A few weeks ago, it was announced that Uber ATG would be divested to self-driving technology startup Auora, at the same time Uber and partners are acquiring a 40 percent stake in Aurora with a cash infusion of $400 million. In addition, the 1,200 Uber ATG employees will be acquired by Aurora. A number of big chunks to digest there, and until now, not really analyzed what the background and possible consequences are.
First, the question of how Uber got to the point of abandoning the Advanced Technology Group (ATG). It has to do with costs. Previous CEO and founder Travis Kalanick saw Google’s efforts to develop self-driving cars as a direct attack on Uber’s business model. No drivers means a robot cab service can undercut Uber on price. Since Google showed no interest in offering it access to the technology, it set up Uber ATG as a program to develop autonomous cars. Without access to this technology, Uber’s existence would be threatened.
This urgency led to Uber putting massive pressure on the development team to catch up as quickly as possible with Google, which has been working on this technology since 2009. With the effect of pushing ruthlessly, bypassing safety regulations. This led to conflicts with the city of San Francisco in 2016 and ultimately to the fatal accident in Phoenix in 2018, where a female pedestrian was fatally injured by an Uber experimental vehicle.
Uber was then forced to suspend all of its public test drives and lost its test license in both California and Arizona. Ultimately, a blow from which Uber was never to recover. Not to mention that this program had cost Uber billions and had been critically viewed by shareholders as a waste of money.
Little did it help that Anthony Levandowski, a former Google engineer and one of the masterminds behind the development of the LiDAR system there, had first founded his own startup Ot.to, which was then acquired by Uber, but immediately ran into trouble when Waymo filed a lawsuit for theft of company secrets. Forensic analysis revealed that Levandowski had downloaded around 15,000 documents from Waymo’s corporate servers during his time as an employee before leaving, and had taken them to Ot.to and Uber.
The court case did result in a settlement in which Uber had to pay compensation to Waymo, but Levandowski was actually sentenced to jail time and a large fine.
Uber’s Company Culture
Uber ran into even more trouble in 2018 when cases of a toxic company culture and sexual harassment came to light. Kalanick had instituted a very aggressive bro-culture that, while beneficial in growing the core business in the early stages, ultimately paved the way for the Phoenix accident and, in turn, Kalanick’s ouster as Uber CEO.
Kalanick was booted from the company in the summer of 2018 and lost control of the company. He was then replaced by manager Dara Khosrowshahi, who had previously been CEO of Expedia.
With the COVID crisis of 2020, Uber came under even more pressure as much of its ride-hailing business plummeted, and with it, its revenue. Pressure mounted on Khosrowshahi to resume Uber ATG test rides in 2019, which were quite subdued, and thus to discontinue the program. As a board-appointed CEO, he has less decision-making power than Kalanick as a founder with significant stakes in the company. Thus, at the end of 2020, Uber ATG was sold to Aurora and resources were combined.
But why did Aurora, with its 600 employees, set out to acquire and integrate a group with 1,200 employees? After all, this means that every technology area is doubly occupied and the integration of the sometimes incompatible and competing technologies and employees offer an almost insurmountable task. Even integrating a small team into a large company can cause friction. I experienced this myself several times when my former employer SAP bought companies that had been integrated into my unit.
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Aurora, founded with big ambitions by 3 great ex-Tesla, ex-Uber and ex-Waymo engineers, has already had its ups and downs. Big partners and customers from the automotive industry, which had been won for investment and development partnership, drop out again. Volkswagen and FCA, for example. Another, Byton, imploded in the summer of 2020, but Hyundai and Kia joined Aurora as partners in 2019. Hyundai, however, is now partnering into Aptiv, a competitor of Aurora, as well.
According to rumors, however, Aurora was already looking for money again. Indications of a possible cash shortage are the suddenly revealed plans of autonomous trucks. Autonomous truck driving on highways is thus currently seen by the industry as the most promising way to quickly generate revenue and create and validate a business model. This would give investors more confidence in future revenues and thus entice them to invest more. However, there is also a risk associated with this. It splits the development focus across multiple vehicle platforms with quite different physics and expectations.
Developing autonomous cars is expensive, and the Uber ATG deal obviously looked too tempting. The question, however, is whether it was a wise decision. Integrating Uber ATG with a completely different company culture could prove fatal. If ATG brought even a vestige of the ‘asshole culture’ Kalanick cultivated, it could tear Aurora apart. Not only by the size of the group itself (twice the size of Aurora, after all), but also in the rivalries that arise when it now comes to sorting out technologies and assigning posts. It is expected that in the coming months Aurora will have to deal with internal power struggles and integration difficulties of the technologies, losing valuable development time.
In the technology industry, and especially in software, the unwritten rule is that doubling the team does not speed up development. Quite the opposite. Just as pregnancy cannot be shortened to one month by adding 8 women. The coordination effort compared to the productive time increases proportionally with the number of people. If different corporate cultures with their own egos and agendas are then added to the mix, this can lead to dysfunctional teams and thus to the exodus of top performers. The industry currently offers ample opportunities to move elsewhere and be productive. The Aurora founders are facing the biggest challenge of their careers with this merger, and it has less to do with technology and more to do with psychology and leadership. And if they can’t get these obstacles out of the way, Aurora is history.
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This article was also published in German.