Waymo Isn’t Slowing Down: Pact With Honda Could Include Delivery
(Bloomberg) -- Waymo, the self-driving car company started by Google, did nothing after an autonomous vehicle run by Uber killed a pedestrian in Tempe, Arizona. It didn’t pull back on tests in the nearby suburb of Chandler, where passengers are already taking rides with no one behind the wheel. Its fleets elsewhere didn’t abandon public streets, a precautionary move made by Toyota.
John Krafcik, chief executive officer of Alphabet Inc.’s Waymo, decided to wait.
“What really brought it home was the Tempe police releasing the video,” he said. He watched the grainy footage of the world’s first self-driving death. Uber’s car barrels down the road, a woman pushing a bicycle crosses into the frame, and neither the autonomous car nor its human monitor acts to slow down. The safety driver appears to be mostly looking away until impact.
For Krafcik, the crash video validated the philosophy Waymo had been following long before he joined, back when it was still part of Google: Never trust humans in cars.
“That just reinforced it,” he told Bloomberg during an interview on March 24 in Las Vegas. Later that day he took the stage at a car dealer convention and went further: If a Waymo vehicle encountered a similar situation, Krafcik claimed, the car would have avoided the death without human help.
“We asked all the hard questions before we deployed,” said Dmitri Dolgov, Waymo’s technical chief, who seconded Krafcik’s assurances of superior safety. That confidence is reflected in Waymo’s continued push in the days after the crash. Krafcik announced a deal last week with a second automotive partner, Jaguar Land Rover, to supply vehicles for the Waymo ride-hailing service slated to launch this year, adding to the existing fleet from Fiat Chrysler Automobiles NV.
Waymo is now nearing a final deal with a third automaker, Honda Motor Co., in a move that will test the company’s ability to compete in the $164 billion delivery and logistics market. The delivery focus of the alliance with Honda hasn’t been previously reported. The companies have been silent since announcing talks in late 2016, but results are coming soon.
Krafcik said not to expect the new service to take the form of a “traditional car driven on roads.” His comments suggest Waymo is ready to try co-creating a vehicle from scratch with an automaker rather than modifying existing models, as it has done with Jaguar and Fiat Chrysler. The Honda model may move people and goods, Krafcik hinted; it might be smaller than a truck and could come without a steering wheel or brakes. A Honda spokesman said the companies are “continuing to explore” the relationship.
Making bold safety claims and announcing new partnerships in the wake of the industry’s worst accident yet could come across as tone deaf. It might even seem like a victory dance. Waymo spent the last year suing over Uber’s driverless technology before settling in February, and now that technology is being scrutinized by politicians, investigators, and even Uber’s own suppliers. Can Waymo really be so sure its own technology is impervious to tragic error?
That’s a question Krafcik, 56, will grapple with in his emergence as an important face of autonomous driving. He must now convince an industry and public given another reason to be skeptical of unproven technology undergoing growing pains on crowded roads. The crash serves as a reminder that the infrastructure and knowhow for widespread robot cars remains years—maybe decades—away. Interviews with fourteen people who have known Krafcik over the last three decades depict a journeyman auto executive forced to master a peculiar mix of technical transition and public relations.
“He just has amazing equilibrium,” said James Womack, a longtime mentor who worked with Krafcik at the Massachusetts Institute of Technology. “He’s the guy for dealing with chaos.”
Krafcik has also become the strongest bet to deliver on a longstanding dream of Google’s founders to birth a multitude of other Googles. That was the idea behind the new Alphabet holding structure introduced by CEO Larry Page a few years ago. Things have sometimes seemed to go backward since then. One Alphabet company, Nest, recently folded back into Google; another housing Google Fiber has pared back significantly.
Waymo, flush with cash and personnel, is often trotted out to investors as the best example of Alphabet’s capacity to produce another colossal hit. It’s set to launch a paid taxi service in Phoenix this year and expand passenger trials to a second city. Some observers credit this first-mover advantage to Krafcik, whose career straddles Silicon Valley and Detroit in a way few can match. But his first three years as CEO have also been marred by a bitter lawsuit featuring allegations of trade-secret theft, dramatic staff defections that sent key personnel to rivals, and the sudden onslaught of just about every car company frantically moving into self-driving research.
Reilly Brennan, an investor and Krafcik friend, compared the decision to take the helm at Waymo in 2015 to Bob Dylan ditching his acoustic guitar in 1965 and anticipating the future. “The evolution is the same as Dylan going electric,” Brennan said. “John is plugged in.”
