Down the road, could Google buy Ford?

The tech titan may want an automaker as it pursues its plan for a driverless car.

By TheStreet Staff Jan 10, 2013 2:05PM

Trucks at a Ford dealership in Littleton, Colo. © David Zalubowski/AP Photo; The Google self-driving car © KAREN BLEIER/AFP/GettyImagesBy Dana Blackenhorn, TheStreetthestreet logo

 

Sometimes I engage in a silly exercise of who might buy whom, based strictly on market cap.

 

In playing the game early this week I noticed that Google (GOOG) is now worth more than $240 billion and Ford Motor (F) is worth just less than $52 billion. Google could buy Ford more than four times over.

 

The idea sounds ridiculous, until you realize how much work Google has been doing in the last few years on self-driving cars.

 

Car companies and tech companies are growing closer. Google has a deal with Hyundai to put its Google Maps into select vehicles, starting this year. All car companies have been increasing the amount of electronics in their vehicles -- it's a relatively cheap upgrade that can add significantly to the price and perceived value of a new vehicle.

 

Car companies are also getting more serious about autonomy, which is what they call the way station on the road to self-driving cars. At the Consumer Electronics Show this week, Toyota Motor's (TM) Lexus division announced an "active safety" concept car, equipped with lasers, cameras and radar that make a driver more like an airline pilot. Drivers are technically in charge, but more and more of the work is being done by the computer.


Smiling in the back seat with an iPad

KPMG has produced a white paper on driverless cars; it forecasts that the necessary regulatory, design and market changes required to put the vehicles on the road could be in place by 2025.

  

The KPMG paper (.pdf file) is filled with pictures of happy young executives in back seats smiling over iPads. But I think the market reality is different. Once these vehicles become available, I can easily see drunk drivers sentenced to using them, and older drivers being pushed into them by their worried offspring.


Even semi-autonomous cars -- like those Toyota is working on now -- might, once they come down in price, be scooped up by driving schools. Those deals might push new drivers toward them.

 

Avis Budget Group's (CAR) recent announcement that it would acquire Zipcar (ZIP) is another marker on this road. Why should a Zipcar sit at a train station waiting for its driver? Why couldn't it come to you? And if it's already coming to you, why couldn't you plug in your destination and just act as a back-up on the way there?


An urban revolution 

Self-driving cars could be a revolution for our cities. It's easy to see the market model moving from purchase to short-term rental, and to see most cars spending their days on the road, not stuck in parking lots. Right now, parking represents one-third of the physical space in many of our cities.

 

Self-driving cars could also, in theory, take up less space on roads. No more of that confusion you always face at exits, with drivers darting across multiple lanes after suddenly realizing they did indeed want to get off there. No more speed demons darting in and out, either, and fewer slowpokes making the speed demons even more dangerous. Relative speeds are what create the most danger on our roads. 


That, and drivers impaired by age, drink, drugs, cellphones, hamburgers, hot coffee, ADD (squirrel!) and kids fighting in the back seat.

 

But here's another market reality: I don't expect car companies like Toyota or Ford to simply give over control of their cars to some tech outfit. They will want to create their own technology regardless of the cost, and their influence on regulators could easily be used to keep tech-heavy rivals out of the market.

 

If the tech companies want in, they may have to buy their way in.

 

Now consider this: Ford had revenue of $136 billion last year. Google had revenue of $38 billion. When Google decided it needed to get into phone hardware to make headway in that market, it did not hesitate to buy Motorola Mobility, never mind the margin hit.

 

A combined "Foogle" would have had earnings of $4 billion on revenue of $46 billion last quarter, by my calculation.

 

So call me crazy. But just watch the technology evolve over the next few years. By this time in 2018, I may not sound so crazy.

 

At the time of publication the author had positions in Google and Ford.

 

More from TheStreet.com

 

105Comments
Jan 14, 2013 11:24AM
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good article, could come to pass I suppose, highly unlikely though

 

Jan 12, 2013 12:46AM
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All of you missed the point. Google isn't looking at buying Ford. Microsoft isn't buying Ford but they have sync in their vehicles. The writer was looking at what companies are worth, and what a large company could buy with its money.

Jan 11, 2013 12:21PM
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Why would you want to buy a dinasor in this day.You would get stuck with the unions old building and equipment.Locations in countries that are worthless.Let them start new and fresh with no weights around there neck.
Jan 11, 2013 10:49AM
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Ford is not for sale, nor will it be.  They've never filed bankruptcy, nor will they.  They are the American stalwart corporation that all Americans can be proud of. Google may be able to purchase many companies, much as AOL purchased Time Warner and we all know what happened there. AOL took a beating and Time Warner resumed it's normal business activities.  Market valuation of technology companies is really very suspect, Face Book is the most recent example of this suspicion.
Jan 11, 2013 10:31AM
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Short sighted perspective, driving a vehicle with fancy electronics is much different than what Google has on the market today.  Not to say anything is never possible but the recent turmoil that the Automobile companies went thru, especially Ford, it has become obvious that wandering off into unknown products and territory can  be seriously detrimental to corporate health. Remember the CEO of Ford during the early late nineties and early 2000's whom said, " We are a Global Conglomerate Corporation who just happens to be a Car Company?  He's now cooling his heels on an Australian Beach, and Ford's stock still has never returned to it's previous highs.  Automotive consumers are a very picky breed, and it takes a business with full concentration on their end product to succeed as the Ex-Ceo of General Motors will testify.  Remember when Hyundai first started out in the car business?....in the early eighties?  They built a cheap attractive little car that would just fall apart at 50,000 miles!  Hyundai was a corporate stalwart producing many, many products then. A product specific corporation that hones their skills and never takes their eyes off of the ball will succeed, not otherwise as proven by the likes of auto companies such as Studebaker, American Motors, etc. 

