Ford and its self-driving car plans

Bloomberg

The autonomous-vehicle gap between Ford Motor Co. and its rivals from Detroit and Silicon Valley can be measured in years. Yet even a company playing catch-up in the race to turn self-driving technology into high-margin businesses is drawing interest from outside investors, an indicator of just how much money is pouring in.
“I’m really excited about what I’m hearing and seeing in terms of interest with many credible entities,” said Sherif Marakby, the Ford veteran who spent a year at Uber Inc. and is now chief executive officer of the newly formed Ford Autonomous Vehicles LLC.
Ford moved last month to reorganise its self-driving car efforts into one distinct unit. The announcement on July 24 left open the possibility of an outside investment such as the $2.25 billion that General Motors Co.’s driverless business received from Japan’s SoftBank Group Corp. in June. The shift was overshadowed the next day by disastrous quarterly earnings that sank Ford’s stock.
Yet serious investors are sniffing around Ford AV, Marakby said in an interview, enticed by a “one-stop shop” strategy that involves robot taxis and driverless delivery slated to hit the streets in 2021. That’s three years later than Alphabet Inc.’s Waymo, which will open a robotaxi business in Phoenix later this year, and two years after General Motors Co., which plans to deploy self-driving Chevy Bolts in a ride-hailing service in 2019.
He declined to identify the interested parties or say when they might invest. But he said they are attracted by how Ford plans to “bring the entire ecosystem together, meaning an investor in this LLC would be looking at bringing this technology to market and developing the business, the revenue and the profits.”
Old-line automakers have struggled to get credit from Wall Street for the billions they are lavishing on developing self-driving cars. That’s why they’ve started to hive off autonomous activities into distinct units that can attract outside investment and even be spun off. Daimler AG, for instance, recently unveiled a Mobility AG separate from its Mercedes-Benz and commercial truck units. GM, whose shares soared after attracting a SoftBank investment in its self-driving car unit, Cruise Automation, is now considering a public offering of shares in a spinoff. A profit warning last month sent GM’s stock back down, highlighting how its high-flying autonomous activities are tethered to the gyrations of the cyclical car business.
Indeed, Wall Street investors have shown little interest in Ford’s stock, which fell to a six-year
low after second-quarter profits plunged and the company revealed an $11 billion restructuring that could take five years. By setting off its autonomous-vehicle business in a limited-liability company, Ford hopes its self-driving strategy will be assessed on its own merits.
Ford CEO Jim Hackett is in the midst of overhauling his company’s aging product line while trying to come up with the billions required to be a player in the autonomous-vehicle future. “There’s not going to be 10 winners in this space when we look back,” Hackett said of the driverless derby. “There’s going to be a few, and we plan on being one of them.”
Self-driving cars are expected to upend the transportation industry and usher in a business worth $7 trillion by mid-century, according to a report last year by Intel Corp. and Strategy Analytics. Automakers, accustomed to modest profit margins of less than 10 percent, believe that removing human drivers from taxis and delivery trucks offers the prospect of generating returns that exceed 20 percent. Those who get it right will have a prosperous future. Those who don’t may not have a future—and so far, Ford has been grouped with the laggards.
Ford has long argued that it is planning something far more expansive than its rivals. The vision includes as many as 100,000 driverless cars—with no steering wheel, accelerator or brake pedal—operating in multiple American cities to deliver people and packages around the clock. Analysts say that sort of maximum utilisation could generate profit margins of 20 percent or more.
For starters, Ford said it will spend $4 billion on autonomous vehicles over the next five years, including the $1 billion it already invested in its self-driving technology partner, Argo AI.