Ford’s shift away from advanced driving tech partner Argo AI means more than just a loss on the books. It represents a new direction for the company’s advanced technology efforts — one that pays more immediate dividends.
The automaker agreed to invest $1 billion into Pittsburgh-based Argo AI five years ago, in the hopes of accelerating its development of Level 4 autonomous vehicles. Soon after, Volkswagen AG joined taking an equal stake in the partnership, hoping to act as an additional catalyst to drive development.
However, Ford CEO Jim Farley said that after five years of hard work, one thing became clear, there was still plenty of work to do.
“We’ve learned though, in our partnership with Argo, and after our own internal investments, that we will have a very long road,” he said during the company’s Q3 earnings call. “It’s estimated that more than 100 billion (dollars) has been invested in the promise of level four autonomy and yet no one has defined a profitable business model at scale.”
That in concert with the increasing capability of Level 2 and Level 3 autonomous technology, it was time to shift from the long-term self-driving vehicle technology to expanding the company’s investment in the semi-autonomous technologies that could provide more tangible benefits — sooner.
“We still believe in Level 4 autonomous, and that it will have a big impact on our business of moving people,” Farley said, but it was time to make a change.
Change comes at a cost
Ford reported an $827 million loss during this year’s third quarter. The company’s negative result came as a result of a $2.7 billion non-cash, pre-tax impairment on its investment in Argo AI. There was no word on what it will cost Volkswagen to get out of the business, but it revealed today it will turn to Israeli-founded Mobileye to continue its development of Level 4 technologies.
While Farley reiterated a commitment to Level 4 technology, he also said it became clear that there was no clear path to its development. In fact, only one automaker — Mercedes-Benz — even has a Level 3 system that’s been approved by any government for use on public roads. The German government gave the go-ahead earlier this year.
The German Federal Motor Transport Authority granted the approval based on the requirements of the United Nations UN-R157 technical regulations for autonomous driving. The move paves the way for Mercedes-Benz’s system, dubbed Drive Pilot, to be offered worldwide.
Drive Pilot will be offered on the Mercedes-Benz S-Class in Europe in the first half of 2022. The system facilitates automated driving at speeds of up to 37 mph in heavy traffic. But don’t look for it in the U.S.; Level 3 systems are not yet legal to use on American roads. The same holds true in China.
In fact, the progression from Level 2 to Level 3 automation is so substantial, it requires national legislation in each country to permit it. Germany was the first country to approve the use of Level 3 systems, passing the Road Traffic Act in 2017, and there’s more than 8,140 miles of German roads where Drive Pilot can be employed.
Which also gives provides some insight as to what automakers are facing to get to Level 4. In fact, Farley pointed out “there isn’t going to be some A ha! moment.”
A different path
So rather than throw money down a hole, Farley and the senior management, elected to take a different tack. The push now is to develop and refine Level 2 — Ford’s current BlueCruise semi-autonomous system — and Level 3 autonomous tech so it can provide a return on the company’s investment.
“I want to focus on advancing Level 2 hardware and software beyond what BlueCruise can do today,” Farley said, “ultimately enabling our customers to travel in very large … operating domains with their eyes off the road will give them back the single most valuable commodity in our modern lives: time. This has become mission critical for us at Ford.”
The company is partnering with other suppliers, plus bringing select employees over from Argo AI to accomplish that while also pushing forward with Level 3 technology that could be used to create new revenue streams that will add to Ford’s bottom line.
Hopefully, this is the last of Jim Hackett’s visions that need to be undone. How many billions did he waste, with the Board’s approval?