Is This the Next Big Thing for GOOG Stock?
Alphabet Inc (NASDAQ:GOOG), formerly and better known as Google, and none other than Ford Motor Company (NYSE:F), the very same company that made a name for itself a century ago for inventing motorized mass transportation, will join forces to build a self-driving vehicle. The Internet and automobile giants are expected to announce their partnership on January 5 at the Global Consumer Electronic Show (CES) in Las Vegas, an event that attracts considerable attention. Google’s announcement is sure to give a boost to the company’s innovative image and GOOG stock’s value. (Source: “CES: Google, Ford Self-Driving Vehicle Tie-Up And Volkswagen Electric Microbus Coming, Say Reports,” Forbes, December 22, 2015.)
The “Google Car,” which is a fully autonomous driving car, continues to run in intense testing. Google remains at the forefront of driverless technology and hopes its developing efforts can make it an overall reality as soon as possible. In order to address the challenges of self-driving vehicles, the Google Car is able to communicate with pedestrians, which should make its driverless technology easier to implement on a wide scale, easing regulatory concerns as well.
Google has filed a patent for its Google Car, which allows communication with pedestrians. As Automotive News has reported, Google and Ford will announce a long-term agreement at the CES, which runs from January 5 to 9, at a press conference. (Source: Ibid.)
For the time being, neither company has confirmed or denied the news. Nevertheless, it is clear that by recruiting a major car manufacturer like Ford, Google could save billions of dollars in developing the infrastructure—and experience—to produce cars, speeding up development.
Google Admitted Holding Discussions with Some Car Manufacturers
A Ford company representative offered a diplomatic hint: “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.” (Source: “Ford in talks with Google to build self-driving cars,” Automotive News, December 22, 2015.)
Rumors of possible agreements between Silicon Valley and Detroit have been floated for the past few months and there have even been suggestions that Apple and Fiat-Chrysler may join forces to build the potential “Apple iCar,” presumably also to be driverless.
Google has sent hints to the market of its alliance plan with Ford. In recent months, two former Ford executives, Alan Mulally (Ford’s former managing director), and John Krafcik have joined Google. Alan Mulally joined Google’s board eight days after retiring from Ford and John Krafcik, who spent 14 years at Ford, joined Google to take charge of the company’s autonomous driving car project. (Source: “Alan Mulally, Former Ford CEO, Joins Google’s Board,” The Wall Street Journal, July 15, 2014.)
If that’s not enough to reveal the existence of a budding relationship between Ford and Google, 100 units of the first-generation of self-driving Google cars were assembled in Detroit by Roush Industries, a major Ford supplier.
So the question is: will Ford launch a “Google version” of one of its cars or will Google develop its own car platform, à la Silicon Valley, featuring mechanical technology courtesy of Dearborn, Michigan? Will it be a driverless Ford, perhaps using the “Focus” body and main mechanicals (including hybrid or full electric/fuel cell) with Google-designed sensors, radar, and computers needed for autonomous driving? Or will it be a totally new design?
What Kind of Deal Can Ford and Google Reach?
According to Yahoo! Auto, three sources familiar with the talks have announced that the Ford-Google agreement would create a legally independent joint venture from Ford. Needless to say, such a deal could be transformational for Google and GOOG stock. (Source: “Google Pairs With Ford To Build Self-Driving Cars,” Yahoo! Auto, December 21, 2015.)
The model is sensible and it is not unlike Lockheed Martin and Boeing forming the independent United Launch Alliance (ULA) as a private space exploration firm. Given the novelty of the technology and the potential risks, in the context of an evermore litigious society, an independent company would protect Ford from potential liability.
Surely, the Ford and Google joint venture (one might call it “Forgle” or maybe “Goofor”?) will rely on Mark Fields’ technological breakthroughs. Last January, Fields, Ford’s CEO, launched an extensive technology program, called “Ford Smart Mobility,” last January, aimed at developing new technologies in the car-sharing field to explore new business opportunities. The major role played by IT in driverless technology then pushed Ford to seek suitable partners with experience in IT applications for the automotive sector.
Meanwhile, Ford plans to test a version of the Ford “Fusion Hybrid” with autonomous driving in California and the company said that it would have a driverless vehicle in its lineup within the next four years.
All the more reason to be bullish on GOOG stock.