Ford takes $2.7B hit on Argo shutdown, shifts its bet to driver assist tech • ProWellTech

As the third-quarter earnings drumbeat continues, we learned more about the state of global supply chains, global consumer appetite for big-ticket items and the future of self-driving technology.

After the bell this afternoon, Ford beat Wall Street analyst revenue estimates of $36.25 billion, per Yahoo Financewith automotive Q3 2022 top line of $37.2 billionand total revenues of $39.25 billion, up 10% despite lingering supply chain issues. The company’s adjusted earnings per share also came in ahead of expectations.

However, the financial news was quickly outweighed at least in commentary terms by the company’s choices regarding autonomous vehicle technology. ProWellTech broke the news earlier Wednesday that Argo AI, a self-driving company in which Ford was an investor, is shutting down.

Ford, in its earnings report, wrote that it is shifting its capital spend from the Level 4 autonomous systems being developed by Argo AI to internally developed “L2+/L3” advanced driver assistance technology.

“So it’s taking that investment and putting it towards a business where we think we will have a sizable return in the near term relative to one that’s going to have a long arc,” said Doug Field, chief advanced product development and technology officer at Ford, during Wednesday’s investor call.

Jim Farley, Ford’s CEO, even went so far as to say “profitable, fully autonomous vehicles at scale are a long way off and we won’t necessarily have to create that technology for ourselves.”

“We don’t expect a single ‘Aha!’ moment like we used to,” he said during a call with investors. “Advancing Level 2 hardware and software beyond what Blue Cruise can do today, and ultimately enabling our customers to travel in very large ODDs or operating domains with their eyes off the road will give them back the single most valuable commodity in our modern lives. Time.”

Letting go of the Argo AI investment, however, had a material impact on the company’s profitability in the quarter. To unwind the trade, Ford had to endure a $2.7 billion “non-cash, pretax impairment” on its Argo stake. That pushed the company’s GAAP results into negative territory for the three-month period.

Taking a huge pre-tax loss is notable, as is the shift to focus on lower-level driver-assist technologies.

The company had some good news to report, however, apart from its top-and-bottom line beats: profitability. Per the automotive company, Ford expects 2022 to bring in $11.5 billion in earnings before interest and taxes. Free cash flow projections for the year also ticked higher, with Ford anticipating $9.5 billion to $10.0 billion worth of the substance in 2022. (Ford’s EBIT in the third-quarter of $1.8 billion was above its own expectations.)

The news of Argo’s dissolution comes not even a month after the company officially launched a robotaxi service on Lyft’s network in Austin using a fleet of Ford Escape hybrid vehicles. Last month, Argo also launched an ecosystem of products and services aiming to support commercial delivery and robotaxi operations. It’s not clear what will happen with those services now, and Argo did not respond to ProWellTech in time.

Ford’s view that it can forgo investments into pricey — and seemingly yet far-out — self-driving technology could mean a dearth of future deals from major car companies into smaller, tech-heavy autonomous companies. And the pullback in optimism could impact suppliers for those companies — the lidar concerns, and their ilk.

Last week at ProWellTech Disrupt, Rivian founder and CEO RJ Scaringe shared similar sentiments to Farley’s, saying that fully autonomous vehicles would be harder to achieve and scale. He said Rivian would pursue Level 2 and Level 3 systems which are on cars now and are getting increasingly better every day.

Ford is not the only company struggling with its self-driving ambitions; Tesla is reportedly in trouble with the U.S. government about its own self-driving tech. The U.S. Department of Justice is reportedly investigating the company regarding its “Autopilot” capabilities, which is Tesla’s advanced driver assistance system that CEO Elon Musk has boldly claimed can drive itself in certain scenarios.

This story is developing. Check back in for updates.