By Heather Somerville

Uber Technologies Inc. sold its self-driving car unit to a Silicon Valley competitor, Aurora Innovation Inc., in the latest business exit by the ride-hailing company as it aims to deliver on a promise to shareholders to become profitable.

The two companies on Monday said that as part of the deal for the self-driving car unit, known as Advanced Technologies Group, or ATG, Uber will make a $400 million cash investment in Aurora. Uber said it would hold a roughly 26% stake in Aurora on completion of the deal. Uber Chief Executive Dara Khosrowshahi also is joining the company's board of directors.

Mr. Khosrowshahi has moved to restructure Uber to deliver on a promise to make the company profitable, scaling back many of its expensive side businesses -- spanning from electric bikes to flying cars -- that haven't gained much traction. Uber has wound down its product incubator and artificial-intelligence lab, exited e-bikes and sold a stake in its loss-making freight-hauling unit. The company has promised to be profitable on an adjusted basis before interest, taxes, depreciation and amortization by the end of next year.

Uber said ATG, combined with other technology programs, lost $104 million in the third quarter on $25 million in revenue.

Aurora is led by autonomous-driving pioneer Chris Urmson, who helped launch Google's autonomous-driving project. The acquisition bolsters Aurora's position in an industry that has suffered under numerous technical setbacks.

"All of this means that through the combination of our companies, we jump to be the top player in our space. It's not foregone, but victory is now ours to lose," Mr. Urmson said in an email to Aurora employees on Monday.

After the acquisition and Uber investment, Aurora has a valuation of about $10 billion, according to a person with knowledge of the matter. That is up from a slightly more than $2.5 billion valuation in 2019.

The purchase of ATG, Aurora said, "will accelerate our mission and the delivery of our first product safety, quickly and broadly."

Uber's Mr. Khosrowshahi said that Aurora is now "in pole position to deliver" on the promise of self-driving technology.

Mr. Urmson has said he plans to first focus on the roll out of self-driving technology for heavy-duty trucks. Autonomous passenger vehicles will follow, and the partnership with Uber gives Aurora a clearer path to launch the technology with a ride-hailing service, said Mr. Urmson.

ATG has partnerships with Toyota Motor Corp. and Volvo Cars, using their vehicles to test its autonomous technology.

Uber's sale of the self-driving unit caps a tumultuous period for the business. It was once led by Anthony Levandowski, who this year was charged and sentenced to 18 months in federal prison for stealing self-driving trade secrets from Alphabet Inc.'s Google, his former employer. In 2018, an Uber self-driving car, with a safety driver in the front seat, hit and killed a woman crossing the street in Tempe, Ariz. The crash caused Uber to pause its self-driving tests and abandon its operation in Arizona. The incident delivered a setback to the entire industry.

Federal investigators who probed the crash found the Uber vehicle had failed to identify the pedestrian or to brake, raising serious questions about safety protocols at the company and the performance of its technology.

Successfully building self-driving passenger cars has been portrayed as key to Uber's future as a transportation platform. Uber's co-founder and former CEO, Travis Kalanick, once called the company's ability to build self-driving cars an "existential" challenge, believing the entire automobile industry would eventually be autonomous.

The company rolled out its first self-driving test cars in Pittsburgh in 2016, where ATG is based.

Aurora, which also has an office in Pittsburgh, said it plans to retain the majority of ATG's 1,200 workforce, expanding its roughly 600-person staff.

The competition to deploy self-driving cars has intensified in recent months. Waymo LLC has this year announced around $3 billion in outside investments to bolster its finances as it races to develop self-driving vehicles. The company in October said it was opening its driverless service to the general public in Phoenix.

Write to Heather Somerville at Heather.Somerville@wsj.com

(END) Dow Jones Newswires

12-07-20 1907ET