National Post (Latest Edition)
SoftBank joins forces with GM as race against Google heats up
DETROIT • General Motors Co., fuelled by a US$2.25-billion investment from SoftBank Group
Corp.’s Vision Fund, is putting serious heat on Google in the race to usher in the autonomous-driving future.
GM announced Thursday that the SoftBank fund would take a stake in its Cruise autonomous-car unit just hours before Alphabet Inc.’s
Waymo expanded its partnership with Fiat Chrysler
Automobiles NV. The major powers are squaring off into alliances to ensure they claim a stake in the future of the transportation industry, where machines will rule the road and old business models could vanish.
“This gives GM Cruise the capital necessary to commercialize at scale,” GM chief executive Mary Barra told reporters. SoftBank’s backing sent GM’s shares surging by the most since the November 2010 initial public offering.
GM intends to be the first automaker to bring an autonomous taxi service to public roads next year, positioning the company alongside Waymo, the Alphabet company formed from Google’s self-driving car project, among the leaders in the burgeoning field. SoftBank can lend expertise and connections to fuel GM’s ambitions, as it’s invested in major ridehailing companies including Uber Technologies Inc. and China’s Didi Chuxing.
GM shares climbed 13 per cent on news of the investment, gaining $4.91 to close Thursday at US$42.74 in New York. The stock was down 7.7 per cent this year through Wednesday’s close.
Cruise’s value is on the rise since GM acquired the company two years ago for US$581 million in cash. Adding in bonuses and other payments to key employees, the deal was said to have cost closer to US$1 billion.
GM’s stake in Cruise is now worth about US$9.2 billion, Joseph Spak, an analyst at RBC Capital Markets, said in a note to clients. While it’s difficult to assess who’s winning the autonomous race, he’s argued that GM “has a meaningful seat at the table” and said the SoftBank deal “affirms that view.”
Run by SoftBank Group Corp. CEO Masayoshi Son, the SoftBank Vision Fund has about US$100 billion in contributions mostly from sovereign wealth funds in Saudi Arabia and the United Arab Emirates. In addition to Uber and Didi, the fund has invested in the likes of India’s ride-hailing leader Ola, chipmaker Nvidia Corp. and driver-behaviour tracker Nauto Inc.
“We were blown away by the ability of the Cruise team to integrate quickly,” said Michael Ronen, managing partner of SoftBank Investment Advisers. “The ability of GM to put production to work and make this a success was the last piece of the due diligence.
The capital raised from SoftBank and another US$1.1 billion that GM will invest in Cruise will carry it through the phase of making a business out of self-driving cars, GM president Dan Ammann said. Both GM and SoftBank will be prevented from selling their stakes in Cruise for seven years, and GM will report the unit’s financial results in quarterly reports.
Some analysts are applying escalating values to GM’s future in autonomous driving and services. Deutsche Bank’s Rod Lache, who’s opined the business could be worth US$30 billion, wrote in a report Thursday that its value may climb to more than US$60 billion in the long run and GM’s shares could more than double.