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 In one meeting, both sides were enthusiastic about the futuristic
technology, yet it soon became clear that they would not be working
together. The Internet search company and the automaker disagreed on
almost every point, from car capabilities and time needed to get it
to market to extent of collaboration.
It was as if the two were "talking a different language," recalls
one person who was present.
As Google expands beyond Web search and seeks a foothold in the
automotive market, the company's eagerness has begun to reek of
arrogance to some in Detroit, who see danger as well as promise in
Silicon Valley.
For now Google is moving forward on its own, building prototypes of
fully autonomous vehicles that reject car makers' plans to gradually
enhance existing cars with self-driving features. But Google's hopes
of making autonomous cars a reality may eventually require working
with Detroit, even the California company acknowledges. The
alternative is to spend potentially billions of dollars to try to
break into a century-old industry in which it has no experience.
"The auto companies are watching Google closely and trying to
understand what its intentions and ambitions are," said one person
familiar with the auto industry, who asked to remain anonymous
because of sensitive business relationships.
"Automakers are not sure if Google is their friend or their enemy,
but they have a sneaking suspicion that whatever Google’s going to
do is going to cause upheaval in the industry."
NO STEERING WHEEL
Analysts estimate Google has invested tens of millions of dollars in
an effort that's ultimately a side project. But car companies, all
too familiar with the devastating financial and brand damage of
recalls, would see any hiccups with the self-driving car as a threat
to their main business.
Nowhere is the disconnect more evident than in Google's latest
prototype. Two people sit abreast in the tiny pod-shaped car, which
has a flexible windshield for safety and is topped by a spinning
cone that helps navigation. https://www.youtube.com/watch?v=CqSDWoAhvLU.
The electric vehicles, unveiled in May, are limited to a maximum
speed of 25 miles per hour and do away with several decades-long
constants in motoring: the steering wheel, brake pedal and
accelerator pedal.
Google co-founder Sergey Brin has described self-driving cars as an
on-demand service that consumers summon when needed. That would
represent a seismic shift from a longstanding model based on
individual ownership, an annual $375 billion U.S. market according
to J.D. Power.
Moreover, a study by consulting firm KPMG last year found that
American consumers would trust brands like Google and Apple more for
self-driving cars than they would automakers.
General Motors’ global product development chief Mark Reuss recently
said Google could become a “very serious competitive threat.”
EVOLUTION VERSUS REVOLUTION
Chris Urmson, director of Google's self-driving car group, would not
discuss any negotiations with automakers but argues that
self-driving cars will benefit car companies and consumers by
expanding the number of car users.
"I'm confident that when there is technology that makes sense, and
when there is a business model that makes sense, that there will be
interest and partnerships" with car makers, Urmson told Reuters in
an interview.
Self-driving cars can free people to do more of the things that earn
Google money, such as Web search. But Urmson said Google is still
figuring out how to make a profit from the technology.
"I would imagine that this is probably different than just making
more time for people to click on web sites," he said.
Car makers such as GM, Mercedes and Volvo have been developing their
own autonomous vehicle technology for years.
But most favor an incremental approach to self-driving cars, in
which features such as lane centering and parking assistance are
gradually integrated into vehicles. Car makers are also hesitant to
invest in new features until they are certain there is enough demand
to pay for them.
That approach and car makers' long development process are at odds
with Google’s ambition to create a fully autonomous car in one
swoop. The Internet company seemed to have little patience for
Detroit, according to people involved in the 2012 talks with
automakers.
“There was a certain amount of arrogance on the Google side, in the
sense of ‘We know what we’re doing, you just help us,’” said a
second person, representing a major car maker, who was involved in
discussions with Google.
“We’d say, ‘Well you don’t really know that much. And we’re not
going to put our name on a project like that because if something
goes wrong, we have a lot more to lose.’”
Another potential sticking point is maps developed by Google and
essential for its robo-cars to operate, says Sven Strohband, a
robotics expert who worked at Volkswagen until 2006 and was not
involved in the discussions. That data, compiled by Google, can be
extraordinarily detailed, down to the height of curbs or location of
signs.
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“The question is who owns the data,” he said. "You need to have
frequent map updates and your car can only go where you have really
accurate map data."
Without a driver to blame when accidents happen, the vehicles could
bring greater liability for car makers.
Google's assurances to one car maker that it would take
responsibility for accidents due to its technology, and that the
data collected by the cars makes it easy to pinpoint fault, was
dismissed, according to the first person involved in the 2012
discussions.
“I just couldn’t believe my ears and was like ‘Wow you live in a
bubble,’” the person said. “Car makers never get to decide who is at
fault. It’s the lawyers, the judge and the jury.”
STARTING SMALL
Whether Google opts to license its technology or seeks to build cars
to its specifications, Google will need Detroit for the last mile,
say industry experts and insiders.
Google has made headway in less sensitive areas such as
entertainment and navigation. In January, Google teamed up with GM,
Audi, Honda and Hyundai to form the Open Automotive Alliance to
incorporate its Android operating system, the software for mobile
phones and tablets, into cars.
And it has taken steps to understand regulations better, hiring Ron
Medford, the National Highway Traffic Safety Administration’s former
Deputy Director, in November 2012.
“My view on this is both parties probably need each other,” said
Strohband, now Chief Technology Officer at venture capital firm
Khosla Ventures.
A source at one automaker said the company talks to Google on a
weekly basis about auto matters, though they have not partnered on
self-driving cars.
Some in the industry predict fully automated cars will be available
as soon as 2020, though research firm IHS Automotive does not expect
the cars to be widely available until 2035. For now, Google is
starting small with 100 to 200 prototype cars. It wouldn't identify
manufacturing partners, though industry reports pinpoint
Michigan-based Roush Enterprises, which assembles small volumes of
custom vehicles such as race cars. Roush declined comment.
To build anything more than a couple thousand cars would likely
require an automaker partner. Industry insiders point to critical
systems such as steering and suspension, the intricacies of working
with hundreds of suppliers and high-volume production at consistent
levels of reliability as skills that cannot be learned overnight.
While Tesla Motors offers an example of an outsider breaking into
the business, the electric car maker has benefited from a hefty
government loan and from having access to the shuttered GM-Toyota
NUMMI car manufacturing plant in Fremont, California.
The cost to launch a new car model, including costs of developing
and tooling, is generally $1 billion to $1.5 billion. For a company
starting from scratch, such as Google, that cost would likely be
higher, say auto industry experts.
Some industry observers have suggested that Google should pair up
with Tesla, which is also developing self-driving technology and
which shares Google's Silicon Valley mindset. With roughly $60
billion in cash, Google could also acquire a smaller auto company,
some speculate, though they note that such a move would involve more
ongoing costs, liabilities and cultural challenges then Google may
be willing to accept.
"Google is the 800-pound gorilla in the room and nobody wants to
miss the boat," said Edwin Olson, assistant professor of computer
science at the University of Michigan, who works with Ford on an
automated vehicle project. "But at the same time I don’t think
automakers want Google to be dictating terms if the time comes and
Google is the only game in town."
(Additional reporting by Deepa Seetharaman in San Francisco, editing
by Edwin Chan and Peter Henderson)
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