Ford will invest $US1 billion ($A1.3 billion) in robotics start-up Argo AI as part of its quest to have a fully driverless vehicle on the road by 2021.
"The next decade will be defined by the automation of the automobile, and autonomous vehicles will have as significant an impact on society as Ford's moving assembly line did 100 years ago," Ford president Mark Fields said on Friday.
"We believe that investing in Argo AI will create significant value for our shareholders by strengthening Ford's leadership in bringing self-driving vehicles to market in the near term."
The money would be spread over five years to develop a "virtual driver system" for the motor company's autonomous vehicle.
Fields said he hoped any new technologies developed in the partnership could be licensed to other companies.
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About 200 jobs would be created at the new company, spread across sites in Pittsburgh, Michigan and California.
Argo AI was founded by Peter Rander, formerly of car service app Uber, and Bryan Salesky, who worked at Google as the director of hardware development for the company's self-driving car project.
The men teamed up to launch Argo in late 2016.
Argo had been considering whether to raise money from venture capitalists before opting to become an independent subsidiary of Ford.
