In April 2019, Ford Motor Company announced a major realignment of its senior executive team with two distinct organizations reporting up to CEO Jim Hackett. The automaker’s global legacy business of designing, building and selling trucks, SUVs and now occasionally cars is now helmed by Joe Hinrichs, president, automotive. The rest of the company comprising all of the potential future business lines is helmed by Jim Farley, president, new businesses, technology and strategy. I recently had an opportunity to sit down with Farley to discuss his organization and where he sees it going.
When I was growing up, there used to be an idiom about car people, that when you cut them, they bleed high octane gasoline. Farley isn’t an engineer or a designer and the gasoline reference is no longer considered appropriate in many circles, but Farley absolutely fits among that group of enthusiasts. He’s worked in the auto industry his entire career and has an impressive collection of vintage machines including a 1965 Ford GT40 that he raced in the 2018 Le Mans Classic event in France.
In 2019, however, he is responsible for the teams that are developing automated vehicles, mobility services, an e-scooter business, a transportation insights platform for cities and many other projects. Today, Hinrichs’ side of the company generates the large piles of cash that are consumed by Farley’s side of the house. If things work out as many mobility advocates hope, those positions will eventually be flipped around and a good portion of the legacy business will fade away.
But the path between selling high profit F-150s and Explorers and that hoped for mobility utopia is likely to be as challenging to traverse as the Rubicon trail and Farley and Ford investors will probably want to strap into the equivalent of the new Bronco for the trip. “My first thought is that the disruption is already happening to our industry at the customer level,” says Farley. ‘We’re seeing a very large group of people going from owning a vehicle to using a vehicle per mile. We’re seeing the micro mobility business like Bird, Lime and Spin grow exponentially, even in the same city.”
“We’re seeing more and more people use connectivity in their vehicle differently, the disruption of our industry in an exciting way, it’s really started now. I would say similar to maybe the first or second generation Prius. When the electrification started to come into our industry, it feels to me like the first generation Prius or the Escape Hybrid when some customers started just making different choices.”
Ford established its Smart Mobility business in early 2016 to lead the way in developing new business models for the future. Over the last three and a half years, Smart Mobility has made quite a varied range of investments and worked on some new technologies. Some like the integration of Amazon Alexa voice services through SYNC Applink and the Spin e-scooter business seem to be going well. Others like the transportation mobility cloud are still at a relatively early stage. Disruption rarely comes without a cost though.
Other efforts have not fared so well, most notably, Chariot and GoBikes. The San Francisco-based bike share service has been taken over has been acquired by Lyft and rebranded as BayWheels. Meanwhile, another San Francisco startup, Chariot, which was acquired by Smart Mobility in late 2016, was shuttered by Ford earlier in 2019. Chariot was a micro-transit service operating a fleet of vans in the Bay area and several other markets but it failed to attract enough riders to be financially viable.
Dabbling in new businesses that don’t succeed isn’t necessarily a bad thing. It’s really only a failure if you don’t learn something from the effort and it sounds like Ford has taken some important lessons from Smart Mobility.
“That’s exactly the question I’m asking, what have we learned and where are we going?,” adds Farley. “What I’ve learned from the team is that it’s time to simplify and focus. We had so many different things spun up which is exactly the right thing to do. But as you said, some of the spaghetti stuck and some didn’t, plus at the same time that customers were changing.”
Ford has opted to go in a different direction from some of its competitors, avoiding businesses like car sharing. Instead, Ford is focusing on three very specific areas for now, micro-mobility, non-emergency medical transport and city solutions.
Just about a year ago, Ford acquired e-scooter sharing company Spin and it has since grown to more than 40 cities and Ford claims it is the third-largest company in the segment. While Farley didn’t make any claims to profitability, there is a key difference between Spin and prior Smart Mobility efforts, people are actually using the scooters with more than half a million regular customers.
Farley highlighted a divergence that has emerged in the scooter world. There a population of frequent users that have shifted to owning their own machines that they can take with them into their homes or workplaces. Those users want folding devices that are lighter and easier to carry along. The occasional users that are going for Spin and its competitors as well as the companies providing them are shifting to more rugged devices that can better withstand the rigors of high frequency use.
