Integrating Circuits

Not since Detroit absorbed California hot-rod culture have the Motor City and the Golden State embraced each other so tight. The quest to perfect self-driving cars and find innovative mobility solutions made it happen. Is this the biggest story in American business?

A few years ago, when Silicon Valley companies started looking at autonomous vehicles and the emerging field of mobility, Detroiters were suspicious. Redoubtable forces in the Valley seemed bent on taking over auto manufacturing, achieving utter economic dominance, and forcing the world to ride as captives inside robot pod-cars.

Apple and Google were thought to command the next steps of the automotive future, while Tesla founder Elon Musk stung with brash statements about Detroit’s ineptitude.

People in Silicon Valley had their own misconceptions. They saw Detroiters as a chest-thumping tribe obsessed with hydrocarbons and ice fishing. Indeed, they wondered, had the people of the Motor City ever faced a problem that couldn’t be solved with a sledgehammer? It didn’t help that squadrons of battery-powered Nissan Leafs and serried ranks of Teslas dominated Bayshore Freeway traffic streaming through Palo Alto. In this enclave, a Chevrolet Malibu was as rare as a flip-phone.

The misconceptions on both sides led to a real and perceived battle for the future of the autonomous world, with both Detroit and Silicon Valley initially determining they could go it alone. At the same time, other mobility clusters, namely in Stuttgart, Tokyo, Seoul, and Shanghai, were seemingly cheering the scrimmage on for fear the two regions would settle their differences and begin to dominate the future mobility transportation space.

“The world needs solutions for hyper urbanization, scarcity of resources, and, most importantly, safety,” says Glenn Stevens, vice president of automotive and mobility initiatives at the Detroit Regional Chamber and executive director of MICHauto, an economic development initiative to promote, grow, and retain the automotive and mobility industries.

“There’s no question the automotive and technology worlds have converged, and while many people look at this as a competition, it’s really an opportunity. It might have been a competition at first, but today the crosscurrents between Detroit and Silicon Valley have grown strong.”

“Silicon Valley suffered from hubris, and Detroit suffered from defensiveness.”
— Eric Noble, product guru at The Car Lab

In fact, most of the world’s automakers — even some that don’t sell cars in the United States — have a presence in southeastern Michigan and the automotive corridor extending from Sunnyvale, where Mercedes-Benz established an R&D center in 1995, into next-door Mountain View, another of the leafy West Bay suburbs between San Jose and San Francisco. In spacious office parks here, engineers and social scientists are determining so many aspects of future mobility.

Sobering up after some conspicuous failures, Silicon Valley admitted there’s no substitute for collaboration with century-old companies that know how to bend metal and churn out millions of vehicles while meeting all regulations for emissions and safety. Tens of thousands of engineers in Detroit, along with test chambers and proving grounds, mean that if you want to build cars you need a technical center — and perhaps an innovation facility — in southeast Michigan.

What’s more, Detroit’s automakers and suppliers have acquired key technology platforms to avoid taking a back seat in the brave, new world of autonomy. “Silicon Valley suffered from hubris, and Detroit suffered from defensiveness,” says Eric Noble, product guru at The Car Lab, an automotive consultancy in Orange, Calif.

The Tesla Model S is loaded with autonomous equipment such as LIDAR units and sensors, but driverless operation is still off in the future. What’s momre, the automaker has struggled to produce affordable vehicles at a mass scale, which Detroit has done for more than a century.

As it stands, Michigan has embraced the future of automobiles like no other place. The state government passed far-sighted laws permitting the testing and deployment of self-driving cars on public roads. Big-truck geeks can hardly wait for their first glimpse of self-driving semis platooning across the countryside. Ann Arbor, where Ford Motor Co. and Domino’s Pizza Inc. have experimented with autonomous delivery vehicles, will have 5,000 connected and automated vehicles on the road by year’s end. By next year, more than 350 miles of Michigan’s roads will host connected vehicles.

Government and organizations are addressing the big picture. For one thing, few cities have a municipal chief of innovation, a position Detroit created in 2016. Then, last year, the Michigan Department of Transportation joined the Smart Belt Coalition to foster development of connected and automated vehicles. Additionally, the Michigan Council on Future Mobility was created, bringing together business and policy leaders to push for advances.

