Ford and Google Announce 6-Year Partnership
The deal will allow Google to enhance Ford's in-car connectivity. In addition to the in-car connectivity, the partnership will include cloud computing and other technology services that will be implemented into Ford vehicles. The partnership is a major piece of Ford's 11 billion restructuring plan that hopes to streamline Ford's operations.
Google will also benefit from the deal due to the increased market share it will gain in cloud computing. The major tech firm has fallen behind rivals Amazon and Microsoft. According to estimates from technology industry research company Gartner, in 2019 Amazon controlled 45 percent of the cloud computing market, while Microsoft had 18 percent and Google had only 5 percent.
We always say, ‘Hey, let’s look at what problems we are trying to solve for the client,’ and ‘How do we think more broadly about that?’” said Thomas Kurian, CEO of Google’s cloud unit, in an interview on Monday. “In some cases they want only the cloud portion from Google. In other cases, they want other aspects of Google.”
The deal explicitly states that Ford and Lincoln vehicles will have Android, Google Assistant, Google Maps, and Google Play accessibility starting in 2023. Google's cloud services will allow access to additional services. Lastly, Google will implement artificial intelligence capabilities into Ford's supply chain and manufacturing operations.
Ford CEO Jim Farley, who assumed the role in October 2020, has been vocal about the importance of partnerships in today's market. “One of the most important parts of our strategy is to partner,” Farley told CNBC. “That means that we have to get out of the business of doing generic things that we do not add value, like navigation systems and a lot of the in-car entertainment experience.” Since Farley took over as CEO, Ford shares are up more than 60 percent.
“We were spending hundreds and hundreds and hundreds of millions every year, keeping up with basically a generic experience that was not competitive to your cellphone,” he said. The financial specifics of the deal were not disclosed, but Farley stated that it was worth "hundreds of millions." Farley also revealed that Ford had evaluated options other than Google, but ultimately chose the tech giant due to its cloud services offerings.
“It’s a tremendous opportunity. Bigger than electrification,” Farley said. “All the digital capability and conductivity and the digital ecosystem outside of the vehicle are all coming together to a loyalty model, where people will have a much more difficult time switching brands.”
Following the news, shares of Ford surged as much as 8.6 percent during Monday's session. Alphabet shares were up around 3 percent.