With reports that many of the early scooters only lasted 2-3 months before having to be scrapped, upgraded designs with features like swappable batteries and better all-weather handling will be key to making the business viable. While Ford doesn’t plan to get into manufacturing scooters, when I asked Farley if he would like to create the Super Duty of scooters, he responded “it could be.”
Much of the discussion around future mobility revolves around cities and Farley’s organization has a distinct focus on this with its city solutions.
“I guess if you look at Ford’s business we’re a very different car company, vehicle company, and our aspiration for mobility, our profile of the portfolio is really different than other companies. That’s probably the main thing I would say. So much of our business happens in the city. I remember walking around San Francisco last year with one of my colleagues, and they said, well we don’t sell any vehicles in San Francisco and I said okay, we’re going to stand at this corner, and we’re going to count over the next 10 minutes, how many Ford vehicles, and they’re like there’s a BMW, there’s a Mercedes. This is San Francisco right, no, like there’s no Fords.”
“I said, nope. So far I count about 10 to 15% market share, because he never counted, the super duties, the F series, the Transit vans, the Transit Connects. Those white vans. They didn’t even exist in a way that you know we don’t talk about that so much of our commercial business happens in a city.”
This fits in directly with the shift in Ford’s overall business in the past year. As the market has moved away from traditional cars, Ford has discontinued many of those models in favor of the form factors customers are buying. A huge part of that customer base is commercial operators in urban areas.
Thus, products like the city insights platform that Ford is currently piloting in Ann Arbor, Mich., and other cities is designed to both assist cities in their planning, but also ultimately to make life a bit more friction free for many of the customers using Ford commercial vehicles. Due to congestion, average speeds in many urban areas have now dropped below 10 mph, slower than a horse.
One of those customers is non-emergency health transportation like Ford’s Go Ride Health and that is the third pillar of the Smart Mobility business that Farley wants to focus on. With an aging population there is a need to transport people to doctor’s appointments, rehabilitation facilities and elsewhere. Even in a world where some of these vehicles may eventually transition to automation, there may still need to be a need for human assistance on these vehicles. For those passengers that need extra help or guidance in boarding or on the trip from someone who isn’t driving, there will still be a role for people.
But not all of these vehicles will be automated immediately. In many cases, these services are transporting passengers from rural, suburban or exurban areas where automated vehicles may not be operating yet.
What about automation?
While Ford Autonomous Vehicles LLC (AVLLC) is a distinct business unit from Smart Mobility LLC, it is very closely related.
“I’d say what you’re increasingly going to see from Ford is a consolidation in a way of our pre-AV and AV business. I’m not going to get into the specifics of what our AV brand and services are going to look like, the portfolio, but just imagine for Ford we really see those as one entity.”
From the time in August 2016, that former CEO Mark Fields announced the company’s intention to produce a level 4 automated vehicle “for use in commercial mobility services such as ride sharing and ride hailing within geo-fenced areas and be available in high volumes” the company has been working on multiple parallel paths. The core automated driving technology development has been put in the hands of Argo AI. Teams from AVLLC have been working alongside the Argo team as well as colleagues from Smart Mobility to understand the business models that can lead to building a commercially viable mobility ecosystem.
Meanwhile the Ford product development team has been trying to take the lessons learned from experiments like delivering pizzas and dry cleaning in places like Ann Arbor, Miami and Washington DC to device a purpose built vehicle that can withstand the rigors of continuous daily use.
When Fields made the announcement, the community of companies actively involved in developing AV technology was growing at a rapid clip with tens or hundreds of millions of venture capital dollars flowing into startups. There was enormous optimism that large scale commercial deployments of AVs would be happening well before the end of the decade.
With only two months left in the decade, that obviously hasn’t happened and likely won’t for a number of years yet as almost everyone in this space has recognized the difficulty of proving the safety and viability of this technology. Ford’s initial hope of high volume deployment of L4 AVs in 2021 was seen by many at the time and even now as lagging behind the leaders in the industry like Waymo and even Cruise. Today, it seems like a much more pragmatic projection.
