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The Pittsburgh-based autonomous driving technology startup Argo is reportedly shutting down after being unable to secure more capital from investors and failing to deliver the technology that its top backers were expecting.

Argo jumped to the spotlight in 2017 when Ford agreed to pour $1 billion into the company within the next 5 years to develop the technology that could lead to driverless cars like robo-taxis.

Next up, Volkswagen joined the ship and invested hundreds of millions into the company with the expectation that its technology could also be implemented in VW’s vehicles.

Five years after the Ford (F) deal, the company is being dismantled and both its intellectual property and employees are being absorbed by the two companies that invested heavily into the startup.

A Fraction of Argo’s Employees Could Be Relocated to Ford and VW

According to sources familiar with the matter who spoke with TechCrunch, the employees of Argo will receive a handsome severance package with healthcare benefits and a portion of the staff will possibly be hired by any of the two automakers. The tech-focused magazine reported that Argo has more than 2,000 employees.

“In coordination with our shareholders, the decision has been made that Argo AI will not continue on its mission as a company. Many of the employees will receive an opportunity to continue work on automated driving technology with either Ford or Volkswagen, while employment for others will unfortunately come to an end”, the AI startup told its employees in a statement.

The reason for shutting down Argo obeys a change in what Ford and VW will be focusing on moving forward in terms of developing self-driving vehicles. As the two automakers are reportedly pulling the plug on the initiative, Argo will lack the capital required to stay in business.

Ford Acknowledges How Elusive Driverless Tech Has Been

Ford told analysts during its latest earnings call that it will be writing off its $1 billion investment into Argo as the development of “Level 4” technology ended up being a highly-elusive endeavor.

“We’ve learned though in our partnership with Argo and after our own internal investments, that we will have a very long road. It’s estimated that more than $100 billion has been invested in the promise of Level 4 autonomy. And yet no one has defined a profitable business model at scale”, stated Jim Farley, Ford’s Chief Executive Officer.

The top executive confirmed that Ford will be onboarding hundreds of Argo’s employees to help the firm develop Level 2+ and Level 3 autonomy for its cars “beyond what BlueCruise can do today”.

Also read: How to Invest in Porsche Stock in October 2022

As a result of the wind-down, Ford took a $2.7 billion non-cash pre-tax impairment on its investment. Ford told analysts that they contemplated other courses of action for Argo including listing the company in the public markets so it could secure the financing it needed to keep developing its autonomous driving technology.

However, the company ultimately decided to wind-down Argo’s operations and make the initiative an in-house endeavor.

Instead of focusing on driverless technology, Ford will now shift to develop more advanced driver-assistance capabilities that it can incorporate into its cars to help users make the most of their driving time.

In a separate press release, Volkswagen also informed the public that it will “no longer invest in Argo AI”. The company’s CARIAD program will now be the only official initiative to develop autonomous vehicles in collaboration with Bosch and China’s Horizon Robotics.

“Cariad will continue to drive the development of automated driving for individual mobility in the Automated Driving Alliance with Bosch. The companies aim to make partially and highly automated driving suitable for mass use and available to everyone”, the leadership team of VW commented.

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