Honda to invest in GM’s self-driving car unit, GM Cruise
Automaker will commit $750 million, followed by $2 billion over the next 12 years
Honda Motor Co. is investing $750 million in General Motors Co.’s self-driving car unit, with plans to commit an additional $2 billion in the coming years, in an effort to jointly develop a fully autonomous car for mass production.
The partnership comes as auto makers and technology giants scramble to plant stakes in a transportation landscape that is swiftly being reshaped by technology.
Honda will work with GM Cruise LLC to develop a purposebuilt driverless car from the ground up that can be manufactured in high volumes and deployed globally. The companies are also exploring opportunities to establish a network of autonomous vehicles.
“This is a partnership that has a running start to it and will allow us to move very quickly,” said Dan Ammann, GM’s President.
Honda will invest the $750 million immediately into GM Cruise, while the $2 billion will be spread out over 12 years, the companies said Wednesday. Honda will take a 5.7% stake in Cruise as a result.
The investment comes on the heels of Japan’s SoftBank Group Corp.’s investment of $2.2 billion in June for a 19.6% stake in Cruise. Together, the Honda and SoftBank commitments bring GM’s post-money valuation to $14.6 billion.
GM shares rallied on the news, which were up 3.3% in early morning trading.
The Detroit auto maker set up Cruise as a separate business unit for further investment. Ford Motor Co. in July created a similar setup for its autonomous vehicle business.
Honda’s decision to invest in GM’s self-driving arm reflects a
culture change under way at the company. The Japanese car maker long prided itself on its engineering prowess, shunning technologies developed by outside companies. Now, Chief Executive Takahiro Hachigo has been on a deal-making spree, with particular focus on electric and autonomous vehicles.
The deal with GM’s Cruise is a surprise move for the Japanese car maker, which has been in talks to partner with Alphabet Inc.’s Waymo, a rival driverlesscar firm, for nearly two years. Honda first revealed it was in talks with Waymo in December 2016 but the two companies have yet to announce concrete plans.
In a statement, Waymo said it continues to discuss opportunities with Honda, as well as other auto makers.
Car companies have been partnering
with tech firms and suppliers to help them develop driverless technology. GM’s pact with Honda is among the first signs that traditional auto makers could look to join forces with one another as they try to fend off Waymo, formerly Google’s autonomous-vehicle program, and others vying to lead in a technology that could upend the transportation sector.
In a May note to investors, Piper Jaffray & Co. said it expects only a small handful of “winners” to emerge from the race to commercialize driverless vehicles. That sentiment and the large capital outlays required to develop the technology could lead to more collaboration among longtime automotive competitors.
Piper Jaffray analyst Alexander Potter said GM is better positioned
than other auto makers and even large technology companies because of its progress with Cruise and ability to mass produce driverless cars.
“We think GM has a structural advantage over peers, including Silicon Valley disruptors,” Mr. Potter wrote.
A number of other auto makers are rushing to forge partnerships on self-driving vehicles, aiming to advance costly technology that many in the industry see as vital to securing their future as consumer preferences change.
Fiat Chrysler Automobiles NV joined a BMW AG-led consortium to develop self-driving car technology more than a year ago with the aim of producing fully automated vehicles by 2021.
BMW launched the partnership with Intel Corp. and Israeli carcamera software provider Mobileye NV in 2016.
Toyota Motor Corp. also announced in August it would invest $500 million in Uber Technologies Inc. as part of an agreement by the companies to work jointly on autonomous vehicles. Uber will integrate its self-driving technology into Toyota Sienna minivans for use in Uber’s ride-hailing network.
GM has said the infusion from SoftBank will fund Cruise to be able to launch a robot-taxi service in an undisclosed city sometime in 2019.
The funding from SoftBank and Honda allows GM to continue developing driverless-vehicle services without siphoning capital way from its traditional carmaking business.
GM has set up Cruise to attract capital from investors who don’t want exposure to the cyclical, low-margin business of manufacturing cars. The Honda deal shows that GM Cruise also is attracting interest from rivals looking to partner with the auto maker on the underlying technology.
Honda has signed deals with China’s Baidu Inc. and SenseTime Co. to work on self-driving technology. Camera software from SenseTime has helped Honda improve the performance of its self-driving prototypes.
The Cruise deal marks Honda’s third tie-up with GM to develop next-generation vehicle technologies. In 2013, the companies said they would co-develop hydrogen fuel-cell systems. In June, Honda announced that it would source electric-vehicle batteries from GM for some of its vehicles.
Honda also has close ties with SoftBank. The auto maker is working with SoftBank-backed firm Cocoro SB to develop artificial intelligence software for self-driving cars, which will allow those vehicles to understand and emulate human emotions.