A year ago, when Ford and Argo held a demo day for its automated driving efforts in Miami, Sharif Marakby, CEO of AVLLC, emphasized that the company wanted to launch at scale. Nonetheless, while Ford is still planning a commercial launch in 2021 in at least three cities including Miami, Washington DC and Austin, Texas, Farley sought to further temper expectations for what he plans to be a core part of the Ford business in the coming years.
“So, we’re still completely committed to having a commercial service available in 2021, we never talked about the scalability of that. And as you know we’ve been very conservative relative to other promises you can get on when we actually develop the scale.”
“So, I don’t have a lot of new news for you, except for a couple things. First of all, we’re going to spend more than the $4 billion that we committed to. And there’s a lot of reasons for that but one of the most important is that we’re committed to having a customer facing business. And that costs marketing dollars and a lot of software development.”
However, the pace of growth is likely to be somewhat smaller than the “high volume” business promised over three years ago.
“The other thing is that, the timeframe is about right. But when we get to that, scaling of the business, especially now that we’re committed to having a consumer facing business and goods movement and people, we’re not putting pressure on the team to, we want to go as fast as we can.”
However, Farley recognized that while tremendous progress has been made in developing a natural driving system, there are still enormous technical and commercial challenges. The lidar and other sensors and compute platforms required to build a robust system are still costly and power hungry. As a company that is familiar with building vehicles for applications like police vehicles and taxi services that have to last hundreds of thousands of miles in just a few years, Ford understands the hurdles that will have to be overcome to make all aspects of the vehicles “commercial grade.”
Farley is happy with the lessons that have been learned from the user experience experiments that have been done and how that has been incorporated into the production intent vehicle. A key factor for Farley is how will Ford’s customer facing business differentiate itself from a driven experience.
“It seems like the industry was so focused on robot taxi kind of generic movement of people.”
“The way we’re thinking about is much more precise on the differentiation for subsets of those customers, where we think we can add a lot of value beyond pulling the driver. So pulling the drivers really fascinating as a human, you can see what’s happening with summon mode and Telsa and all the videos going around, everyone’s as humans, – the car there’s no one in it it’s driving itself, that’s very fascinating. But really from a customer standpoint. If you’re developing a service, you pull the driver. What’s better. That’s what we’re working on and that’s where we need to make more progress.”
In essence, getting rid of the human drivers in transportation services is just one piece of the overall puzzle for automated vehicles. While you might eliminate an individual’s salary, at various stages of the value chain, there will remain a need for human interaction, or perhaps an entirely different type of automation. This could be a robot that delivers packages from the AV to the doorstep such as the one from Agility Robotics that Ford is experimenting with or drones that might complete the delivery from automated cargo vans. It could also be nurses or aides riding along to aide someone being transported to a dialysis or chemotherapy appointment.
Interestingly, Farley was also non-committal on exactly how AVs would be deployed for different use cases. In the past, Ford has indicated that it would like flexible vehicles that could be used for passengers, packages, meals and more, shifting throughout the day as needed.
“We think that when you look at humans getting in and out of a self driving vehicle, and you look at the form factor for urban goods delivery, there is a sweet spot. But the vehicle, the way it’s configured will have to be totally different. And that’s one of the things we learned in Miami we tried to do both in the same vehicle, and we learned that for a lot of applications iIf you want to be highly utilized, having the same configuration on the interior isn’t optimal.
So what we may end up seeing is multiple sets of vehicles within the fleet with some handling passengers and others deliveries. If they can achieve enough scale that may well turn out to be a commercially viable solution. Or not. It’s premature to be certain.
One thing that is certain is that Farley wants Ford’s service to be customer facing. While that means Ford will be working with partners to provide those services, it most likely rules out operating Ford AVs on other ride-hailing networks such as Lyft or Uber or at least not without substantial branding so that customers know who is behind these vehicles. Farley also declined to be specific on whether that branding will be Ford or some name we haven’t heard yet.
Either way, that is part of the reason that the total investment for its automated driving investments will grow beyond $4 billion. That increase will fund the software platforms required to support a robust consumer facing brand and marketing dollars to establish the brand in the mobility services marketplace.
For a guy that loves driving fast cars, leading a 116-year old automaker into a highly uncertain future of mobility as a service is a huge challenge, but Jim Farley and the rest of the team at Ford seem to be taking a very thoughtful and holistic approach to the many tasks at hand.