Big News Day For Ford

Ford reported Q4 earnings this afternoon, posting a $2.8 billion loss, or a $1.3 billion dollar gain, depending on whether how we count “special items.” That’s a $4.3 billion swing.

The bigger news seemed to be Ford’s 2021 outlook. CFO John Lawler estimated Ford would book an annual pre-tax profit of $8 billion to $9 billion dollars in the coming year. That would be a great year for Ford, and potentially its largest profit in 5 years. Although given that this past quarter’s swing due to “special items” was $4.3 billion, there’s a lot of variability here.

Ford also announced a big investment in electric autonomous vehicles. The headline number is $29 billion through 2025, of which $22 billion will go to electric vehicles and $7 billion will go to autonomous vehiicles. Various tweeters explain some of this headline number includes some expenditures from previous years, so it’s not clear how much of this is new money.

Meanwhile, The Wall Street Journal reports that Ford may under-perform expectations by a billion dollars or two, because of a global shortage of semiconductor chips. The shortage is already hitting both GM and Ford. Ford, in particular, is set to cut shifts at its F-150 plants in the coming weeks, due to the lack of chips. Since the F-150 is Ford’s profit engine, that’s expensive.

The Beauty of Over-The-Air Software Updates

Ford just announced the E-Transit, an electric version of their market-leading Ford Transit commercial van. The announcement contains lots of good information about Ford’s electric ambitions, but the bit that excited me was a bit of a footnote: over-the-air updates.

Tesla pioneered OTA updates years ago, but it’s taken most of the big auto manufacturers a while to follow suit. Ford already promised that the upcoming Mustang Mach-E will have OTA capability — combined with OTA for the E-Transit, this seems like a trend.

Most pure software products that I use today is updated continuously, in most cases because the software itself is hosted in the cloud anyway. Internet of Things software, like the code in my car or my microwave, is much less likely to be connected to the cloud and easy to update.

Those updates are so crucial. Being stuck with software that was written at the time you made a purchase really dates hardware. Ford’s own press release for the Mach-E cities FOMO.

OTA helps a product get better over time, not worse. That’s a game-changer for assets that typically depreciate, like cars. OTAs don’t typically flip a depreciating asset into an appreciating one — it’s still nicer to have a new unit with the newest hardware and the newest software. But OTAs really help slow the depreciating utility of hardware like cars.

Argo and Ford and Volkswagen

A few weeks ago, Volkswagen closed a multi-billion dollar investment in Argo AI. The investment was originally announced last summer, so this was hardly a shock. Nonetheless, the deal results in a really interesting ownership structure for Argo, that is shared by Cruise, and is pretty uncommon among startups.

When GM purchased a 40-person startup called Cruise Automation in 2016 for a reported $1 billion, a self-driving acquisition race began.

About a year later, Ford announced that it “would” invest $1 billion over four years in a little-known Pittsburgh-based startup called Argo AI. Confusingly (at least to me) for $1 billion Ford was not “acquiring” Argo — it was becoming a shareholder. It wasn’t even clear whether Ford would be a majority shareholder.

There is a certain logic to this structure, but it’s really unusual. The logic is that Argo, as an independent company, would be able to grow rapidly, like a startup, unencumbered by Ford’s constraints and brand. It would just have a lot of Ford’s cash.

On the other hand, Ford made a tremendous bet on what was then a very small team. If Argo hit a home run, Ford wouldn’t necessarily reap most of the reward. And if Argo took all that money and drained it, Ford had limited power to prevent that.

In the time since the Argo investment, Cruise has essentially spun out of GM into a similar structure. It’s taken major investments from both Softbank and Honda, to the point that Cruise is once again an independent company with corporate investors who have poured in billions of dollars but have a lot less control than you might imagine.

Volkswagen’s investment in Argo seems to be a vindication of this unorthodox approach. Unlike Ford, Volkswagen is investing in a real company — still a startup, but one with hundreds of employees and solid technical progress. Volkswagen’s investment shows they think this may be the path forward.

So often when you see a corporate investor try to become a venture capitalist, things go poorly for both the big company and the startup. In this case, things seem to be going quite well.

Rivian, Amazon, and Ford

Rivian, which operated in stealth mode for nearly a decade, continues to quietly fly under the radar as one of the most intriguing startups in mobility.