Jan 11, 2013 9:06AM
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I am tolerant of people that do not share my opinion and have another point of view.  But I certainly do not agree with people who have another opinion and who are not tolerant of a different opinion.  Just because I enjoy driving for my previous reasons stated does not mean that I am a control freak, define myself by my possession or am against change.  I just thank a car that drive itself is useless and is inefficient.   That is why we have Public Transportation as it moves more people for less expense creating less traffic and will save fuel.   And for environmental freaks save the planet from global warming.

But again I say everyone is entitled to their opinion, which I feel that I deserve without being personally attacked.  Please respectfully disagree..

Jan 10, 2013 9:29PM
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,more  lawsuits-  this  is the year owners  win-  black  cessation-

whites  own not  a decent  percent  in any company and  i am not  paying  a lot  for this leak

i  repeat  google  is owned  by ras-  viacom- viacom  staff  illegal  and all sales  or  deals  are off-

not  one  legal company on the nyse-

so what does  that equate  or compute  in loss-

no more  stock-  attorney general  on hot seat  incompetence-  state  has  documents  and courts  verifying  name  change  of ownership and  s-4  filings- show  details  of those  who are  involved  in conspiracy and stocks  and securities  fraud

Jan 10, 2013 8:02PM
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We have become a nation of quick dollars made as easily as possible and the aftermath is not my problem.  I'll be sitting a beach somewhere counting my money, probably in the Caymans with Romney, and I don't care about the bodies left behind, not my problem.
Jan 10, 2013 7:58PM
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Anything is possible in business today ! No one ever would have thought the Busch family would sell out to a foeign conglomerate. Now as millions like me will never puchase their product again they decide to raise prices! Bye-bye BUD. So FORD won't possibly be that dumb to sell to a what ? a what ? a thing called Google ?
Jan 10, 2013 7:17PM
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Using the total value of the company as an indication of how much it can spend is like the government using GDP as a gauge of spending. Cash on hand, income and ability to borrow is the maximum and even that's a stretch.
Jan 10, 2013 7:15PM
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ok....what's wrong with this picture?  If Ford had revenues that were about 2.5 times it's estimated value, but Google had revenues less than 1/6th of its estimated worth, then who is really the stronger company?  

 

Personally, I think a lot of the so-called "tech" companies are vastly overrated.  But hey, I've only worked in the thech industry for over 30 years.......what do I know?!?!         hahahahahaaaaa!!!

 

 

Jan 10, 2013 7:07PM
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I will have bought my last ford if they do.  never owned a chrysler product (and never will) and will never buy GM again.  looks like I might finally be gettin' a Beemer some day - WHOOO HOOOO!!
Jan 10, 2013 7:01PM
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The US auto-companies have already outsourced our jobs to such a ridiculous degree that Japanese car companies such as Toyota hier more Americans then US auto-companies do.  So what would this be, a continuiation of the same trend, but this time out-sourcing the driver to one of Google's computers?

 

This wouldn't surprise me in the least, given the trend of outsourcing and all, in general :o :p

Jan 10, 2013 6:54PM
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yes.. I am waiting for the Google, Apple, Oracle, Microsoft, etc types,..i.e., Silicon Valley money... to start buying into the hardcore, East Coast, successful Rust Belt companies.
These software giants have Billions in cash and nothing to do with it....

Jan 10, 2013 6:53PM
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What a lame article  -   "sometimes I engage in a silly exercise".  really?    TheStreet staff need to get a job.
Jan 10, 2013 6:51PM
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I already ride something that I don't have to drive,It's called a bus............
Jan 10, 2013 6:48PM
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why in hell would they want tto ??
Jan 10, 2013 6:33PM
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IF THEY DO I WILL NEVER BUY ANOTHER FORD WHICH IS THE ONLY CAR I WOULD BUY IF MY CURRENT FORD DIES!

BOYCOTT GMC AND CHRYSLER AND ANY OTHER BAILOUT COMPANY FROM OBAMA'S CORRUPT PAYOFFS! GE!!! BOYCOTT!

I GOT RID OF GOOGLE AND GMAIL! F THEM LIBERAL SPYING AHOLES!

Jan 10, 2013 6:31PM
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NO Google will NEVER be able to Buy FORD it is the Only Car Co OWNED by the Family that's name is on the Car
Jan 10, 2013 6:21PM
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If they do buy FORD then they will program the car to only drive to places to eat or buy gas and maint. from places who pays Google to get the biz.... like their search is now.
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