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Ford, VW-backed Argo AI is shutting down

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ford test vehicle with argo ai tech on street
Image Credits: Ford

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

During an all-hands meeting Wednesday, Argo AI employees were told that some people would receive offers from the two automakers, according to multiple sources who asked to not be named. It was unclear how many would be hired into Ford or VW and which companies will get Argo’s technology.

Employees were told they would receive a severance package that includes insurance and two separate bonuses — an annual award plus a transaction bonus upon the deal close with Ford and VW. All Argo employees will receive these. For those who are not retained by Ford or VW, they will additionally receive termination and severance pay, including health insurance. Several people told TechCrunch that it was a generous package and that the founders of the company 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 on its mission as a company. Many of the employees will receive an opportunity to continue work on automated driving technology with either Ford or Volkswagen, while employment for others will unfortunately come to an end,” Argo said in a statement.

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

That decision appears to have been fueled by Argo’s inability to attract new investors. Ford CEO Jim Farley acknowledged that the company anticipated being able to bring autonomous vehicle technology broadly to market by 2021.

“But things have changed, and there’s a huge opportunity right now for Ford to give time — the most valuable commodity in modern life — back to millions of customers while they’re in their vehicles,” said Farley. “It’s mission-critical for Ford to develop great and differentiated L2+ and L3 applications that at the same time make transportation even safer.”

Farley also insinuated that Ford would be able to buy AV tech down the line, instead of developing it in house. “We’re optimistic about a future for L4 ADAS, but profitable, fully autonomous vehicles at scale are a long way off and we won’t necessarily have to create that technology ourselves,” he added.

Ford also stated that the “development and customer enthusiasm for benefits of L2+ and L3 ADAS warrant dialing up the company’s near-term aspirations and commitment in those areas.”

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

While a lesser player, Lyft had also taken a 2.5% stake into 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-hailing company said in a statement that Argo has been a great partner and that this development does not impact Lyft’s autonomous strategy.

“We will continue working 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 completed. We’re well positioned to win the AV transition through the combination of our hybrid network, marketplace 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 of stealth in February 2017 when Ford announced it would invest $1 billion over five years into Argo. Since then, the company has raised more than $2.6 billion, primarily from Ford and VW, in a pursuit to develop, test and eventually commercialize its automated driving system.

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

The promises around commercializing AV technology have proven more difficult than expected. A wave of consolidation washed over the industry with companies folding, being absorbed into other companies, including Apple. Others, turned to the public market either through a traditional IPO like TuSimple, or by merging with a special purpose acquisition company as Aurora did in hopes of gaining the capital it needs to continue its mission.

Argo seemed to be gaining ground in the past year. The company’s self-driving Ford Fusion vehicles, and now Ford Escape Hybrids, were frequently seen testing on public roads in Austin, Detroit, Miami, Palo Alto and Pittsburgh, where it is headquartered. In the EU, Argo was using the all-electric Volkswagen ID. Buzz for its testing programs in Hamburg and Munich. Argo also has several pilot programs underway in Austin, Miami and Pittsburgh with Lyft, Walmart and 412 Food Rescue.

Just last month the company revealed 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 — stretches far beyond the self-driving system that allows a vehicle to navigate city streets without a human driver behind the wheel. Argo appeared to be telling the world it was open for business.

“We are incredibly grateful for the dedication of the Argo AI team, and so proud of our achievements together,” Salesky and Rander said in a statement. “The team consistently delivered above and beyond, and we expect to see success for everyone in whatever comes next, including the opportunities presented by Ford and VW to continue their work on automated driving technology.”

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