Google's Self-Driving Car Quest Now Runs Through -2-

By Tim Higgins Features Dow Jones Newswires

MOUNTAIN VIEW, Calif. -- John Krafcik can speak two languages, Motor City and Silicon Valley, and if Google makes progress in developing self-driving cars, it might have his translation skills to thank.

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After building his career at Ford Motor Co. and Hyundai Motor Co., Mr. Krafcik, 55 years old, now heads Google's self-driving car effort, called Waymo. Unlike automotive industry executives, who tend to have plush offices, he has a desk among software engineers. On a recent afternoon, the desk was mostly clear except for a copy of trade journal Automotive News.

The tech and auto industries have been at loggerheads for years. General Motors Co. was so annoyed with Google, a unit if Alphabet Inc., it once tossed one of its software engineers off a test track for plowing through cones. Fiat Chrysler Automobile NV's Dodge ran a television ad that took a thinly veiled shot at the tech giant. More than two years of on-and-off talks with Ford were fruitless.

The mutual mistrust has fostered a confusing array of alliances between automakers, ride-hailing companies, rental-car concerns and tech giants. Silicon Valley looked down its nose at the mundane work of manufacturing. Detroit feared being turned into a commodity producer making a shell for others to fill, like cellphone handset makers, a problem Mr. Krafcik wants to solve.

"We're not a disruptive element, we're an enabling element," he said in an interview.

Whether Mr. Krafcik can knit the two industries together will go a long way in determining the future shape of the robot-car market and who stands to profit from it.

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At Waymo, Mr. Krafcik is leading efforts to apply driverless technology to a range of uses -- whether for ride-hailing, freight delivery or public transportation -- and possibly license it to car makers. He has forged partnerships with Fiat Chrysler and is in talks with Honda to build self-driving cars. That's helped Waymo deploy the largest fleet of self-driving cars, racking up more than 3 million miles of testing on public roads and leaving GM, Ford and dozens of other auto makers rushing to develop their own technology.

There have also been setbacks. GM, the largest U.S. auto maker by sales, explored partnerships with Waymo but shifted tactics after talks stalled and instead acquired an autonomous-car tech startup called Cruise Automation in a deal that could be worth more than $1 billion. It also invested $500 million in ride-sharing startup Lyft Inc. Talks also unraveled with Ford, which earlier this year pledged to invest $1 billion in artificial intelligence startup Argo AI.

Some question whether Mr. Krafcik has figured out how to maneuver the levers of power within the large tech company.

"He needs to be a futurist, a technologist, a salesman, a counter-regulator, a hacker, a financier," said one Google car alum.

Misunderstandings between Detroit and Silicon Valley were commonplace after Google began teasing details about its car efforts in 2010. Automotive executives were dismissive of the engineers Google recruited from self-driving car competitions held by the Department of Defense. Google's engineers, meanwhile, turned their noses up at Detroit in their pursuit to quickly put the technology on the road.

One of the earliest flirtations with an auto maker, Fiat Chrysler's Dodge brand, didn't go far. Google gave a test ride to a senior executive, according to people familiar with the matter said.

Soon after, Dodge began running commercials mocking the idea of self-driving vehicles made by "a search engine company." In the TV spots, the baritone voice of actor Michael C. Hall says, "We've seen that movie...it ends with robots harvesting our bodies," followed by footage of the 2011 Dodge Charger that he introduced as the "leader of the human resistance."

Around the same time, members of the Google team were invited to an event by GM as it began selling in late 2010 the plug-in hybrid Chevrolet Volt, Detroit's high-profile effort to counter Toyota's Prius.

During a driving session on a closed course, one of the Google employees began showing off his drifting skills--where the driver intentionally over steers through a turn. The stunt knocked over safety cones. A furious GM manager threw the team out, said a person at the event.

The incident became lore among some GM managers. "We had to restrict them a bit. They weren't very good drivers," said a former senior GM executive involved with the Volt introduction. "At least not as good as the car guys from Detroit."

Google declined to comment.

Google's so-called Chauffeur team, which in its earliest days was a rag-tag bunch, tried to polish its pitch to charm Ford. The Dearborn, Mich., company was interested in replacing its vehicles' software with Google products such as maps and music but the Google team only wanted to talk about robot cars, a person familiar with the effort said. "We came across as arrogant Valley punks -- and we were," a former Google employee said.

Ford executives were put off by the fact that Google was testing vehicles on the roadways, a practice Ford considered premature. "They were looking at our vehicles and thinking of them like science-fair projects," the former Google employee said.

Google didn't have luck with Japanese auto makers, either. Discussions with Honda Motor Co. prior to 2014 didn't progress, said Nick Sugimoto, the head of Honda's Silicon Valley office. "They were inflexible. They weren't clear about what they wanted, and they really didn't listen to me," he said.

Google couldn't decide whether it should develop its own car or leave that to an auto maker. At one point they debated the merits of acquiring electric-car company Tesla Inc. Google co-founder Larry Page told the group, according to a person in attendance, that "he didn't want to drive a Tesla, he wanted to drive a Larry." A Waymo spokesman declined to comment.