All this occurs as Michigan companies continue to entwine themselves in California’s embrace.

In 2017, General Motors Co. in Detroit, which had a small advanced technology office in Palo Alto, announced it would invest $14 million to repurpose an existing San Francisco facility for Cruise Automation. GM had acquired the autonomous-driving tech startup in 2016 and was testing a fleet of Chevrolet Bolt EVs with self-driving technology in San Francisco, metro Detroit, and Scottsdale, Ariz. The plan entails the hiring of 1,100 new employees over the next five years.

Integrating the acquisition into the gigantic automaker was a trying process. “We identified that the folks with decades of experience building cars really know what they’re talking about when it comes to assembly plants and how they put things together,” Cruise’s CEO, Kyle Vogt, said at Fortune’s recent Brainstorm TECH event in Aspen, Colo. “We had to sort of suck up our pride and do what was right for the mission here.”

GM and Cruise welcomed the company Strobe to the fold in late 2017, adding a leader in chip-scale LIDAR systems, which use laser light the way radar uses radio waves. And GM’s new Maven car-sharing app offers Chevy Malibus starting at $8 per hour.

Without an R&D base in Silicon Valley, FCA North America in Auburn Hills has nevertheless made rapid advances because of a deal with Waymo, the self-driving spinoff of Google. In January, FCA announced an agreement to supply thousands of Chrysler Pacifica Hybrid minivans to Waymo for duty with the ride-hailing service.

Navigant Research, producer of an autonomous-driving scorecard, predicts the first autonomous car we’ll ride in will be from GM or a Waymo-enhanced Pacifica. A free-for-all is happening before our eyes, and as players as far-flung as telecom giants Verizon and Qualcomm Technologies get involved, Detroit has started to be appreciated as a bastion of rationality.

What follows is a snapshot of how automotive and tech companies, along with traditional automakers, are pursuing the integration of artificial intelligence, or AI, and self-driving capability, to advance the new field of mobility.

Sunny Side  

On a cloudy late-January morning, Dragos Maciuca refuted a common notion about Californians. “Honestly, to some extent we do occasionally have the image of being just a bunch of surfers going to the beach all the time,” says the technical leader of Ford Motor Co.’s R&D center in Palo Alto. “That’s southern California. Around here, it’s a lot more work.”

Ford established its center in 2012. At that time, 10 people toiled in a downtown Palo Alto office. Under the guidance of Maciuca — who had worked for Lockheed-Martin, Apple, and others — Ford’s new center grew fast and now encompasses three buildings and more than 200 employees on the Stanford University campus. About 80 percent of the team is made up of engineers, while social scientists like ethnographers help determine market preferences. They share 150,000 feet of office space and mix together on projects across 22 teams. Ideas and innovations are relayed to Ford R&D centers in Dearborn; Aachen, Germany; and Shanghai.

“The biggest thing is the collaboration we’re doing with the startups in Silicon Valley,” Maciuca says. “It could only be done here because, by being part of this ecosystem, we find out about technologies much sooner than otherwise.”

Plus there are interactions with companies from outside the traditional automotive arena. Video game developers, for example, may offer innovations for augmented reality in heads-up  and navigation displays.

Referrals from venture capital firms bring the parties together and, because of competition, it helps to have Ford’s advantage as an century-old iconic brand. “What I mean is almost a personal and unquantifiable interest of people to work with us,” Maciuca says. “When we approach a startup that has high technology — nothing to do with the automotive industry, but we approach them to adapt it to us — and you have a guy who drives an F-150 for all his life and he’s excited about working with Ford, that’s the unquantifiable element that others wouldn’t have.”

The objective is to inject more software into the company, and Maciuca gives a vivid explanation of the process. “All these connections between us and these startup technologies that are happening here cannot be planned. You can imagine Silicon Valley being a big collider, where you put in a lot of particles and accelerate them and get these collisions that occasionally lead to something good.”

The randomness of it all would make Alfred P. Sloan, the molder of General Motors into a carefully engineered corporation starting in the 1920s, blanch were he present to observe. Just contemplate an agenda like Maciuca’s. “In January I don’t know exactly who I’m going to meet in April, and I’m going to have some great project in October,” he says. “Sometimes startups aren’t even created in January, but then by August we want to talk to them.”

