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Argo AI, an autonomous vehicle startup that burst onto the scene in 2017 amassing $1 billion in investment, is shutting down — parts of which are being absorbed into its two main backers: Ford and VW, according to people familiar with the matter this.
At 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 not to be named. It’s unclear how many will be hired by Ford or VW and which companies will 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 on close deals with Ford and VW. All Argo employees will receive them. For those not retained by Ford or VW, they will also receive termination 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 consultation with our shareholders, the decision was made that Argo AI will not continue its mission as a company. Many of the employees will receive the opportunity to continue working in automated driving technology at Ford or Volkswagen, while work 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 has made a strategic decision to shift its resources to developing advanced driver assistance systems, and non-autonomous vehicle technology that can be applied in 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 has acknowledged that the company hopes to bring autonomous vehicle technology to the mass market by 2021.
“But things have changed, and there’s a huge opportunity now for Ford to give time — the most precious commodity in modern life — back to millions of customers while they’re in their cars,” Farley said. “It is mission critical for Ford to develop efficient and differentiated L2+ and L3 applications that simultaneously make transportation safer.”
Farley also hinted that Ford could buy AV tech off the line, rather than developing it in-house. “We are optimistic about a future for L4 ADAS, but profitable, fully autonomous vehicles at scale are a long way off and we don’t need to create that technology ourselves,” he added.
Ford also stated that “customer growth and enthusiasm for the benefits of L2+ and L3 ADAS allows for dialing in the company’s near-term aspirations and commitment in those areas.”
VW, Argo’s other major backer, has also indicated plans to shift resources and no longer invest in Argo AI. The company said it will use its software unit Cariad to advance the development of highly automated and autonomous driving with Bosch and, in the future, in China with Horizon Robotics.
While a smaller player, Lyft also acquired a 2.5% stake in Argo. Lyft announced earlier this year plans to roll out at least 1,000 self-driving vehicles on its ride-hailing network in several 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 affect Lyft’s autonomous 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 currently the leader in paid AV rides in North America with over 100,000 rides completed. We are 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 in Argo. Since then, the company has raised more than $2.6 billion, mainly from Ford and VW, in a bid to develop, test and eventually commercialize its automated driving system.
Ford’s initial investment comes at a particularly hype-y time for the nascent autonomous vehicle industry. The startups, many founded by early pioneers of Google’s self-driving project, have secured attractive venture capital deals. A string of acquisitions followed: GM bought Cruise for $1 billion in 2016; Delphi, now Aptiv, acquired nuTonomy for $450 million; and Amazon bought Zoox.
Promises to commercialize AV technology have proven more difficult than expected. A wave of consolidation swept through the industry with companies folding up, being absorbed into other companies, including Apple. Others, turn 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 getting the capital it needs to continue its mission.
Argo seems to be getting stronger this past year. The company’s self-driving Ford Fusion vehicles, and now Ford Escape Hybrids, are often seen testing on public roads in Austin, Detroit, Miami, Palo Alto and Pittsburgh, where it is headquartered. In the EU, Argo uses 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 announced 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 communications tools — extend beyond the self-driving system that enables a vehicle to navigate the city streets without a human driver. Argo appears to be telling the world it’s open for business.
“We are incredibly grateful for the dedication of the Argo AI team, and proud of our achievements together,” Salesky and Rander said in a statement. “The team continues to deliver above and beyond, and we look forward to seeing success for everyone in whatever happens next, including the opportunities presented by Ford and VW to continue their work on automated driving technology.”
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