Farley’s About-Face On Ford Driverless-Car Bet Has Lessons For 2023

Ford’s decision to deep-six its investment in Argo AI and withdraw itself from the robotaxi business created a big hit to the company’s third-quarter results: a write-down of $2.7 billion. But Ford CEO Jim Farley’s abrupt flip against the immediate future of autonomous driving is the kind of major strategic withdrawal that more CEOs will have to consider in the bumpier era corporate America seems to be entering.

Ford swung to a quarterly loss solely because of the hefty charge associated with the shutdown of Argo, an autonomous-driving startup based in Pittsburgh which is 40%-owned each by Ford and Volkswagen AG. Both companies said they would absorb some of the workforce and take on some of Argo’s work, with Ford emphasizing continuing to improve its “Level 2” and “Level 3” automated-driving features that are in its vehicles today and will be in the near future. Level 3 describes highly automated driving, while the ultimate goal of AV backers is Level 5, which would require no human intervention.

“Things have changed,” Farley said in a Ford statement. “Profitable, fully autonomous vehicles at scale are a long way off.”

That Ford is so cleanly moving on from Argo is yet another huge directional turnabout by Farley, who has determinedly whipsawed the automaker on several fronts during the two years he has been at the helm. His biggest about-faces for the company have included the decision to invest whole-hog in electric vehicles overall, to field battery-electric versions of Ford’s most popular nameplates such as the F-150 pickup truck, and to source the batteries for the turnover of Ford’s fleet internally rather than rely on outside suppliers.

Contrast Farley’s hard-bitten coffin-closer on autonomous-vehicle utopia with the vision that was expressed by one of his predecessors, Mark Fields, in 2016, when the then-CEO said, “Ford is going to be mass-producing vehicles with full autonomy in five years.” Fields was broomed out and followed as Ford chief by Jim Hackett, who harbored similar visions. Now, Ford executives concede that fully autonomous vehicles are … five years away.

There are some potential lessons for other manufacturing CEOs in all of this. Here are a few:

Say the emperor has no clothes. It’s difficult to overstate the breathlessness with which autonomous-driving proponents advanced their vision and, over the period of just a few short years, got the auto industry and Silicon Valley to invest what Bloomberg has estimated to be as much as $100 billion into it. Certainly the enthusiasm of Elon Musk and Tesla in pursuing this dream was instrumental in influencing so many others to part with their money.

And the auto industry will continue to pursue autonomous driving, most notably General Motors, through its investment in Cruise, and many startups providing driverless transportation in logistics and other areas that will cut business costs.

But many companies are having to trim their sails these days with the slowdown of the economy, rampant global inflation, undependable capital markets, and rising geopolitical uncertainties, and it made sense to Farley that side-burnering AVs was where Ford could do it. As huge and as immediately painful as the move was, it won’t be the last such course-altering decision in the coming months by manufacturing chiefs.

Pick the right revolution. It’s not that Farley has given up on having Ford participate in future-altering investments. It’s just that he selected electric vehicles rather than driverless vehicles to carry his company forward. And if he were going to pick one over the other, it made sense for Farley to bet on a seemingly inexorable move to battery-electrics that is being pushed by governments, activists and other players and increasingly accepted by consumers.

Automotive strategists once talked about the evolution of EVs and AVs as tied firmly to one another. But Farley has decided Ford can proceed with its transformation to an EV company without also trying to make sure no human has to drive its new vehicles.

This also is not to say that the goals of autonomous driving, or at least many of them, can’t be accomplished in some other ways. For example, society can make great progress in helping shuttle people who need help in transportation without sticking them into driverless vehicles.

“Mobility for older, younger and handicapped people can also be achieved with a service like Uber, if these services wouldn’t be too greedy to pay their driver a fair share,” the strategy chief for an automaker told me in the wake of Ford’s abandonment of Argo.

Reckon with technological determinism. It’s no accident that the initial enthusiasm for the “AV revolution” came from the young scientists and engineers who were invited to participate in successive Defense Research Advanced Projects Agency (DARPA) contests beginning about 20 years ago, as Rita McGrath of consultancy Valize has pointed out.

One of DARPA’s goals was to create a “critical mass of talent focused on the challenge of autonomy, which it was interested in for military and defense purposes,” she noted. This “critical mass” quickly drew tech companies such as Google into the fray, and once automotive companies saw the Silicon Valley giants invading their turf — the automobile — they understandably jumped in as well.

But the truth remains that, while automated-safety features such as adaptive cruise control and lane-departure warnings have made driving less perilous and have brought the automobile closer to independence from human drivers, the future of self-driving at scale remains a long way off.

“True autonomous driving is a long way in the future, as we don’t have the technology yet to handle what our brain is handling,” said the automaker strategy chief.

Indeed, there are too few clear advantages to such a future, too many potential disadvantages, and too many major obstacles — costs, liabilities and so on — in the way. Think of it as kind of on a parallel track with another intriguing but not exactly urgent goal of humanity: landing people on Mars.

Behold the fading influence of Silicon Valley. Amid the many troubles faced by digital giants — a slowing economy, tenuous valuations, increasing attacks on their privacy practices, little enthusiasm for “the metaverse” — the continual delay in achieving the dream of “driverless cars” may prove one of the biggest.

For it was going to be through the ubiquitous automobile and its central importance in the life of western consumers where Silicon Valley was finally poised to take hold not only of what people were doing on their digital devices but also of how they were conducting their lives in the physical world. Now, it appears that kind of future at least is much further off. And meanwhile, through their plunge toward all-electric fleets, traditional automakers have re-asserted their control of their industry’s technological future.

People may be wary of centralized-control schemes. Finally, there’s this: It’s very possible that the idea of a highly centralized transportation scheme, made up of millions of driverless pods traversing urban landscapes under the control of AI-powered computers, isn’t what people want after all. Many Americans saw what resulted from centralized control of the economy during the pandemic, by government decision-makers, bureaucrats and “experts” in determining the public good, and they weren’t fans.

One of the biggest critiques of autonomous driving has come from Americans who want to continue to control their own vehicles because it gives them freedom, and some who just enjoy driving. These people may continue to own the day.