If the current climate in which huge automakers gobble up technology startups resembles anything, it’s the early days of GM, when Billy Durant bought up innovative brands like Cartercar and Elmore just in case they turned into something special. “How could I tell what these engineers would say next?” Durant reasoned.

What is strikingly new is the intensified pace of development throughout the industry. Companies have embraced Jack Welch’s mantra, “Change before you have to.” Or, as Akio Toyoda said when announcing management changes at Toyota Motor Corp. in Japan, “Over the next 100 years there is no guarantee that automobile manufacturers will continue to play leading roles in mobility.”

Nor is there a guarantee they won’t diversify further from autos. Consider Honda North America, which makes everything from outboard engines to jet aircraft. The issue comes to mind after talking to Dennis Clark, managing director of strategic venture partnerships for Honda Innovations. This R&D arm opened up in Silicon Valley three years ago, has expanded to Israel, and most recently set roots in Southfield.

Clark agrees about how initial animosities have been resolved. “This started as an us-versus-them type story that was heavily portrayed by the media, but all actors have quickly realized that we need each other, and we need to come together,” he says from his Ravendale Drive office in Mountain View, a town that nestles against Palo Alto and Sunnyvale. “And this includes not only startups and large companies like Honda and our major supplier partners, but also innovators here in the Valley and transportation and automotive experts that have been in the industry for decades in areas like the Detroit region.”

Initially the Honda Innovations’ Xcelerator program, which serves as a catalyst to discover and experiment with new technologies, focused on the user-experience domain: augmented and virtual reality. “Then we very quickly branched into safety, autonomy, even manufacturing-related innovation and some robotics,” he notes.

Honda helps a tech startup by building a proof-of-concept. It may next choose to bring in a supplier, many of which are Detroit-based. From there, the decision is made about productizing.

While declining to disclose how many employees work on the program, Clark says the Honda Xcelerator satellite in Michigan occupies a floor inside an office tower next to the Westin Southfield Detroit. This group engages with startups and maintains a relationship with Techstars Mobility, an accelerator that has its office at Ford Field in downtown Detroit.

“We do a lot of work with Techstars, helping to mentor startups and getting involved with the community,” Clark says. “We have these complementary skill sets. And, of course, there are a variety of test tracks and different industry organizations that startups can get involved in and very quickly learn a lot about the automotive industry. Those opportunities aren’t as present in Silicon Valley. Some of the Detroit startups we’re seeing that are focusing on automotive and transportation have a little bit of an edge there.”

“The biggest thing is the collaboration we’re doing with the startups…”
— Dragos Maciuca, technical leader, Ford Motor Co.

At the 2018 Consumer Electronics Show in Las Vegas in January, Honda announced its partnership with Braiq Inc., a New York City startup whose breakthrough software reads a driver’s biometric information and road data to personalize an autonomous car’s driving style. “They were incubated out of Techstars Mobility in Detroit,” Clark says. “We’re now working directly with them on a proof-of-concept prototype. That’s our Detroit team taking the lead there.”

Another partnership announced at CES works much more extreme angles. Honda is integrating high-accuracy, low-cost GPS solutions developed by EXO Technologies, a startup from Tel Aviv, Israel. “In the course of us working with them, Lear (Corp. in Southfield) acquired this company and added that technology to their portfolio.”

EXO (which stands for Exact Orbit) uses software to correct errors and give location readings down to the wheel nuts. Even Clark sounds a little wondrous about it. “You have an Israeli startup that came to the U.S., based themselves in Silicon Valley, and ended up pitching Lear, which is a very traditional partner. They’re integrating that company into their business right now.”

Last year, Ford Motor Co. acquired The Factory in Detroit’s Corktown district to house its Team Edison group. The building will house 220 workers who are focused on innovations for electric and autonomous vehicles.

The View from Venture Capital 

Looking out of his office at ice floes in the Detroit River, Chris Thomas spoke volubly, and at a brisk clip. The co-founder of Fontinalis Partners, the venture capital group taking the name for the brook trout at his counterpart Bill Ford’s fishing club, shared a few ideas about the crosscurrents in play between Silicon Valley and Detroit, and explained why Fontinalis is in the hunt.