There are skeptics, even among Krafcik admirers. Mike Jackson, CEO of AutoNation and a Waymo partner, lauds the company’s tech while questioning the inevitability of robotic ride services replacing car ownership. The assumption of ubiquitous carpools, a staple in every Silicon Valley dream of transportation’s future (and the cash flow projections that go with it), doesn’t sit well with the veteran car salesman.
“You can’t get in this thing with a bunch of strangers,” Jackson scoffed during that recent appearance on stage with Krafcik in Las Vegas, while a crowd of car dealers looked on. The Waymo boss adjusted in his seat and smiled but didn’t respond.
The youngest of eight in what he considers a family of “car nuts,” Krafcik finished college at Stanford University and knew he wanted to make vehicles. His then-girlfriend had a year left in school and that meant Detroit wasn’t an option. He landed a two-year gig at NUMMI, a joint venture of General Motors and Toyota, and studied under Yoshimitsu Ogihara, an engineering manager who Krafcik affectionately calls his “Yoda.”
Krafcik’s next career turn happened during grad school at MIT. He saw a bulletin board posting, in 1986, seeking help with a “global study of automotive practices.” Womack, then the director of the university’s motor vehicle program, was looking for an assistant. “It took me a nanosecond to know this is the guy I need,” Womack recalled.
Krafcik’s background at NUMMI was a natural fit for Womack's project to probe, among other things, why Japanese automakers could churn out cars with better reliability at three times the pace of their American peers. The research didn’t always go over well. On Krafcik’s first visit to a GM plant outside Boston, the floor manager snapped, “Those guys make Jap crap. I make Oldsmobiles. You get that, son?’”
Womack recalled that Krafcik “was a superlative diplomat” and a “slight, lithe, gazelle-like guy” who would bound from plant to plant, collecting data to show how everyone was doing things wrong.
“Eventually,” Krafcik said, “the industry got religion.” He ended up coining the term lean production as a result of his research.
Next, he climbed the ranks at Ford before leaving in 2004 for the insurgent Korean automaker Hyundai. He became CEO of its U.S. operations in 2008, making a mark in the financial crisis with the Sonata. Ads starring Jeff Bridges peddled the model as a low-frills, inconspicuous luxury car.
John Suh, a former colleague now at Hyundai’s venture arm, Cradle, said Krafcik promoted technical add-ons like automatic emergency breaking and remembered him as a “real standout” in marketing. That knack helped fuel growth in the U.S. until sales dipped in late 2013, and Krafcik was gone. Conventional wisdom in the industry links Krafcik’s departure to weak sales, but he insists he had simply exhausted his stay. “There was really no career progression path for an American executive,” he said.
He spent four months as a free agent, fielding offers. A call came from Tesla CEO Elon Musk, now a reliable Waymo foe, according to two people with knowledge of the situation. (Krafcik said he and Musk have spoken before but wouldn't comment further; Tesla declined to comment.)
He took a role as the number two at TrueCar, a website that crunches data to match car shoppers with deals. Depending on who you ask, Krafcik was brought on to be a diplomat with dealers who had turned hostile, massage the automakers involved in rebate programs, or glad-hand investors ahead of the IPO. TrueCar’s stock has returned to the $9 price from its 2014 debut, and Krafcik remains on the board.
TrueCar marked Krafcik’s first foray into a digital firm, and its complicated business forced him to navigate nearly every nook of the car world. Just not autonomy: “Never heard him say anything about it,” said Mike Dunn, TrueCar’s former CTO. “Nobody ever talked about it.”
The Google recruiter came for Krafcik in 2015. Page was scouting an automotive hand for what was then a six-year-old car project. Krafcik took his first ride in Google’s Firefly, a squat prototype he would later eliminate. He reached out to Womack, and the management professor advised caution: He would be committing his career to an effort that demanded unprecedented technical feats, and, perhaps more so, unseen social change.
“Off the 30 meter board,” Womack said, “this is a jump, with a tuck, into a pail of water.” Krafcik started at Google that September.
For his first initiative, Krafcik tried to cut an ambitious deal with a former employer: Ford. The two companies conceived a plan with new self-driving vehicle designs and a multi-year business alliance. The talks collapsed after Mark Fields, Ford’s then-CEO, flew to Google’s headquarters for a dinner with Page where he pushed for a faster timeline, according to a person familiar with the episode.
