Detroit carmakers now have sights on Silicon Valley

For the first time in the industrial history of the United States, the center of automotive technology is drifting away from Detroit, Michigan.

With the aim of putting fully autonomous vehicles on the road by 2021, Ford Motor Co announced that it is doubling the size of its office in Silicon Valley to 260 people and investing in four companies that are key to building self-driving cars.

The carmaker's move follows more than $1 billion in investments made earlier this year by Detroit-based General Motors Co in a pair of Californian technology companies to keep up with Google's autonomous-car project and Uber Technologies Inc's ride-hailing business.

While old-school mechanical engineering remains in the Midwest, as does some low-skilled factory work that hasn't moved to Southern states, these investments show Detroit carmakers have realized that they must go to the nation's technology center to find the software expertise needed to make the cars of tomorrow. Traditional automakers now directly employ hundreds of people in Silicon Valley, which is also home to Tesla Motors Inc, which is based in Palo Alto.

"The shift to California is undeniable," said Eric Noble, president of the CarLab consulting firm in Orange, California. "The technological development for autonomous vehicles and intelligent cars will continue to be done in Northern California because that's where the knowledge is."

Tough realities

Ford and GM face a few tough realities in their race to keep pace with the high-tech leaders. Companies such as Google and Uber threaten to upend the industry by turning car owners and drivers into passengers who simply pay for a ride.

Even though the carmakers and the state of Michigan are developing tech talent, Silicon Valley is still ground zero for the people who write code, create driverless algorithms and come up with new business models for mobility.

Ford has invested in Velodyne Lidar Inc which develops the laser-based sensors that are the eyes of self-driving cars, and 3-D mapping company Civil Maps, both of which are based in California.

The Dearborn, Michigan-based carmaker also acquired SAIPS, an Israeli-based computer vision and artificial intelligence designer. It has also reached a licensing agreement with Nirenberg Neuroscience LLC, whose founder, Sheila Nirenberg, has developed a machine-vision platform that Ford said can bring humanlike intelligence to self-driving cars.

"We came to Silicon Valley - there are a lot of great places around the world - but the ecosystem here is just unbelievable," Ford CEO Mark Fields told reporters. "It's like a bazaar of ideas, and everybody's open."

Smooth cruise

GM CEO Mary Barra last year took her top leaders to visit tech companies and venture capital firms to get their thoughts on fostering innovation. GM went on to buy a 9 percent stake in Lyft Inc, a competitor to Uber, for $500 million. GM also spent more than that to buy San Francisco-based Cruise Automation, which writes software for autonomous driving.

Owning Cruise, which has grown from 40 employees to 100, has helped GM hire people who may not have been interested in working for an automaker, Mike Ableson, GM's vice-president of global product planning, said in a June interview. Some people want to remain in the California environment but also have the stability of a large company, he said.

Similarly, Ford's announcement may have been intended to present the maker of F-150 pickups as an "exciting destination for human talent", Adam Jonas, an analyst at Morgan Stanley, said in a research note.

"There is at least a perception in the market that all the cool kids are going to places like Uber, Google, Tesla or China," he wrote. Ford and other automakers "want to change this".

Michigan man

Despite this trend, Michigan is fighting back.

Governor Rick Snyder said recently that Alphabet Inc's Google announced in May that it will open a self-driving car research center in suburban Detroit and that Harman International Industries Inc, the audio and automotive technology company, opened its North American headquarters nearby.

Bloomberg