By Tim Higgins

SAN FRANCISCO -- Ford Motor Co. has acquired majority ownership of an artificial-intelligence startup called Argo AI and plans to invest $1 billion in the company, the latest move in an auto-industry spending spree to develop self-driving car technology.

The investment, to be made during the next five years, is part of Ford's efforts to develop a self-driving car by 2021. Argo is now a Ford subsidiary, but founders Bryan Salesky, a former Alphabet Inc. executive, and Peter Rander, formerly with Uber Technologies Inc., will keep equity in the startup, which they founded late last year, Ford said.

"We think automation is going to define the automobile in the next decade," Ford Chief Executive Mark Fields told reporters in San Francisco.

Auto makers and tech companies including Alphabet, Uber and Tesla Inc. are racing to develop autonomous technology. General Motors Co. last yearspent $1 billion to acquire Cruise Automation to expedite its self-driving program. And Toyota Motor Corp. has said it would spend at least $1 billion on a Silicon Valley research center to study autonomous driving and robotics.

Ford has signaled this is a transition year for the 113-year-old auto maker as it invests heavily in new technologies and efforts to move beyond making conventional cars and trucks. The company is working to roll out a self-driving vehicle in 2021 and has said that autonomous cars could account for 20% of U.S. vehicle salesby the end of the next decade.

Ford last year acquired San Francisco-based Chariot, a private shuttle service, with plans to expand the commuter service to additional metro areas.

Mr. Salesky, Argo's chief executive, declined to say how many employees his company has currently but said he aims to hire 200 by year's end. According to his LinkedIn biography, Mr. Salesky left Alphabet last year where he was Google's director of hardware development for self-driving cars. Mr. Rander, according to his LinkedIn bio, was an engineering lead for Uber, helping launch the tech company's first-generation of self-driving prototypes.

The deal was structured in a way that aims to keep Argo as a nimble startup while also allowing for the technology to be integrated into vehicle development. The company's board is made up of Mr. Salesky and Rander, two Ford executives and one independent director.

While Ford will get exclusive access towhat is developed, the company said Argo could ultimately license the technology to other auto makers.

The deal's unique structure underscores the challenges companies such as Ford have faced with attracting the necessary talent to develop AI systems.

"There is a dearth of talent at a certain level -- these are very sought-after people," said Chris Jones, chief analyst for Canalys. "It will really help them recruit the talent."

Write to Tim Higgins at Tim.Higgins@WSJ.com

(END) Dow Jones Newswires

February 10, 2017 15:48 ET (20:48 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.