Krafcik said Waymo walked away because the terms were unfair. “It just wasn’t the right one for us,” he said. “We already had the risk of the technology. We’re also deciding on vehicle formats for years and years and years. There was significant capital risk on our plate, not shared equally.” A Ford spokesman declined to comment.
This was also the moment when Krafick discovered brewing rancor within Waymo. Anthony Levandowski, a founding engineer on the Google self-driving project, had simmering disputes with Chris Urmson, the program’s longtime leader. Krafcik was brought in to “referee a cage match,” a former employee said. Tensions boiled over, and Levandowski left—but not before sending an email to Page that criticized Krafcik and the attempted Ford deal and proposed splintering the car team. (Waymo later sued Levandowski for allegedly taking trade secrets to Uber. The case settled earlier this year.)
A minor victory for Krafcik followed when he scored a deal with Fiat Chrysler. But that celebration was cut short by the August 2016 exodus of Urmson and several early members of the team. Former Waymo employees describe the departures as tremendously dispiriting. Some were also frustrated that partnership talks were all redrawn when Krafcik joined, according to one person, contributing to a sense that business plans were constantly in flux and shaped by pressure from rivals like Uber and Tesla. The former Waymo personnel asked not to be identified discussing a past employer.
Waymo’s spin on these departures is that they coincided with a transition in driverless cars: This was the moment the project moved from its early incarnation as a pure research gambit towards its commercial destiny. In other words, a shift from a Google project to the free-standing business of Waymo. That idea is undercut somewhat by the fact that Urmson and several others who left are now working on self-driving companies with commercial aims.
Jaime Waydo, who runs Waymo’s systems engineering, points to the veterans who stayed, including Dolgov and Andrew Chatham, who runs maps. Even those critical of Krafcik praise his hiring, particularly his deputies Shaun Stewart (head of partnerships) and Tekedra Mawakana (the policy lead).
Krafcik’s boosters see him as a turnaround exec. “He has had to take that organization and get it out of the ditch strategically,” said Eric Noble, an industry consultant at the Carlab. “In a very short amount of time.”
One of Krafcik’s signature tactics is turning to collaborators, something Google has historically spurned. When Waymo’s robot fleet in Phoenix grew beyond its staging warehouse, the team prepared to buy a second building. Krafcik proposed outsourcing instead.
“Everyone’s thinking, ‘Really? A partnership for a depot?’” Waydo recalled. The boss got his way and signed a deal with rental-car firm Avis to manage the fleet.
AutoNation, another partner, is working to extend the life of Waymo’s Chrysler minivans to at least 250,000 miles. After the Ford talks failed, Krafcik shifted strategy to court these sorts of automotive veterans who had become laggards in autonomy. The deal announced last week with Jaguar is an example of this approach. The luxury carmaker hadn’t invested heavily in self-driving research, and so a pact to sell 20,000 SUVs to Waymo by 2020 puts its vehicles on the front lines of automation.
The Jaguar deal makes Waymo’s upcoming fleet significant, but not nearly big enough to create a multi-city taxi service to rival the reach of Uber’s enormous population of human drivers. Tesla and GM are also preparing rival services based on their own technology.
Continuing to find new partners might eventually be a challenge. Despite Krafcik’s charm offensive, carmakers are wary of how much customer experience, data and revenue they want surrender to Waymo. Some have spurned the tech giant, including Hyundai, which opted instead to work with Urmson’s new company, Aurora.
Krafcik said that future deals with Hyundai, Ford and others are all possibilities, and he has talked to companies in China, too. (He said he hasn’t spoken with Uber CEO Dara Khosrowshahi since the settlement of the lawsuit.) He now sees Detroit, after years of fearing Google, feeling less threatened. “Very much so,” he said.
Some onlookers question if Krafcik will be around to see Waymo’s alliances through. “You can’t meet John,” said Noble, the consultant, “and not think he’s someone that would have fun running a carmaker.”
For now, though, Krafcik looks to be having fun running a company that’s resolutely not making cars. On the convention floor in Las Vegas, he spotted a Ford Transit Wagon. It’s a hulking eight-seat model he worked on years ago that looks best suited for shuttling around a troop of Girl Scouts or a military platoon.
Krafcik leaped into the second row and turned to the nearest Ford employee: “Do you have a self-driving version?” The answer was no.
“Coming soon,” Krafcik said with a laugh.
©2018 Bloomberg L.P.