Argo AI Shuts Down After $1 Billion Ford Investment
Argo AI, the autonomous vehicle startup that burst onto the scene in 2017 stacked with a $1 billion investment from Ford, is shutting down. Its parts are being absorbed into its two main backers: Ford and VW. The decision marks the end of a five-year run that saw the company raise more than $2.6 billion in pursuit of commercial self-driving technology.
Ford Pivots to Advanced Driver Assistance Systems
During an all-hands meeting Wednesday, Argo AI employees were told that some would receive offers from the two automakers. The exact number of hires remained unclear, but the message was stark: the company would not continue as an independent entity. Argo's founders, Bryan Salesky and Pete Rander, addressed the more than 2,000 employees directly, stating that many would receive opportunities to continue work on automated driving technology with either Ford or Volkswagen, while employment for others would unfortunately come to an end.
Ford's commitment to the shutdown was made official in its third-quarter earnings report released the same day. The company said 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. Ford 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. Jim Farley, Ford's chief executive, acknowledged that the company had anticipated bringing autonomous vehicle technology broadly to market by 2021. "But things have changed," Farley said, "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." Farley insisted Ford would be able to buy AV tech down the line rather than developing it in house, adding 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.
Volkswagen's Separate Path Forward
Volkswagen, 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. VW's departure removes a key source of capital that had helped fuel Argo's growth since the company came out of stealth in February 2017.
A Rapid Consolidation in a Hype-Heavy Industry
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. Its 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 had 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 — stretch 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."
Employees Face Uncertain Futures
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.
Lyft's Stake Remains Small but Steady
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.
A Startup Era Comes to a Close
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 shutdown brings an end to a chapter that began with enormous promise and ended with the harsh realities of capital-intensive hardware development.
The autonomous vehicle industry will undoubtedly feel the ripple effects. Ford and VW now possess talent, test programs and mapping data that previously existed only inside Argo. Whether they can integrate those assets into their respective timelines without the coordination problems that contributed to Argo's demise remains to be seen. For the employees who built the company, the path forward offers both opportunity and uncertainty — a fitting end to a story that began with a billion-dollar bet and ended with a sobering strategic pivot.
