Ford in talks with Google to build self-driving cars

By Richard Truett and Gabe Nelson, Crain News Service

DETROIT (Dec. 22, 2015) — Ford Motor Co. and Google Inc. are in talks to have the auto maker build Google's next-generation autonomous cars under contract, Automotive News has learned.

Although few details about the project are known, a source with knowledge of the project said both parties have been negotiating on a contract manufacturing deal “for a long time.” An announcement, if finalized, could come as early as the week of Jan. 4 during the annual International Consumer Electronics Show in Las Vegas.

A Google spokesman said the firm would not comment on speculation, but company officials confirmed it is talking to auto makers.

Ford spokesman Alan Hall neither confirmed nor denied a possible deal.

“We work with a lot of tech companies all over the world. We keep these discussions private for obvious competitive reasons and we do not comment on speculation,” he said.

Google has added two veteran Ford executives to its leadership team. Former Ford CEO Alan Mulally joined Google's board of directors eight days after he retired from the auto maker on July 1, 2014. Then in September, Google hired John Krafcik as CEO of the company's Self-Driving Car Project. Mr. Krafcik, who most recently was president of TrueCar Inc., was CEO of Hyundai Motor America. He spent 14 years at Ford, including a stint as chief engineer during the development of the Ford Expedition SUV.

Ford is scheduled to hold a press conference Jan. 5 in Las Vegas. CEO Mark Fields, product development chief Raj Nair, research and advanced engineering vice president Ken Washington, and Don Butler, executive director of connected vehicles and services, are scheduled to attend.

Yahoo Autos reported on the negotiations on Dec. 21, quoting three sources familiar with the deal who said the deal would create a joint venture legally separate from Ford. The venture would shield Ford from potential liability. The agreement, if completed, also would be non-exclusive, meaning Google could negotiate a similar deal with another auto maker, Yahoo Autos reported.

Fields strategy

A Ford deal with Google would fit within the strategy laid out by Mr. Fields, who last January launched a plan called “Ford Smart Mobility” to bolster the company's expertise in car sharing and other new business models for transportation.

Ford executives have been dropping hints all year that it could work with Google, Apple or another tech giant to accelerate its quest to bring self-driving cars to market.

“It's not only about what are the things that are going to be core to us but who are we going to partner with, in some cases,” Mr. Fields said in a Dec. 11 interview. “Because I don't think we can just be so arrogant to think that we're going to do everything on our own and we're going to do something better than maybe a company that does that 24/7. For us, partnerships are really important.”

At the same time, auto makers have been wary of working too closely with Silicon Valley technology companies, particularly Google, whose innovations and ability to harvest data might reduce consumers' desire to own a vehicle in the future.

During a visit last week to Ford's year-old Silicon Valley research facility in Palo Alto, Calif., Mr. Fields signaled that Ford sees new mobility models as a way to grow its business.

Ford generates roughly 6 percent of the revenue in today's global auto industry, but rival transportation options such as planes and trains add up to another multitrillion-dollar market, Fields said, and of that, “we get zero.”

During the Palo Alto event, an audience member asked Fields why Ford is developing its own software for self-driving cars, rather than simply striking a deal to use best-in-class software from an outside vendor.

Mr. Fields joked that Silicon Valley practically invented the concept of “frenemies,” which, in a corporate context, means that companies are willing to simultaneously collaborate on projects and compete against one another.

Ford's R&D center is working on self-driving software, Mr. Fields said, “but that doesn't mean we won't work with others. I think that's part of the beauty of being here.”

Such a partnership would mark another step toward the marketplace for Google. Bloomberg reported last week that Google, which is thinking of putting its technology into automated taxis as a rival for Uber and Lyft, may spin off the unit into a standalone business within its new Alphabet Inc. corporate structure in 2016.

What kind of car?

It isn't clear whether Ford would design a purpose-built vehicle for Google or supply a standard production car fitted with the sensors and computers that the car needs to guide itself down the road. Ford announced this week that it plans to start testing autonomous Fusion Hybrids on California roads next year.

Ford's Washington said recently that he expects fully autonomous vehicles to be ready within four years.

Having Ford build Google's test fleet would save the Silicon Valley tech giant years and billions in development costs. The Ford-built vehicles would use the auto maker's production-ready powertrain as well as safety and emissions components.

There are already ties between Ford and Google. Google's first generation of 100 self-driving vehicles were assembled in Detroit by Roush Industries, a company closely aligned with Ford. The bubble-shaped cars, as Crain's Detroit Business first reported in 2014, used components from local Detroit area suppliers.

Thilo Koslowski, lead automotive analyst at Gartner Inc. in Santa Clara, Calif., said it makes sense auto makers would want to work with Google, which could help them catch up to rivals that are pursuing automated driving to differentiate their products.

And at Google, “the focus has shifted to looking for OEM partners to deploy the technology, rather than considering building their own vehicles,” Mr. Koslowski said. “That makes sense. If Google is interested in bringing the benefit of the technology to consumers, then they need as many partners as possible.”

Ford and Google are said to have been in talks since at least 2012 on autonomous cars. The two companies also teamed up in 2011 on technology that would help vehicles learn customers' driving habits and get them to destinations more efficiently.

Ford announced on Dec. 15 that it had secured permission from California to test its own autonomous cars in California. Ford will use hybrid versions of the Ford Fusion in those tests.

Reporters Nick Bunkley of Automotive News and Dustin Walsh of Crain's Detroit Business contributed to this story, which appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.