The average American has never heard of them, and probably will never hear of them until they launch their first electric vehicles next year.

They’ve raised a ton of money since their founding in 2009, and they’ve made some recent news as a possible pawn in a (possibly non-existent?) competition between Jeff Bezos and Elon Musk.

Rivian also has an interesting relationship with Ford. Ford invested over half a billion dollars in Rivian, despite (because of?) Rivian targeting Ford’s profit-center, the pick-up truck.

Nonetheless, Ford is building its Mustang Mach E on its own platform, and recently canceled a Lincoln vehicle that was supposed to be built on Rivian’s “skateboard” platform.

If you want to learn a bit more about Rivian and listen to highly-energetic take on why first Ford and now Amazon should buy Rivian, check out this video from HyperChange last year.

Ford Mustang Mach-E

Back when I worked at Ford, one of the points that my manager liked to emphasize was that Ford makes cars for the masses.

Although he never made a specific comparison to Tesla, it wasn’t too hard to imagine the connection. Ford, the company of the Model T and the $5 Day, isn’t on earth to make high-end cars for Silicon Valley millionaires. Ford’s purpose in this world is to make terrific, affordable cars for everyone.

It makes perfect sense that the company’s recent announcement of the Mustang Mach-E — an electric SUV — is priced at less than half of Tesla’s Model X. Ford makes cars for the masses.

And frankly, it looks like a pretty awesome car for the masses.

Check out this review from The Verge.

Ford and Argo AI

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.

How Ford Builds Autonomous Vehicles

Chris Brewer, the chief engineer for Ford’s Autonomous Vehicle Program, has a great post on Medium outlining the major components of Ford’s self-driving car.

Pay attention to the part where he talks about compute platforms and power consumption. That was my team!

Well, to make fully autonomous SAE-defined level 4-capable vehicles, which do not need a driver to take control, the car must be able to perform what a human can perform behind the wheel. Our virtual driver system is designed to do just that. It is made up of:

Sensors — LiDAR, cameras and radar

Algorithms for localization and path planning

Computer vision and machine learning

Highly detailed 3D maps

Computational and electronics horsepower to make it all work

It comes with a nifty video!

“We’re Looking for Innovators” has a couple of articles up about the huge demand for self-driving car engineers. And my cricket buddy from Ford, Jinesh Jain, is featured!

So I thought I’d share some of Jinesh’s quotes.

“It’s helpful to know C++ or to have experience with human-machine interaction. But being adaptable and a quick learner is more important since companies that design and build robotic cars may be using a different mix of technologies or applying them in different ways.”

And I like to think that this quote is specifically directed at me 😛

“Successful candidates bring a fresh set of eyes and new ideas. The auto industry is on the cusp of a great transition so, we’re looking for people who can drive innovation.”

Jinesh is great. You should work on self-driving cars so you can meet him!

Ford Smart Mobility LLC

Disclosure: I work in the same building as some of the Ford Smart Mobility LLC staff, but I don’t work in the LLC and I certainly am not speaking for them here. In fact, I’m basically just regurgitating news reported elsewhere.

Design News has a writeup of a panel discussion including a pair of Ford executives, Patrick Ellis and Dave Kaminski.

According to the article, Ford has created Smart Mobility as a means of creating a more nimble organization that functions more like a startup. This is almost straight out of The Innovator’s Dilemma.

Ellis also explained why Ford Smart Mobility LLC is excited to work with startups:

Ellis said that Ford sees working with startups as a mutually beneficial arrangement. Larger companies like Ford get access to new, innovative technologies, while startups benefit from Ford’s infrastructure. “Everyone in Silicon Valley is an entrepreneur, everyone has an idea they think is great and can develop and change the world. Which is great — it’s motivation, it’s passion, which is something that you just can’t buy,” Ellis said. “Most of the startups are removed from the traditional OEMs or the Tier 1 suppliers and that’s really one of the things that gives us a brand new scope of opportunity. Instead of the traditional methods that we use to either learn about a technology or start developing it, we’re actually going Tier 2 or lower right in the beginning.” It’s in this space where Ellis said Ford is really finding opportunties to partner with and potentially invest in startups.

So if you are a startup working in the automotive space, Ford would like to work with you!