Argo AI, Volkswagen AG close $2.6 billion autonomous-vehicle tech deal

Self-driving software company Argo AI said Tuesday that it's closed on a $2.6 billion deal with German automaker Volkswagen AG to partner on autonomous-vehicle technology.

The newly-inked deal propels a multibillion alliance that pits Argo, VW and Ford Motor Co. against competing autonomous- and electric-vehicle ventures including General Motors Co.'s self-driving subsidiary Cruise LLC, which has the financial backing of Honda Motor Co.

The deal, originally announced last July, includes a $1 billion investment by VW in the company as well as the integration of VW's Munich-based Autonomous Intelligent Driving team into Argo, an addition valued at $1.6 billion. 

"Today, with the close of Volkswagen AG's investment, we become a global company and welcome new teammates to the Argo AI family," Argo CEO Bryan Salesky and Argo Munich Vice President Reinhard Stolle said in a statement. "This news not only solidifies our well-capitalized position, but differentiates us as the only self-driving technology platform company with partnerships and commercial agreements for deployments across the U.S. and Europe."

The Munich operation adds to the roster of a company that has expanded quickly since it was co-founded in 2016 by Salesky and Peter Rander. Headquartered in Pittsburgh, the firm has engineering centers in Metro Detroit, Palo Alto and Cranbury, N.J. It maintains fleet operations in Miami, Washington, D.C. and Austin.

Argo Munich will serve as the company's European headquarters. With the addition of more than 200 employees there, the company now has about 1,000 employees worldwide.

Prior to Argo's deal with VW, Ford had committed to investing $1 billion to the fledgling company. To date, the Dearborn automaker has invested $400 million, with the rest to follow, said Alan Hall, Argo AI communications director.

Under the terms of the deal, Ford and VW will hold equal minority stakes in Argo, with the rest held by Argo employees. Argo's role in the partnership is to develop the self-driving system that its automaker partners will then use in the development of their products. 

"This deal signifies that we now have a second investor to help finance the continuation of development of that product," said Hall. "It also means we have a second customer for our product. These are both very good things in terms of our business."

For the automakers, the deal is an opportunity to potentially save hundreds of millions of dollars as they pursue the development of autonomous- and electric-vehicle, which are seen as the future of the automotive industry but have yet to catch on widely with consumers. Analysts have said that buy-in from large automakers could help accelerate the adoption of these technologies. 

Ford's autonomous vehicle division is currently test-driving self-driving vehicles in numerous cities, including Detroit. The automaker had initially aimed to launch its first fleet of fully autonomous vehicles in 2021, but has delayed that to 2022, a move it attributed to the coronavirus pandemic. 

VW previously said it would launch products built with Argo's software in the early 2020s. The closure of the VW-Argo deal follows VW's board last week signing off on several projects that fall under its multibillion alliance with Ford. In a news release, the automaker said it expected to sign final agreements with Ford "in the near future."

In addition to their shared investment in Argo, the two automakers will initially collaborate on a handful projects, pending formal approval: a midsize pickup truck to be developed by Ford; an electric vehicle for Ford of Europe that will be built using VW's electric-vehicle architecture; a city delivery van VW will develop; and a larger commercial van developed by Ford.

jgrzelewski@detroitnews.com

Twitter: @JGrzelewski