Q&A Part 1 | Dragos Maciuca

So as I said, the way we typically work with startups is either we do local proof of concept or we become the pass-through for the technology for others to— back in Dearborn to use. We act sort of, as I said, as cultural translators that they need to understand what goes on in Silicon Valley and we're trying to also putting some of the agility, some of the dynamicism that we have here, we're trying to inject it back into Dearborn, into the mothership. But also the other way around, trying to educate the startups how to work with us. Very important to making the introductions to tier 1 or tier 2 suppliers. So as I said, a lot of times we may find a technology from a 2-person startup that's really critical to what we need, but we're not going to buy the technology from a 2-person startup because we need to have it for the next 10 years. They're not going to be able to support us. They may want to change direction along the way. So to some extent we do these forced marriages between the tier 1 supplier and the startup and we get the tier 1 supplier to adapt this technology. The other thing also that's been happening is that for a long time we've just been buying technology from tier 1 suppliers. That means 2 things. One is that we're getting the technology filtered through their business models and through their eyes. And 2 is that it's late because by the time they show it to us, the technology has been pretty well developed. So we're not trying to bypass the tier 1 suppliers, but we want to learn what goes on behind them. A lot of times we're gonna look at the technology way ahead of time and then if we like something, we will recommend it to a tier 1 or even force a tier 1 supplier to use it so that we can get it faster and we get the specific technology that we're interested in.

Yeah? So in this whole life cycle, how much as a Ford who has been traditional automaker are open for innovation? For their in-house incubator instead of depending on the— which is of course the risk for a small startup company of 2 or 3 because of their livelihood, right?

Yep.

No guarantee when they can close or change the direction. So have you thought through Ford itself having their own R&D, that kind of incubator inside the company?

Well, so—

That's what I'm doing pretty much.

I mean, that's basically what we're doing with this office here. This is partly an internal incubator, but we are just leveraging the technologies that are around us. So we don't depend 100% on the startups, but we are leveraging the technology that they offer. So with the people that we have here, we are developing a lot of technologies ourselves, but in conjunction with the startups that we work with, so that basically becomes an amplifier effect. It's the startup's technology plus our work that gets it into Ford.

I see. So you're going through that learning and then morphing more into your own self-sufficiency down the road.

No, I think the model of working with startups, it's always gonna be here because again, I would be very concerned of us developing our technology only. So you can run into 2 extremes. We're starting from one extreme where we've outsourced pretty much everything to the tier 1 suppliers to the point where we don't know what's in our— we get black boxes from them. So we don't know what's inside. It's harder to debug. It's a lot harder to defend if something bad happens. Plus, especially with autonomous vehicles, it's very important to connect a lot of sensors together. So when each sensor does its own thing, it's somewhat OK. But when you need a LiDAR to talk to a camera to talk to a radar, and you buy each one of them from a different supplier, you better understand how the software works so that you can glue them. Otherwise, who's going to glue them for you?

Exactly.

So that's one extreme. We're trying to bring more of that in-house. If you do everything in-house, you're guaranteed pretty much to miss a lot of cool technologies that or relevant technologies that others would be developing. Plus a lot of times what I find by far the most exciting is when you find a technology that wasn't even developed for the automotive industry. We found, again, 2-person startups that developed stuff for solar panels. They developed stuff for painting buildings. But because you understand how the technology works and you understand the needs on the automotive industry side, you can make that translation. Otherwise, they would have never come to us because they never had the automotive industry on their radar screen. But because we meet them either by chance or because we're focused on finding a particular technology, we find them and we bring them in. And so I don't want to reach a stage where all the development is done in-house. I don't want to be at the stage either when when we simply buy everything from someone else and we just integrate it, because then you become sort of the Foxconn for Apple, and you don't want to be there either because the margins are horribly low. So again, it's all about this balance between what you do in-house and what you bring from startups, between having— looking at a lot of crazy ideas that most of them are not going to pan out, to focusing on a few projects that are solid and going to production. Again, if the pendulum swings too much to one side or the other, it's never good.

I'm just trying to put a shirt on because we are in a different business model, just trying to understand from auto industry side that how open as an executive of Ford, how much, how many percentage of time you spend with tier 1 vendors convincing them convincing them that yes, it is good to partner with this startup to make a win-win situation. Is it, in your situation, let's say, or other executives, is it easy or they are still into that show mode, tier 1 suppliers, and adopting is a little harder?

No, I think they're actually changing quite a bit too. I mean, if you look at the acquisitions they've done, they've done a lot of acquisitions in sensors and software in the last couple of years. couple of years. So they're definitely moving faster.

So they're open enough?

Oh no, absolutely. And especially when they know that we want it, it makes— I mean, it's one thing if a startup goes to a tier 1 supplier and goes, hey, I have some technology that we think is good for the automotive industry. That's one discussion where it's kind of slow. When we go to a tier 1 supplier and tell them, hey, grab that technology because we want it and we're gonna put it in 5 million vehicles, That's a completely different discussion.

That's right.

So they are much more open to that. But yes, of course it has to make sense for them also because they need their own profit. But in general they've been very receptive. Plus that most of the time if we want it, most likely someone else will want it too. So typically the most you can get out of something like this for us, it's exclusivity for a year or two, but eventually— and it's also in our advantage that eventually these others pick it up too because that will bring down the cost. If it's just us, it's 5, 10 million units. If it's the entire industry, then we're talking about 100 million units. So it's a different discussion that helps us. So typically all we want to get from the forced marriage is a couple of years exclusivity. I think I'm done, by the way. This is the last point that when we work with startups, it's basically a long-term due diligence, technical due diligence. So unlike a VC that may spend a couple of weeks with the startup figuring out their technology, we get to spend several months and actually do a proof of concept working with the team, seeing how the team works, seeing how the technology works. making sure that it really gives us what we want. And then if it's really strategic, we have the opportunity to invest. And we have a strategy group that's dedicated to mergers and acquisitions, and we've done already a whole bunch of investments. There are more that we're going to announce in the next few months. It's all about bringing this technology in and making sure that when it's really strategic, that we get to keep it in-house and It doesn't go away in a different direction.

Excuse me.