As she often does, Kristen Korosec at TechCrunch has the details. It sounds like employees are getting a healthy severance, but the timing of this is extremely curious. This comes while GM-backed Cruise is trying to expand into other cities, though Tesla is reportedly under investigation for self-driving claims.
As TechCrunch notes:
The answer for why it’s getting tossed aside appears to be Ford, Ford, Ford. Per a Ford press release:
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.
Yikes. Emphasis mine. An accounting terms, an “impairment” means that the value of something purchased is now less than it was (or what you said it was). If Ford is saying that they’re taking a $2.7 billion pre-tax impairment that means that they’d invested more than $2.7 billion in Argo AI (they initially put in $1 billion) OR they counted the investment as earnings (maybe when Argo said it was worth $7.5 billion).
During the quarter, Ford concluded that the auto industry’s large-scale profitable commercialization of Level 4 advanced driver assistance systems will be further out than originally anticipated – but development and customer enthusiasm for benefits of L2+ and L3 ADAS warrant dialing up the company’s nearterm aspirations and commitment in those areas. In the third quarter, Ford made a strategic decision to shift its capital spending from the L4 advanced driver assistance systems being developed by Argo AI to internally developed L2+/L3 technology. Earlier, Argo AI had been unable to attract new investors. Accordingly, Ford recorded a $2.7 billion non-cash, pretax impairment on its investment in Argo AI, resulting in an $827 million net loss for Q3.
Additionally, L3 autonomous driving is currently crap and L2+ autonomous driving isn’t a real thing?
Curious times at Ford.
UPDATE: Went back in their filings to answer the above question:
Ok, fun with math time. Here is Ford’s 2021 10K SEC filing. Here’s what it says:
So, Ford said at one point they put in $1 billion. Ford sold some of their holdings for $500 million to Volkswagen, who reportedly put in $2.6 billion. Ford then said it gained $3.5 billion due to their retained investment in Argo. I’m assuming this was when the company was worth $7.5 billion (as determined, I assume, by the VW investment). There’s an unknown variable here because we don’t know if Ford put in more than $1 billion overall, but it sounds like Ford got to ride Argo as a gain and most of that money has evaporated in a quarter.
Top photo Argo AI
Personally I don’t see it being anything beyond a novelty until V2V, V2E, and maybe even V2P (or at least the phones on people) communication is a thing.
With so many economic cloud on the horizon, they probably have some opportunity to pick someone for the cheap. Intel is spinning off MobileEye (a previous Tesla supplier), there are components which will reach commodity level.
So……about that “edit comment” button?
A saying in the investment world, the first one to try and break through a wall often ends up bloodied, bruised, beaten – and broke. It’s a lot safer and cheaper to follow them through the hole they made with their sacrifice (and money).
The only thing that would have been even smarter would have been if Ford didn’t flush $1 billion on that boondoggle in the first place.
This here is basically corporate nonsense speak for ‘our valuation is based on flying pig level estimates of the value of the intellectual property and has no actual relation to real money, tangible goods, or even anything of value.’ Anything like software, contracts, trademarks, etcetera goes in the “Other assets” category. Which is a grab-bag of legitimate (“we have a contract we can exercise to sell 25,000 used office chairs at $250 each”,) bullshit (“our trademark is worth eleventy bajillion dollars,”) and a mix of the two (“we spent $500M and say the software is worth $500B”.)
That isn’t to say that Argo wasn’t pissing money down the drain like you wouldn’t believe. They absolutely were. They were shoveling stacks of cash into the dumpster fire. They were paying SWE2’s on average $180k+ excluding bonuses. SWE2! Sr. Systems Engineer – not even architect – was over $230k/year. IN PITTSBURGH. Worse, it was a fucking yet another white bros only hellscape. Which meant they were overpaying drastically for people who would only ever under-deliver. I mean, it’s pretty damn obvious since they’ve pulled the plug saying they can’t do the job.
I think the “preferred equity security investment” that Ford is counting as “other assets” means that Ford loaned Argo some money.
The key statement in the article is: “Earlier, Argo AI had been unable to attract new investors.”
The burn rate is too high and Ford doesn’t want to keep pumping cash into the dream. Not something a public company wants to keep showing up on their books. The write-down is painful enough.
Take half of these self-driving auto needs and work out how to do self driving trains. It should require 1/100th of the effort.
Then after you figured out trains do the same for buses with fixed routes. That should take 1/10th of the effort.
Then after you figure out trains and buses then start to think about cars.
And straight away i take most of it back for writing the most confusing pile of horseshit i think ive ever seen.Could you make it any more obvious? All that does is make you look like you’ve screwed up
Even if we could improve the condition and consistency of our roads by orders of magnitude–with obsessive standardization and maintenance of road markings, signals and signage–there will always be construction zones. And weather. And the complete unpredictability of human-driven vehicles.
Sounds like Ford has figured this out. Better late than never, I guess.
Okay, I can’t keep my face straight anymore.
