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Ford is effectively ceasing work on its attempt to develop its first fully autonomous vehicle, incurring a loss of $2.7 billion.
On Wednesday, the company made the announcement that it would no longer provide Argo AI, a self-driving car technology company in which it had invested $1 billion in 2017.
Ford will instead pursue in-house development of a lower level of automated driving technology rather than having Argo develop self-driving car technology for cars without steering wheels, brakes, or accelerator pedals, which is referred to in the industry as Level 4 or L4 technology.
The level it will presently seek after all alone, known as Level 3 or L3, permits a driver to not focus out and about in specific circumstances, like on the roadway, however it would anticipate that a driver should know to the point of rapidly assuming command over the vehicle if necessary.
The choice will imply that Argo simulated intelligence will closure.Additionally, Ford incurred a $2.7 billion charge in the recently concluded third quarter as a result of the investment in Argo's decline in value.That led to a loss of $827 million during that time period.
Ford reported adjusted earnings per share of 30 cents despite excluding special charges for Argo and other items. This is a decrease from the 51 cents it earned on that basis a year ago, but it is still a slight improvement over the 27 cents that were predicted by Refinitiv-surveyed analysts.
Ford's automotive revenue was $37.2 billion, up $4 billion from a year earlier and $1 billion higher than analysts' expectations.Increased vehicle prices contributed $3.4 billion to the increase in revenue.
Beyond the cost of closing Argo, Ford did experience some issues in the quarter.At the end of the quarter, it said, it had about 40,000 vehicles in its inventory that had been built but needed parts before they could be shipped to dealers because of supply shortages.
It also experienced an increase in commodity costs of $1.5 billion and $1 billion in supplier payments that were higher than anticipated.
In addition, it suffered a loss in China as a result of costs associated with the production of electric vehicles and a smaller profit and profit margin in its primary market in North America.
Even though its European unit made a small profit in the quarter compared to a small loss a year ago thanks to higher vehicle prices, CEO Jim Farley did admit that "our performance in China and Europe is not nearly as healthy as we’d like it to be."
But there is good news: Ford has increased its goal for the company's cash flow for the entire year to between $9.5 billion and $10 billion, up from $5.5 billion to $6.5 billion, due to the strength of the automotive operations.
Following the announcement of the earnings, after-hours trading saw Ford (F) shares fall 1%.
However, the main takeaway from the earnings report was a significant shift in focus on self-driving cars.
The company insists that it will continue to offer fully autonomous vehicles in the future, albeit not soon enough to warrant the necessary investment.It stated that rather than investing in a fleet of robo-taxis with no drivers aboard, it decided it was better to invest in driver assistance technology that is closer to being implemented on vehicles today and that customers want from their new cars.
Farley stated, "We’re optimistic about a future for L4 ADAS [advanced driver assistance systems], but profitable, fully autonomous vehicles at scale are a long way off and we won't necessarily have to create that technology ourselves." However, he added, "We’re optimistic about a future for L4 ADAS."
Farley stated that he anticipates being able to employ many Argo employees at Ford to develop L3 driver assistance features.
Doug Field, Ford's chief advanced product development and technology officer, stated, "That’s really the decision, in many ways, that is driving what we’re doing here at Argo... we are deeply passionate about the L3 mission."
He stated that there is a finite amount of talent available for the development of the various self-driving and driver assistance features.
"So this is the manner in which we need to utilize that ability," he said.
