Ford just committed to investing $1 billion in a nascent startup called Argo AI.
Despite my fondness for, and gratitude to, Ford Motor Company, I confess this is a little bit of a head-scratcher. The whole thing is just so unusual.
Why $1 BB?
Why over 5 years?
Why invest in the company instead of buying it outright?
Just to justify it after the fact, I might say something like this:
Ford has been betting big on self-driving cars for a while. But there are factors about the larger Ford Motor Company organization that make it difficult to move as fast as Ford CEO Mark Fields might want.
Ford HR has more structure and process than in a startup. Every new hire has to go through a drug screen. There are pay bands that might not line up with the salaries demanded by top AV engineers.
Ford IT is very concerned about security, which has implications for sharing code and using cloud computing services.
Ford Legal has a risk / reward view of the world that maybe doesn’t match up with the risk that say, Elon Musk, is willing to take.
There are other examples.
A year ago, to surmount these issues, Ford created Ford Smart Mobility, LLC. But unlike Argo AI, Ford Smart Mobility LLC is still a wholly-owned subsidiary of Ford. Maybe CEO Mark Fields wants to try something more radical.
One option is to fund a startup. But keep the investment at arms-length, so if anything goes terribly wrong, it won’t blow back on Ford Motor Company.
So instead of buying this new startup $1 BB, like GM did with Cruise, Ford is buying a big stake in the startup for much less (how much they own and at what price is not public). If all goes well, at some later date they can buy the rest of the startup and incorporate it into Ford Motor Company.
That’s pure speculation, but it’s the best I’ve got.