There’s a bit of nuance lost in the straight news stories describing the deal between Volkswagen AG, Ford Motor Company, and Argo AI announced Friday. Argo, the Pittsburgh-based artificial-intelligence tech company, will maintain independence as exclusive supplier of self-driving systems to VW and Ford. The two automakers individually will remain minority stakeholders in the privately held tech company. Combined, VW and Ford will hold majority interest, although Argo continues to operate with its own board of directors.
Such is the way of modern tech companies working with old-line automakers. The new VW-Ford partnership, which includes VW purchasing a portion of Ford’s interest in Argo AI, values the tech company at $7 billion, a boon to its 500 employees. Clean up your resumes, young engineering-degree graduates. Argo A.I. says that $7 billion valuation for the employee-owned company will help it recruit another 250 employees in a very competitive market.
News reports abbreviate the story, saying that VW is investing $2.6 billion into Argo. But its actual dollar-amount investment is $1 billion, of which it is purchasing a $500-million share from Ford, with the value placed in autonomous driving development adding the other $1.6 billion in value.
Ford had announced back in February 2017 that it would invest $1 billion itself in Argo AI over five years. Selling half of that to VW helps Ford in its struggle with cost-cutting as it invests heavily in its own electrification projects , though these days the Wolfsburg automaker needs the cash as much as the Dearborn automaker does.
Ford earlier announced it would put a Level 4, geofenced autonomous car on the road by 2021. VW officially won’t say how soon it plans to put an Argo-software-enabled Level 4 car on the road, though I can’t imagine it would be more than a year or two after Ford’s. You won’t be able to buy a Ford or a VW Level 4. These vehicles are for car-sharing services only, so expect to call up one of these cars via a service like Uber or Lyft, and only in a few select cities at first—probably New York and San Francisco. General Motors, which purchased Cruise Technology in 2016 for more than $1 billion, hopes to compete directly with VW and Ford.
A while back, Alex Roy and I argued on Cheddar TV the question of whether Silicon Valley tech companies or Detroit/Tokyo/Germany automakers were the dominant partners in developing automated/autonomous systems, and he seems to have won the argument (I sided with the automakers). Since that Cheddar TV appearance, Roy has joined Argo AI, which won’t be limited to selling its technology to its two investors. As one spokesperson put it, Argo automation will be akin to having “Intel inside.”
Ford and VW announced last January that shared EVs would be a big part of their partnership, and on Friday, Ford said it will use VW’s MEB electric vehicle architecture “to design and build at least one high-volume fully electric vehicle in Europe for European customers in 2023.”
Automated/autonomous and EV technology have gone hand-in-hand so far, especially in connection with shared services where cars that need to be recharged can change out with freshly charged ones. While Ford has been working on its own EV platform, most prominently for the “Mustang inspired” four-door crossover vehicle, I’d be surprised if the platform doesn’t end up having a lot of parts common with VW’s MEB.
This seems a good time to recount the Ford/VW disclaimer, included in Friday’s announcement, that the “Volkswagen-Ford global alliance” (interesting billing, no?), “which does not involve cross-ownership between the companies, is expected to create annual efficiencies for each company.”
In other words, a Renault-Nissan-like alliance, good; a Renault-Nissan hook-up like what Carlos Ghosn wanted, bad.
Friday’s VW-Ford alliance update also triggered renewed speculation about Volkswagen’s pickup-truck plans. The two will share a new midsize pickup platform for VW and Ford models to be sold in Europe, Asia-Pacific, the Middle East, and South America.
Once again, it’s hard to believe that the next North American Ford Ranger won’t converge with the foreign-market Ranger overall design. It’s plausible, though, should Ford decide foreign-market Rangers aren’t stout enough for North America.
And no, there won’t be a Ranger-based body-on-frame VW pickup sold in the U.S. The VW truck, if it’s approved for U.S. sale, will be unibody, like the Honda Ridgeline and upcoming Hyundai Santa Cruz.