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New York
CNN Business
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Ford is essentially pulling the plug on the effort to build its first fully self-driving car, and it will cost the automaker $2.7 billion to walk away.
The company announced Wednesday that it will no longer provide financial support for Argo AI, a self-driving car technology company in which it invested $1 billion in 2017.
Instead of Argo developing self-driving vehicle technology for cars without steering wheels, brakes or accelerator pedals — what’s known in the industry as Level 4 or L4 technology — Ford will instead pursue in -house development of a lower level of automated driving technology.
This level will now be pursued on its own, known as Level 3 or L3, allows a driver to ignore the road in certain conditions, such as on the highway, but it expects that a driver is aware enough to ride quickly. vehicle control if necessary.
The decision will mean that Argo AI will close. And the decline in the value of Ford’s investment in Argo caused it to take a $2.7 billion charge in just the third quarter. That resulted in an $827 million loss in the period.
Even excluding special charges for the Argo and other items, Ford reported adjusted earnings per share of 30 cents, a slide from the 51 cents it earned on that basis last year. a year, but a slight improvement on the 27 cents forecast by analysts polled by Refinitiv .
Ford reported automotive revenue of $37.2 billion, a jump of $4 billion from last year and $1 billion more than analysts’ forecasts. Revenue was helped by $3.4 billion from higher prices on cars.
Ford did have some problems in the quarter beyond the payment it took to close Argo. It said supply shortages left it with about 40,000 vehicles in its inventory at the end of the quarter built but waiting for the necessary parts before they can be shipped to dealers.
It was also hit by $1 billion in higher-than-expected supplier payments, and a $1.5 billion increase in commodity costs.
And it had smaller profits and profit margins in its core North American market due to higher commodity costs, and losses in China, due to costs associated with developing electric vehicles.
While higher vehicle pricing helped its European unit post a small profit in the quarter compared to a narrow loss a year ago, CEO Jim Farley admitted, “Our performance in China and Europe are not nearly as healthy as we would like them to be.”
But, in good news, Ford raised its goal for full-year cash that the business will generate to between $9.5 billion and $10 billion — from $5.5 billion to $6.5 billion — on the strength of the company’s vehicle operations.
Shares of Ford ( F ) fell 1% in after-hours trading following the earnings news.
But ultimately, the big news of the earnings report was a major change in direction in self-driving cars.
The company insists it still hopes to offer fully self-driving cars in the future, just not enough to make the investment such technology would require today. It said it decided it would be better to invest in driver assistance technology that is closer to being implemented in today’s cars, and what customers want from their new cars, rather than a fleet of robo-taxis without drivers on board.
“We are optimistic about a future for L4 ADAS [advanced driver assistance systems]but profitable, fully autonomous vehicles at scale are still a long way off and we don’t have to create that technology ourselves,” Farley said.
Farley said he hopes to find jobs for many of Argo’s employees at Ford, with them shifting gears to develop the L3’s driver assistance features.
“That’s really the decision, in many ways, that drives what we’re doing here at Argo… we’re very passionate about the L3 mission,” said Doug Field, Ford’s chief advanced product development and technology officer.
He says there is only so much talent available to develop various driver assistance and self-driving features.
“So this is the way we want to use that talent,” he said.
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