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Ford’s new self-driving wing: an admission of likely defeat?

Ford has announced that it is moving its self-driving portfolio into a separate division, called Ford Autonomous Vehicles. This wing will contain its $1bn Argo AI assets, and the parent plans to invest an additional $3bn more here. It’s a similar move to GM, which spun out Cruise and netted a $2.25bn investment from SoftBank, but in both cases, there’s a sense that the automakers want to be able to cut ties with these projects quickly, should things go south.

On the one hand, this approach is a way for Ford to more easily segment its core business, which it already overhauling by moving focus away from conventional saloons and hatchbacks, and onto SUVs and trucks – its best performing products. Outside of the parent company, the startup could be more agile, unencumbered by all the legacy overhead of a century-old automaker. On the other hand, this is a way to ensure that if self-driving doesn’t take off, it doesn’t drag the rest of Ford down with it.

This is certainly a pragmatic approach, but it will be interesting to see which side the investor community sees. There’s also a decent chance that some of their money flows out of Tesla and back into the traditional automakers, now that these companies are more focused on future-looking technologies – particularly drivetrain electrification. It also doesn’t help Tesla that CEO Musk appears to be on the warpath again, this time silencing a Seeking Alpha contributor.

With FAV, Ford is looking to bring in third-party investment. Ford’s VP Autonomous Vehicles and Electrification, Sherif Markaby, will be the CEO of FAV, with EVP and President of Mobility, Marcy Klevorn, becoming chair of the board. Makarby is being replaced by Ten Cannis, who will now head Team Edison – the aptly names electrification project.

“Ford has made tremendous progress across the self driving value chain – from technology development to business model innovation to user experience,” said Jim Hackett, president and CEO, Ford Motor Company. “Now is the right time to consolidate our autonomous driving platform into one team to best position the business for the opportunities ahead.”

There also seems to be a pretty major overhaul in Ford’s Global Operations team, which will see IT rolled into the division, and then have the CIO report to the Global Ops leader. The objective here is to integrate new technologies into Ford’s industrial systems, looking to improve manufacturing efficiency, reduce delivery times, and improve its capital efficiency. If that isn’t a golden IoT opportunity for a plethora of companies to profit from, we aren’t sure what is.

Notably, Ford emphasizes that it will be “rethinking the ownership experience, including making charging an effortless experience at home and on the road, as well as offering full-vehicle OTA software updates to enhance capability and features.” This sounds like the VaaS topic that Riot has covered pretty extensively, where a consumer essentially subscribes to receive a car when they need, without actually physically possessing the car at all times.

Also in the new world of mobility, Ford acquired minibus shuttle platform, Chariot ($65m), and also invested in Motivate, a startup that launched the Ford GoBike bike sharing service that was live in San Francisco. In June, there were rumors that Uber wanted to acquire Motivate, but at the beginning of July, Lyft acquired the company instead – for an undisclosed sum. Uber had bought a bike company, JUMP, in April though.

Ford has also recently purchased Autonomic and TransLoc, two partners that it had been working with on the Ford Transportation Mobility Cloud (TMC), a platform that Ford hopes to pitch to cities and transportation firms. Autonomic was the main developer of the TMC, which is available to over automotive companies. Transloc specialized in short-duration trips, developing back-end tools and front-end applications to best organize vehicles to serve customers.

So while the new FAV wing is meant to drive new growth, Ford is looking to make some major cost savings in its core business. There is a five-year target to reduce development times by 20%, to make it more responsive and bring its average showroom age down from 5.7 years to 3.3, as well as cut R&D costs by $7bn through shared resources and shared parts for vehicles. This includes five new vehicle architectures, such as front-wheel drive unibody, on which all designs will be based, with modular components that can be shared between designs.

Another company in the automotive space is making similar moves to Ford. LexisNexis, a firm specializing in data analytics for insurance, has launched LexisNexis Risk Solutions, specifically to develop new services for connected cars and automakers. It’s a much smaller project than FAV, beginning with just 35 staff, but it plans to hit 100 employees within five years.

Again, it is a strategic move for LexisNexis, as this division shouldn’t impact the parent’s health for the worse, even if it goes down in flames. Currently, LexisNexis works with 95 of the top 100 personal lines insurers in the US, and 90% of UK motor insurers, with business in Brazil, China, India, and Spain too.

“We’ve established the Connected Car team to enable us to innovate and execute quickly, as well as respond to the increasing pace and interest between automakers and insurance providers to engage consumers with driving behavior information, collision detection and other programs that connectivity enables,” said Adam Hudson, Senior Director of Product Management for US Connected Car.

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