Otto Co-Founder Returns to Uber to Run Trucking Business

(Bloomberg) -- Lior Ron -- who co-founded Otto Trucking LLC with his controversial business partner, Anthony Levandowski -- will return to Uber Technologies Inc. to run the startup’s trucking business, called Uber Freight, the company said Tuesday.

Both Ron and Levandowski had worked at Alphabet before founding Otto Trucking and joining Uber. In 2017, Alphabet accused Levandowski of downloading more than 10,000 corporate files and using them to help Uber build self-driving car technology. Uber fired Levandowski in May of last year, and settled the trade secrets case with Alphabet Inc. in February for $245 million. In March, Ron left the company.

Now, Ron is returning to Uber following a months-long, behind-the-scenes negotiation to rework the terms of Uber’s deal to acquire Otto Trucking, announced almost exactly two years ago.

The new terms clear the way for Uber to better compete with more established players in the trucking industry, dispatching truck drivers for their next cross-country delivery. Inside the company, Uber Freight is considered one of the company’s most promising growth opportunities, overshadowed only by its fast-growing food delivery effort. Today, Uber Freight service reaches every state in the continental U.S.

“We started Uber Freight with a mission to support the many men and women across the country who work incredibly hard to keep the economy running," Ron said in a statement. Ron will report directly to Uber chief executive officer Dara Khosrowshahi.

As part of the reworked Otto Trucking agreement, Uber will give Otto Trucking shareholders an equity stake in Uber Freight as a standalone business, the company said. Uber owns a majority of that business, but the company declined to provide its exact ownership stake.

Under the original deal terms, Otto Trucking shareholders would have had the right to take a cut of the profits Uber generated from its trucking business, while retaining some of Otto Trucking’s intellectual property. The earlier agreement also made it difficult for Uber to make strategic acquisitions related to its logistics business, the company said. And if Uber Freight were to become wildly profitable, Uber would have had to shell out billions of dollars to Otto Trucking’s employees.

Levandowski, who was fired from Uber in May 2017 after he invoked his Fifth Amendment right not to testify in Alphabet’s lawsuit, is selling his new Uber Freight shares to a venture capital firm and other shareholders, Uber said. The company won’t say which venture capital firm, nor will it say what value the deal assigns to Uber Freight’s business. Levandowski did not immediately return email request for comment.

Ron didn’t work for Waymo, Alphabet’s self-driving car unit, during his time at the search giant, insulating him from some of the more pointed allegations in Alphabet’s trade secrets case. Ron testified in court about times when Levandowski asked him to delete his messages, defending his co-founder as merely a paranoid engineer.

In one text exchange with Levandowksi leading up to the sale to Uber, Ron told Levandowski that they needed "hard terms" with Uber’s then-chief executive officer Travis Kalanick. Levandowksi replied, "Or else we destroy him."

They succeeded in getting the terms. In August 2016, Uber announced a $680 million stock deal to acquire two companies controlled by Levandowski and Ron -- Ottomotto LLC, a self-driving company, and Otto Trucking. The deal was meant to catapult Uber ahead of Waymo in building a fleet of self-driving cars, while allowing the Otto team to continue developing self-driving trucks. Two years later, the Otto Trucking deal had never technically closed, Uber now says.

Today, Uber’s self-driving car testing is on hold following a fatal collision in Tempe, Arizona, and the company has begun to take steps to return to the road. Last week, Uber disbanded its self-driving trucking effort to focus on self-driving cars.

For more than a year, Uber Freight’s focus has been on human-driven trucks, not autonomous ones. Uber has a mobile application that allows truck drivers to schedule their next delivery as if they were accepting a ride on the Uber app.

"Over the past year, Uber Freight has become one of our fastest-growing and most promising businesses. To further enable Freight’s growth, we are setting it up to operate as an independent business unit within Uber, and more than doubling our investment going forward," Uber said in a statement, declining to say how much it plans to invest in Freight in absolute terms. "Lior Ron, who helped lay the groundwork for the strong momentum we’re seeing today, will rejoin Uber to lead the team."

To contact the reporter on this story: Eric Newcomer in San Francisco at enewcomer@bloomberg.net

To contact the editors responsible for this story: Emily Biuso at ebiuso@bloomberg.net, Anne VanderMey

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