“We’re a bit of a unique animal in that we’re focused on next-generation mobility,” Thomas says. “We were the first firm in the world that was focused on this space when we launched in 2009 on the back of a year long analysis.”

Thomas agrees about the misconceptions between Silicon Valley and Detroit, but takes heart from momentum in the last two years “bringing different expertise together to look at opportunities.” Two keys, he says, were Ford’s $1-billion acquisition of Argo AI to perfect autonomous driving, and the GM-Cruise Automation deal.

Fontinalis has invested in several Silicon Valley companies. One is Postmates, a delivery app whose slogan is “Anything. Anywhere. Anytime. We get it.” It’s hardly what one would expect of Motor City thinking. Then Fontinalis threw down another sly move, helping reverse the flow again when Techstars Mobility, the startup accelerator at Ford Field that has become a magnet for emerging technology, came to Detroit in 2014.

“It’s been an unmitigated success with all these companies coming through. We’re very proud to invest in almost all of them, alongside Techstars, since the very first class to date,” Thomas says. “This is an example not of one company, but of an entity that’s in the business of making sure they set up their accelerator in the place where their companies are going to have the most success. We’ve had the privilege of setting up 33 companies to date. Now, these are young startups, but every billion-dollar company began as a young startup. And what better place for them to succeed but here in metro Detroit?”

In January, General Motors Co. announced it will mass produce self-driving cars that lack steering wheels and pedals starting next year. The vehicles will likely be based off of the . Chevrolet Bold and the Chevrolet Cruze produced in Orion Township (an earlier model is shown here).

Gold Pans

Dirk Remde has a light German accent and a droll sense of humor. Asked how he was doing, the executive director of supplier Continental AG’s Silicon Valley R&D Center says, “Very well. But that’s not so difficult in California.”

Beyond any mention of weather, Remde extols California’s openness. Open-source platforms are for the greater good, he says. “It seems, generally, when you’re talking to people, there’s an open, freer communications spirit than a lot of other locations,” he explains. So when you’re in Germany or Detroit, you talk to other people in the same industry with caution. It seems here people believe that only hinders progress. They want to share and find solutions together.”

Three years ago, Continental moved into Silicon Valley with a small team in Santa Clara. They soon upsized to a building customized just for them. “So we have a nice new R&D center here for a large number of engineers,” he says. “Researchers here are in contact with Continental’s headquarters in Germany and the North American base at Auburn Hills and, thereby, facilities in 56 countries.”

To anchor the San Jose center, Remde brought in a number of engineers from Auburn Hills when applying a formula of one-third seasoned Conti hands and two-thirds newbies extracted from the local culture. That meant “quite a few from Auburn Hills because they’re experienced, they’ve been working for the company for quite some time, and they’re building a base of our teams. You want to bring in the local talent and networks, but at the same time you also have to make sure that you have the people who know the products already and know the internal networks.”

Lear, meanwhile, pursues things in the opposite way, having opened an innovation center in 2016 in a former cigar factory on State Street facing Capitol Park in downtown Detroit. Lear bills the project as a way of placing the company where the action is and bringing in outside thinking.

“It’s a new and developing scene,” says Eric Rasmussen, Lear’s vice president of strategy and business development. “It’s very exciting. There are a lot of companies that are starting up in Detroit and the region. I think this trend in technology in automotive, that convergence, has a lot to do with that.”

It was Lear, incidentally, that confounded the whole Silicon Valley-Detroit formula by purchasing EXO Technologies, the new partner of Honda. Rasmussen offered his thoughts  on the acquisition from inside the company’s headquarters along Telegraph Road in Southfield, and reflected on the deal.

“Detroit isn’t going to out-software and out-Al Silicon Valley, and Silicon Valley isn’t going to out-automotive-engineer Detroit.”
Eric Noble, product guru, The Car Lab

The amount of code and software in automobiles is increasing fast, he notes, and Silicon Valley will produce the chips and programs. But it takes partners. “Bringing together that know-how with the rigorous and unique demands of operating within a car is where companies like us can really help,” he says.

The coming together of Detroit and Silicon Valley, a huge development for American business, subscribes to the notions of famed economist Adam Smith about absolute economic advantage and David Ricardo about comparative advantage. Detroit has its areas of expertise — whole-car design and engineering — and Silicon Valley has its chips and code.

