Argo.AI Closes Up, But Ford & VW Are Taking The Employees On

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Yesterday, TechCrunch broke news that Argo.AI is shutting down. The company’s operations are reportedly going to shift to Volkswagen and Ford, the company’s two main backers.

Multiple sources who wished to remain anonymous told TechCrunch that Argo.AI employees were told during an all-hands meeting Wednesday that some of them would receive offers from the two automakers. It was unclear how many people would be hired by Ford or VW and which companies will end up with Argo’s technology in the end.

One bit of very good news is that the company’s employees aren’t going to end up in the cold. All Argo employees will receive a severance package that includes insurance and two separate bonuses — an annual award plus a transaction bonus upon the deal close with Ford and VW. Those who are not retained by Ford or VW will additionally receive termination and severance pay, including health insurance. Several people told TechCrunch that it was a generous package and that the founders of the company spoke directly to its more than 2,000 employees.

Why Did Argo Shut Down?

For people who aren’t Tesla superfans wearing blinders installed by the Technoking (or whatever he identifies as these days), Argo seemed like a very promising company. Not only did it have the backing of two big automotive companies, but it was also making decent progress at offering rides in multiple cities, and had deals to offer driverless rides through Lyft.

So, those of us who saw the potential are probably wondering what happened.

Fortunately, we do get some clues from Ford and VW. Let’s start with a short Twitter thread by Jim Farley:

This is a mission at @Ford to change travel for the many rather than the few. Yes, there is potential for attractive revenue streams tied to L3. But at the end of the day, it’s about giving millions of people time back & lesson the monotony of highway miles & stop-and-go traffic.

— Jim Farley (@jimfarley98) October 26, 2022

What we can gather from this is that the company wants to shift focuses. Instead of funding a robotaxi company (offering what many people call SAE “Level 4” Autonomy), they want to focus on a hands-free eyes-free experience in privately-owned vehicles. The TechCrunch article added to this that Ford and VW probably decided to pull the plug because nobody else wanted to invest in Argo, and that plans to offer more by 2021 didn’t come to fruition.

Farley also pointed people to a press release by Ford that sheds some further light.

“We’re asking ‘What’s best for customers?’ in everything we do,” said President and CEO Jim Farley said in the release. “Winning for customers is driving a re-founding of the company through Ford+, with high ambitions for quality, innovation, profitability and growth across all our businesses – making smart choices about how we deploy capital even as we learn and adapt.”

Ford went on to say that includes adapting as circumstances change. At the end of last quarter, Ford came to the conclusion that profitable Level 4 advanced driver assistance systems (ADAS) won’t be available on a large scale as soon as originally anticipated. However, they also found that development and customer enthusiasm for benefits of L2+ and L3 ADAS warrant increasing their near-term aspirations and commitment in those areas.

Ford states that it chose to move its capital spending away from Argo.AI, which is developing L4 advanced driver assistance systems, and invest it within itself for the development of L2+/L3 technology (again, these are the “SAE Levels of Autonomy,” for what it’s worth). This was due to Argo.AI’s prior inability to bring in new investors. Because of this choice by Ford, it had a $2.7 billion non-cash loss before taxes related to its investment in Argo.AI, which resulted in an $827 million net loss during Q3. Ouch!

Put more simply, Ford didn’t see Argo panning out anytime soon, so it pulled the plug, wrote off a big loss, and is going to take what it can from that loss to aim at better non-robotaxi tech.

What About Volkswagen?

Volkswagen also put out its own press release about this.

VW explained the pullout as “focusing,” explaining that instead of further investment in Argo.AI, it plans to instead work more with another autonomous vehicle partner: Cariad. “In individual mobility, Cariad is continuing to drive forward the development of highly automated and autonomous driving together with Bosch and, in the future, in China with Horizon Robotics,” the release said.

Like Ford, the company wanted people to know that it give a crap about what happens to people working at Argo. “Volkswagen is working with Argo AI to provide continued employment for employees and to further develop the most promising projects in the field of autonomous driving,” VW said.

Volkswagen didn’t go into as much detail as Ford, but it’s pretty clear that the message is consistent between it and Ford. Argo wasn’t working out, but they still think there’s great potential both from Argo’s tech and Argo’s former employees.

Autonomy Clearly Isn’t As Easy As People Thought

While Tesla probably made the most ambitious claims, it’s pretty clear that everyone in the industry was very optimistic about the future of autonomous vehicles. I don’t have to explain what’s happened and happening with Tesla, but Google/Alphabet ended up with Waymo, GM developed Cruise, and Ford/VW was working with Argo. They all had plans and timelines, at least some of which didn’t pan out.

While much digital ink is in the process of getting spilled about this, the only for sure thing we can learn from this event is that it’s a much bigger challenge than everyone thought. So, it would be unfair to say that anyone (including Elon Musk) were fools. The experts in the field clearly thought it would happen easier, and smart people listened to them. Some of them did better than others, but anything resembling robotaxis today is still only operating in very limited areas.

Should We Brace For Another AI Winter?

There have been several times in the history of artificial intelligence where interest and funding in the field has decreased, known as an AI winter. This is similar to the idea of a nuclear winter, where conditions are so harsh that no life can survive. After periods of hype and excitement around artificial intelligence, there have been disappointed followed by criticisms which led to cuts in funding.

Seeing Ford take a $2.7 billion hit to get out of Argo, and seeing other companies still continue to struggle with autonomous vehicles may inspire some fear in people that we’ve seen yet another hype cycle bust in artificial intelligence, and that winter is coming.

But, I think it’s too soon to make that call, even in the smaller autonomous vehicle space that lives within the larger AI field. I’d say to grab coats if we saw GM and Alphabet/Google heading for the exits like Ford and VW, but there’s no indication today that they’re headed in the same direction. Tesla is also still making progress on FSD Beta and trying to come up with Robotaxis.

Featured image by Argo.AI.