Friday, 28 January 2022

Honda to invest $2.75bn in General Motors self-driving unit

Copyright Reuters, 2018

WARREN: Honda Motor Co Ltd will invest $2.75 billion in General Motors Co’s Cruise Automation, the second outside multibillion-dollar commitment to the self-driving vehicle unit this year and an affirmation of the U.S. automaker’s strategy for the emerging technology.

Honda, which has lagged behind many of its rivals in developing self-driving vehicles, is paying $750 million upfront for a 5.7 percent stake in Cruise and will contribute another $2 billion over 12 years in development work and fees, the companies said on Wednesday.

The deal, which calls for Honda to provide engineering expertise, extends cooperation between the two automakers in a technology that has enormous costs and risk but no market-ready products.

Other global automakers are forging similar alliances to share the uncertainty and huge price of developing technologies that have yet to gain widespread consumer acceptance.

GM shares were up 3.1 percent in early afternoon trade.

In May, Japan’s SoftBank Group said it would buy stakes in Cruise totaling 19.6 percent for $2.25 billion.

Where SoftBank is primarily a financial partner, “we view Honda as a strategic investor,” sharing in vehicle, systems and business development with GM, wrote RBC analyst Joseph Spak in an investor note.

In a blog post early Wednesday, Cruise Chief Executive and co-founder Kyle Vogt joked: “Honda is joining the party. They’re bringing chips, dip, and $2.75 billion.”

Honda’s investment boosts the value of Cruise to $14.6 billion – about a third of GM’s market cap, $48 billion. GM acquired the San Francisco-based startup in March 2016 for a reported $1 billion.

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