Ford, VW-backed Argo AI closes

Ford, VW-backed Argo AI closes

Argo AI, an autonomous vehicle startup that burst onto the scene in 2017 with a $1 billion investment, is shutting down – its parts being absorbed by its two main backers: Ford and VW, according to people familiar with folder.

At a town hall meeting on Wednesday, Argo AI employees were told some people would be receiving offers from both automakers, according to multiple sources who asked not to be named. It was unclear how many would be hired at Ford or VW and which companies would get Argo’s technology.

Employees were told they would receive a severance package that included insurance and two separate bonuses – an annual award plus a transaction bonus upon closing the deal with Ford and VW. All Argo employees will receive them. For those not retained by Ford or VW, they will additionally receive severance and severance pay, including health insurance. Several people told TechCrunch that it was a generous package and that the company’s founders spoke directly to its more than 2,000 employees.

“In coordination with our shareholders, the decision has been made that Argo AI will not continue its mission as a company. Many employees will have the option of continuing to work on automated driving technology with Ford or Volkswagen, while employment for others will unfortunately end,” Argo said in a statement.

Ford said in its third-quarter earnings report released Wednesday that it made the strategic decision to redirect its resources to the development of advanced driver assistance systems, not autonomous vehicle technology that can be applied to robotaxis. The company said it recorded a pretax non-cash impairment of $2.7 billion on its investment in Argo AI, resulting in a net loss of $827 million for the third quarter.

This decision appears to have been motivated by Argo’s inability to attract new investors. Ford CEO Jim Farley has acknowledged that the company expects to be able to widely commercialize autonomous vehicle technology by 2021.

“But things have changed, and now there’s a huge opportunity for Ford to give back time – the most precious commodity in modern life – to millions of customers while they’re in their vehicles,” Farley said. “It is essential for Ford to develop high-performance and differentiated L2+ and L3 applications which, at the same time, make transport even safer.”

Farley also hinted that Ford would be able to buy AV technology down the line, instead of developing it in-house. “We are optimistic about the future of L4 ADAS, but large-scale, cost-effective, fully autonomous vehicles are still a long way off and we won’t necessarily have to create this technology ourselves,” he added.

Ford also said that “the development and customer enthusiasm for the benefits of ADAS L2+ and L3 justify strengthening the company’s near-term aspirations and commitment in these areas.”

VW, Argo’s other major funder, has also indicated its intention to shift resources and will no longer invest in Argo AI. The company said it will use its Cariad software unit to advance the development of highly automated and autonomous driving with Bosch and, in the future, in China with Horizon Robotics.

While a lesser player, Lyft had also taken a 2.5% stake in Argo. Lyft announced earlier this year plans to launch at least 1,000 self-driving vehicles on its ride-hailing network in a number of cities over the next five years, starting with Miami and Austin.

The ride-sharing company said in a statement that Argo is a great partner and that this development does not affect Lyft’s standalone strategy.

“We will continue to work with our other partners to advance the safety and commercialization of AV technology,” a Lyft spokesperson said in an emailed statement. “Lyft is the current leader in paid AV rides in North America with over 100,000 rides flown. We are well positioned to win the AV transition through the combination of our hybrid network, market engine and fleet management capabilities.

Lyft also has partnerships with AV companies Motional and Waymo.

Argo was founded in 2016 by Bryan Salesky and Pete Rander. The company came out on stealth in February 2017 when Ford announced it would invest $1 billion over five years in Argo. Since then, the company has raised more than $2.6 billion, mostly from Ford and VW, to develop, test and eventually commercialize its automated driving system.

Ford’s initial investment came at a particularly high-profile time for the nascent autonomous vehicle industry. The startups, many founded by the early pioneers of Google’s self-driving project, have landed eye-popping venture capital deals. A series of acquisitions followed: GM bought Cruise for $1 billion in 2016; Delphi, now Aptiv, acquired nuTonomy for $450 million; and Amazon bought Zoox.

Promises about the commercialization of AV technology have proven more difficult than expected. A wave of consolidation swept through the industry, with companies retreating and being absorbed by other companies, including Apple. Others have turned to the public market either through a traditional IPO like TuSimple or by merging with a special purpose acquisition company like Aurora did in hopes of securing the capital it needs to pursue its mission.

Argo seemed to be gaining ground over the past year. The company’s self-driving Ford Fusion vehicles, and now Ford Escape hybrids, have been tested frequently on public roads in Austin, Detroit, Miami, Palo Alto and Pittsburgh, where its headquarters are located. In the EU, Argo used the all-electric Volkswagen ID. Buzz for its test programs in Hamburg and Munich. Argo also has several pilot programs underway in Austin, Miami, and Pittsburgh with Lyft, Walmart, and 412 Food Rescue.

Last month, the company unveiled an ecosystem of products and services designed to support commercial delivery and robotaxi operations. The products – a list that includes fleet management software, data analytics, high-definition mapping and cloud-based communication tools – extend far beyond the self-driving system that enables a vehicle navigate the city streets without a human driver behind the wheel. Argo seemed to tell the world that he was open for business.

“We are extremely grateful for the dedication of the Argo AI team and so proud of our accomplishments together,” Salesky and Rander said in a statement. “The team has consistently exceeded expectations, and we expect everyone to be successful in everything that comes next, including the opportunities presented by Ford and VW to continue their work on automated driving technology.”

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