In 2014, Google sent a chill through the automotive industry with the unveiling of a pod-like car it had designed. The "Firefly" car sent a clear message to Detroit that Silicon Valley could compete. Apple's efforts to develop its own self-driving technology leaked out in 2015.

Google was eager to put more vehicles on the road to test with real customers and pushed for putting the technology in Ford and GM vehicles. Those talks also stalled.

Jon Lauckner, GM's head of R&D, visited the Google campus and expressed doubt the technology was ready for use, according to people familiar with the meeting.

Months later GM dispatched its president and its product chief to smooth things over with Google, but the two sides still couldn't cement a deal. GM executives were unhappy Google wanted the automaker to only supply vehicles, these people said. Google thought it had the leverage, thinking GM didn't have another option, this person said. To its chagrin, GM surprised the industry last year with plans to acquire Cruise Automation.

Mr. Page and Google's other founder Sergey Brin realized they needed someone from the automotive industry with relationships, according to a person familiar with their thinking.

In Sept. 2015, they hired Mr. Krafcik. He had begun his automotive career more than 30 years ago at a car factory about a half-hour drive from Waymo's offices.

As a young engineer-turned business student at the Massachusetts Institute of Technology, he visited 90 car factories in 15 countries to study why the Japanese companies were better at making cars than U.S. companies. His studies contributed to a seminal book, "The Machine That Changed the World," on "lean production" techniques that inspired a generation of car makers.

As chief executive of Hyundai Motor America, he helped make sales gains in the wake of the 2008 financial crisis when other automakers were failing.

His name had been floated as a potential Ford chief when Alan Mulally he retired in 2014 and as a candidate to run GM after it emerged from bankruptcy. He also had experience in the tech sector as president of online car-buying website TrueCar.

"Being able to speak the language of the automotive ecosystem is very important to us," said Astro Teller, head of Alphabet's Google X, an R&D division that was home for the self-driving project until being spun out as Waymo last year.

Mr. Krafcik joined Google when the company was months into talks with Ford about investing in an electric car program in exchange for thousands of cars. The sides were so close to a deal that a news release had been drafted, according to people familiar with the matter. Mr. Krafcik told Messrs. Page and Brin he thought the project was too costly and time consuming, the people said. Google ended the talks.

Several of the program's top engineers have left under his watch, including the program's former leaders, Chris Urmson and Anthony Levandowski, who both set up competing companies.

Mr. Levandowski is at the center of a legal battle between Waymo and Uber Technologies Inc. Waymo alleges Mr. Levandowski stole trade secrets from Google to help jump start Uber's self-driving program. Uber denies wrongdoing and fired Mr. Levandowski, who hasn't commented on the allegations.

Mr. Krafcik's message to auto makers is that he wants to make better drivers, not cars. In a world of self-driving cars, many industry executives expect traditional car ownership to be upended as consumers begin paying for rides rather than sheet metal.

In a conference room named after a robot, Mr. Krafcik scribbled numbers on a whiteboard: 3 trillion and 17 million. The bigger number was the total miles driven in the U.S. last year, while the smaller one was roughly the number of new car sales across the country. The challenge was to get consumers spending on the distances they travel in cars rather than on the cars themselves.

If the average large automotive company turns a profit of about $1,400 per vehicle sold, he said, a vehicle that lasts 150,000 miles only garners about a penny per mile.

"The thing that the industry is struggling with right now is that for the 100 years it's been in existence it's been focused on the number of units built," he said. "We are moving to a world where...it has to be miles driven."

Mr. Krakcik said he began talks with Sergio Marchionne, the chief executive of Fiat Chrysler, which lacked the resources to develop its own self-driving software. Months later the two executives announced a deal for Waymo to integrate its hardware into 100 minivans, a partnership that was expanded to 500 more minivans this year.

Mr. Krafcik liked that the new Chrysler Pacifica minivan had two things: rear doors that open and close with the push of a button and plenty of electrical power to run onboard computers needed to drive the car.

The trial program marked a turning point for Google. For the first time it was working with an automaker to install its own software and hardware. That allowed it to retire the Firefly. Mr. Krafcik then developed a deal with Avis Budget Group to maintain the growing fleet. This year, Google began allowing non-company families in the Phoenix area to try out the vehicles.

Waymo is also working on a user experience that allows passengers to feel comfortable with riding in a vehicle without a human driver. It includes a display system that tells riders why the vehicle is making decisions, such as stopping, people familiar with the effort said.

In December, Mr. Krafcik announced that Waymo and Honda had rekindled talks over a possible partnership. This time around, Google's attitude was sharply different, said Honda's Mr. Sugimoto. "John was very clear about his intention is not to invade the auto industry or destroy the existing supply chain," he said.

During a tour that he often gives to curious automotive executives, Mr. Krafcik rushed through a garage with rows of decommissioned robot cars, now being prepared for exhibits around the world. Then he opened a door to the employee parking lot and pointed to his ride, a white 1990 Porsche 964 Targa.

"People worry that with the work we're doing...that we're going to take all of the joy out of driving," he said. "I don't believe that's true. There's always going to be stuff like this."

--

Mike Colias

and

Christina Rogers

contributed to this article.

(END) Dow Jones Newswires

September 11, 2017 17:08 ET (21:08 GMT)