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2 February 2018

Ford forces partners in-house, frantically pushing Mobility service

By Jack Vernon

Ford is snapping up two of its partners, in a move to bulk up its ‘New Mobility’ segment – as the company looks to stave off foreign competition, and exploit new opportunities. The two businesses, Autonomic and TransLoc, are being pressured to boost Ford’s integrations with other enterprise customers, as it tries to navigate a market that is shifting under its feet.

Ford has been trying to define itself as the innovator in the cloud vehicle services space. Given that most see Ford as trailing the likes of GM on autonomous driving, connected and electric vehicles, this could be one area Ford can generate a lead over the competition – although GM is investing heavily in ride-sharing, via Lyft.

The acquisition follows Ford’s announcement that it will be working with one of the Autonomic, a transportation architecture and technology provider, on its upcoming Transport Mobility Cloud (TMC) platform, for city transportation partners.

TransLoc provides software and cloud technology to support “microtransit” services, including, real-time tracking, demand modelling and response analysis, as well as consumer-facing mobile apps and services. Ford is also looking to put Autonomic to work, improving its TMC.

The TMC will use the Cellular Vehicle to Everything (C-V2X) connectivity that Ford plans to add to its vehicles, to allow a city’s infrastructure to track and manage traffic in real time – using it say to reroute traffic away from congested streets, for example. Ford has not yet announced any smart city customers for the TMC – although it is still early days for the project.

Ford is acquiring both these companies through its Smart Mobility subsidiary. Autonomic CEO Sunny Madra will lead a new part of Ford called “Ford X”, which will be a division for Ford to explore and incubate new concepts and projects before deciding what to push to market. Madra thinks that many of the ideas Ford X will look at will never make it past the incubator phase, but that a few gems will hopefully make it into the Ford Mobility business group.

Ford Mobility already includes Chariot, Ford Commercial Solutions, as well as FordPass and any of Ford’s digital service businesses – including those focused on self-driving vehicle opportunities, and in-vehicle offerings in general.

Ford will also create another subsidiary that will focus on things like fleet management services, and include the Autonomous Vehicle Partnership Platform, which counts companies including Lyft, Domino’s, and Postmates as members. The TMC will be housed in this wing.

These acquisitions, and the restructured focus on the Ford Mobility group itself, reflect a greater emphasis on the company’s connected and autonomous services.

New CEO Jim Hackett, in an earning call last week, said the company has much to do be truly “fit.” He was in part referring to the dangers of higher commodity prices that have affected the company’s performance in recent quarters, as higher steel prices have shrunk Ford’s margin, but also to the wider perception of Ford as being behind the technology curve.

Ford is committed to $7.5bn in capital investment in 2018, in areas like the TMC, and self-driving technology, as it plays catch up with competitors. It is this perception of Ford as lagging its competitors and subsequent poor stock market performance that caused former CEO Mark Fields to be shown the door last May – after only serving three years at the helm.

Critical to the company rebrand is the promotion of itself as mobility transport provider. The Chariot project is key to this vision, as it is Ford’s first step in operating a ride-hailing and sharing service. Ford Chariot has been given the go-ahead by the Transport for London to launch the shuttle bus service on four routes – which looks to provide optimized routes for passengers, via a smartphone app.

Ford remains under pressure from competitors to develop more services. This week, Google’s Waymo division announced that it had finalized orders for thousands of self-driving Chrysler Pacifica hybrid minivans. The Pacifica comprises much of Waymo’s self-driving fleet – and will power the new Seattle deployment.

Waymo CEO John Krafcik said the group had moved from research and development to operations and deployments. This news will be extremely concerning for other car companies trying to independently develop their own self driving services, as Waymo now appears to have an solid lead in terms of self-driving technology.

Under Fields, Ford identified that a standalone data and services segment could achieve a margin of 10% for the group – and the company began working towards building this wing, to counter a turbulent core market.

Ford had an operating margin of 12.9% in North America in 2016, which it was able to achieve by selling many high margin trucks. Typically, its cars sell at a much lower margin, making the 10% identified in data and services particularly attractive – and something that shareholders will desire.

Things have not all been rosy for Ford. Last week saw the head of its operations in China, Jason Luo, step down after just five months in the position. Luo reportedly resigned for personal reasons that predate his time at Ford – but the resignation got the Wall Street community talking. Last year, Ford saw its market share in China decline, selling 6% fewer vehicles than it had done the previous 2016 – in a year when the Chinese automakers only grew stronger.