers reveals a major factor in autonomous vehicle development: money. It requires writing big checks, and plenty of them to compete in this segment. In a blog post announcing the deal, John Lawler, CEO, Ford Autonomous Vehicles L.L.C., and Ford Motor Co. vice president, Mobility Partnerships confirmed that adding VW helps.

Ford CEO Jim Hackett, left, and VW AG CEO Herbert Diess continue to find ways to partner in new segments to ease the burden of development costs on both.

“Building a safe, scalable and trusted self-driving service, however, is no small task. It’s also not a cheap one,” Lawler wrote in the post. “We’ve committed to spending more than $4 billion through 2023 on the development of our self-driving service. A large part of this investment is dedicated to developing the self-driving system. With Volkswagen’s investment in Argo AI, we will now share the cost of developing Argo AI’s technology.”

Ford’s already seen how difficult and tenuous the development process can be as the company had planned to launch its first fleet of fully autonomous vehicles in 2021, but due to the coronavirus pandemic that been pushed back until 2022.

(BMW, Daimler announce their own autonomous vehicle collaboration.)

The move isn’t surprising as Ford and VW previously said they would work on several projects together in the coming years, making the announcement at the 2019 Detroit Auto Show. VW also already had a relationship with Argo, and plans to use the company’s software in its products built in the early 2020s.

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