Ford takes a $2.7 billion hit as it scraps efforts to develop self-driving cars


New York
CNN business

Ford is essentially scrambling to develop the first complete self-driving car, and it will cost the automaker $2.7 billion to pull off.

The company announced on Wednesday that it would no longer be funding Argo AI, the self-driving car technology company it invested $1 billion in in 2017.

Instead of Argo developing self-driving car technology for cars without steering wheels, brakes or accelerator pedals—known in the industry as Level 4 or L4 technology—Ford will continue to develop a lower level of self-driving technology. .

The level it will now achieve on its own, known as Level 3 or L3, allows a driver to avoid the road in certain cases, such as on the motorway, but would expect the driver to be aware enough to take it quickly. if necessary, control of the car.

The decision will shut down the Argo AI. And the impairment of Ford’s investment in Argo caused a $2.7 billion charge in the just-ended third quarter. That led to a loss of $827 million in the period.

Excluding special charges for Argo and other items, Ford reported adjusted earnings per share of 30 cents, up from 51 cents on that basis a year ago, but a slight improvement on the 27 cents expected by analysts surveyed by Refinitiv. .

Ford reported revenue of $37.2 billion, a $4 billion jump from a year ago and $1 billion more than analysts’ forecasts. Revenues were helped by $3.4 billion from higher vehicle prices.

Ford had some problems in the quarter beyond the charge he took for shutting down Argo. The supply shortage said it had about 40,000 vehicles in inventory at the end of the quarter, but needed parts were waiting before they could be shipped to dealers.

It also took $1.0 billion in better-than-expected supplier payments, and a $1.5 trillion increase in commodity costs.

And it had lower profit and profit margins in its key North American market due to higher commodity costs, and a loss in China due to costs related to electric vehicle development.

Although higher vehicle prices helped its European unit post a narrow profit in the quarter compared to a narrow loss a year ago, CEO Jim Farley admitted: “Our performance in China and Europe is not as healthy as we would like it to be.”

But in good news, Ford raised its full-year cash-generating target to between $9.5 billion and $10 billion — from $5.5 billion to $6.5 billion — to strengthen the company’s automotive operations.

Shares of Ford ( F ) fell 1% in after-hours trading after the earnings news.

But in the end, the big news from the earnings report was the big change in direction for self-driving vehicles.

The company says it still hopes to offer fully self-driving vehicles in the future, soon enough to make the investment the technology will require today. He said he decided it was better to invest in driver assistance technology that is closer to being implemented in vehicles today, and that customers want from their new cars, than in a fleet of robot taxis that have no drivers at all.

“We are optimistic about the future of L4 ADAS [advanced driver assistance systems]but cost-effective, fully autonomous vehicles at scale are a long way off and we won’t necessarily have to create that technology ourselves,” said Farley.

Farley said he hopes to find work for many of Ford’s Argo employees to shift gears to develop L3 driver assistance features.

“That’s really the decision, in many ways, that’s driving what we’re doing at Argo … We’re very passionate about the L3 mission,” said Doug Field, Ford’s senior product development and technology officer.

He said there is a lot of talent in helping the driver and developing different self-driving functions.

“So this is the way we want to use that talent,” he said.