“What California learned was that the automobile was frightfully complex, and the people who know how to engineer it were, in fact, quite bright,” says Eric Noble, product-development consultant of The Car Lab. “And Detroit was the global home of that village knowledge.”

“If a foreign country can supply us with a commodity cheaper than we ourselves can make, better buy it off them with some part of the product of our own industry employed in a way in which we have some advantage,” Smith wrote in The Wealth of Nations.

FCA US in Auburn Hills will deliver thousands of self-driving Chrysler Pacificas in a new deal with Waymo, the self-driving unit of Google parent Alphabet.

Taking things further, Noble says Silicon Valley is “the bridge to the autonomous vehicle that consumers are going to demand.” Crossing that bridge may have been instigated by the success of Mercedes-Benz in Sunnyvale. Detroit, having endured many struggles in the interim, finally realized Silicon Valley isn’t a threat, but a valued partner in the race to make the United States the dominant player in the global mobility sector.

“They do different things,” Noble says. “Detroit isn’t going to out-software and out-AI Silicon Valley. And Silicon Valley isn’t going to out-automotive-engineer Detroit. Areas should specialize in what they do best and outsource the rest. What Detroit does best is engineer cars. What Silicon Valley does best is innovate technology.”

Silicon Valley’s present inimical relationship with the Hollywood studios gives some perspective on the fortunate union with Detroit. The positive forces that may arise from it are almost beyond imagining. As a matter of fact, the question brings to mind an epigram on the wall at Ford’s R&D center in Palo Alto, uttered by none other than Henry Ford. “I cannot discover,” he said, “that anyone knows enough to say definitely what is and what is not possible.”


Motor Vehicles and Equipment: 394,984 Employees*​
A 2017 study by MICHauto, an economic development initiative of the Detroit Regional Chamber, shows the state is home to more than 2,200 automotive facilities, including automakers, suppliers, tool-and-die shops, R&D facilities, and technical centers. It is believed to be the largest such concentration in the world.

Motor Vehicles and Equipment: 79,414 Employees*
Silicon Valley has dozens of technology companies working in the automotive space, including Waymo, Apple, and Intel. Auto Alliance, a nonprofit advocacy group, reports California has 381,827 total auto jobs (2.0% of state workforce), while Michigan has 943,619 total auto jobs (19.9% of state workforce).

The Israeli Connection

As software and technology become even more important in the automotive realm, Israel — a country that has no large-scale auto assembly plants and no indigenous car culture — has emerged as an important contributor.

“A lot of it is based on technology, meaning knowhow from their military programs,” says Eric Rasmussen, senior vice president of strategy and business development at Lear Corp. in Southfield. “Those people come out of the military and start companies.”

The Israelis are offering breakthroughs in vision systems and safety, and advances in cybersecurity help protect against hacking when cars are connected to networks.

Dennis Clark, managing director of strategic venture partnerships for Honda Innovations, which has an office in Southfield, says by his count there are more than 500 companies in Israel focusing on transportation and mobility. “Tel Aviv is quite small, but they’re in close proximity,” he says. “What’s funny is … you go there and you’ll see everybody that’s doing automotive innovation from Detroit and from the Valley.”

Here’s a look at three innovative Israeli companies. Whether or not their names are familiar, they’re making an impact.

Mobileye NV: Founded in 1999, Mobileye employs more than 450 engineers who develop vision systems for autonomous driving, working with at least 25 OEMs. It has partnered with Delphi for a turnkey autonomous system for customers starting next year, and with BMW and Intel for fully autonomous vehicles by 2021.

Waze Mobile Ltd.: Programmer Ehud Shabtai started to develop Waze, a free GPS-navigation app for smartphones, in 2006. Shabtai incorporated crowd-sourced information on routing and travel time. Waze Mobile was launched in 2008, and within three years it employed 70 people in Israel and 10 in Palo Alto, Calif. Waze became a subsidiary of Google in 2013 in a $966-million acquisition.

EXO Technologies: EXO, which stands for Exact Orbit, innovated a more precise yet inexpensive way of measuring vehicle location by correcting for errors in reading satellite position, time, and atmospheric effect. For autonomous vehicles, this will help in selecting lanes and hitting drop-off points. Lear’s acquisition of EXO was announced last December; terms were not disclosed.

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