The Auto Channel
The Largest Independent Automotive Research Resource
The Largest Independent Automotive Research Resource
Official Website of the New Car Buyer

Ford Sees Its Way Out Of Autonomous ARGO AI Investment - Its Only Money

PHOTO (select to view enlarged photo)

SEE ALSO: Consumers Not Comfortable In Robot Cars
SEE ALSO: Happy Days - Ford ARGO News

DETROIT — (AP) — Ford said Wednesday that it is disbanding Argo AI, an autonomous vehicle company that it co-owns with Volkswagen.

Executives said they don't see a path to profitability on fully autonomous vehicles, and will now focus on partially automated driver-assist systems, which need to be monitored by humans.

Ford took a $2.7 billion accounting charge to reduce the value of its investment in Pittsburgh-based Argo, and it's writing off a cash investment of about $500 million. Due largely to the noncash accounting charge, Ford reported a net loss of $827 million from July through September.

Ford said it and Volkswagen would hire many of Argo's 2,000 employees and some of its offices would remain open.

The Dearborn, Michigan-based automaker said in a news release that it determined large-scale commercialization of self-driving vehicles will take longer than it expected. Yet customer enthusiasm for driver-assist systems warranted additional commitment of capital. Ford also said Argo had been unable to attract more investors.

“We've looked at this every way that you can,” Chief Financial Officer John Lawler told reporters Wednesday. “We just see the profitability, given the investment that's going to be required, a long way out.”

Doug Field, Ford's chief technology officer, said a breakthrough will be needed to make self-driving cars work, and then further advances would be required before the vehicles could be deployed widely. High-tech laser and radar sensors on autonomous vehicles can't be scaled to high volumes or affordable price points, Field said. The vehicles also require costly high-performance computers and cooling systems, he said.

“There's a lot of work to not only just crack the technical problem, but then turn that into a high-volume reliable vehicle,” Field said.

Some Argo facilities will become Ford buildings, and many of the engineers and software developers will become part of Ford's mission to develop better driver-assist systems, the company said.

Excluding one-time items, Ford said it made a profit of 30 cents per share during the quarter. That beat Wall Street estimates of 27 cents, according to FactSet. Revenue of $39.4 billion also beat estimates of $37.46 billion.

The company said it had strong cash flow in the quarter, ending it with $32 billion in cash and $49 billion in total liquidity. That will help maintain investments in internal combustion and electric vehicles.

Ford said it expects full year pretax earnings to be around $11.5 billion, at the low end of previous guidance of $11.5 billion to $12.5 billion. It has reported increased commodity prices and problems with its supply chain.

Lawler attributed the change to factories slowed by parts suppliers that are struggling to ramp up production due to labor shortages and currency declines in the United Kingdom, a big market for the company.

Economic issues may also be starting to weigh on consumers, and a U.S. recession is possible, Lawler said. Near-record vehicle prices are starting to decline. And demand for midrange vehicles is outpacing more profitable ones loaded with options, he said.

“We still have a strong order bank, and we're still seeing significant demand,” he said. “You're starting to see that the macroeconomic environment, the interest rates are starting to have some impact on the industry.”

Lawler said Ford is preparing for a recession, but it’s in a better position to handle it than past downturns because it has lower inventory and a more profitable model lineup. “We see the probability that we could move into a mild or moderate recession in the U.S. next,” he said.

Ford built 40,000 vehicles without one part or another during the quarter, Lawler said, and it expects to ship the completed vehicles to dealers by the end of the year. Like other automakers, Ford has been hit hard by parts shortages including a global shortage of computer chips.