Honda to invest $ 2.75 billion in GM autonomous vehicle

WARREN, Mich (Reuters) – Honda Motor Co Ltd (7267.T) will invest $ 2.75 billion and take a 5.7% stake in General Motors Co (GM.N) A self-driving cruise unit, designed to jointly develop autonomous vehicles for deployment in passenger car fleets around the world.

Honda's partnership comes a few months after the Japanese group SoftBank (9984.T) made a multi-billion dollar pledge in Cruise. This places Cruise in a league with Alphabet Inc's (GOOGL.O) Waymo unit in terms of resources and ambitious plans to launch commercial services.

Honda, which has fallen behind many of its competitors in autonomous vehicle development, is contributing $ 750 million to GM's Cruise equity and will contribute an additional $ 2 billion over 12 years to the work. development and royalties, companies announced Wednesday.

The agreement, which provides engineering expertise from Honda, expands the cooperation between the two automakers in a technology that has enormous costs and risks, but no marketable products.

Other global manufacturers are forging similar alliances to share the uncertainty and the huge price of developing technologies that still need to be widely accepted by consumers.

GM shares rose 3.1% in trading early in the afternoon.

In May, SoftBank announced its intention to take a 19.6% stake in Cruise for $ 2.25 billion.

Where SoftBank is primarily a financial partner, "we view Honda as a strategic investor," RBC analyst, Joseph Spak, RBC's analyst, said in the development of vehicles, systems and business development.

In a blog post on Wednesday, Cruise CEO and co-founder Kyle Vogt joked: "Honda is joining the party. They bring chips, dips and $ 2.75 billion. "

Vogt told Reuters that Cruise and Honda would design a vehicle destined to be autonomous, rather than the modified sedan with steering wheel and driver controls on which it is currently working.

"We are still aiming for 2019 to have the first version or the first wave of vehicles to come out on our own platform. That's what comes after that, "he said.

Honda's investment brings Cruise's value to $ 14.6 billion, about one-third of GM's $ 48 billion market capitalization. GM acquired the San Francisco-based start-up in March 2016 for $ 1 billion.

In comparison, analysts estimated Waymo's value at $ 175 billion. Honda had two years of discussions with Waymo about a possible collaboration, but no agreement was announced.

At a press conference Wednesday, GM President Dan Ammann said that 2019 "remains the goal" for GM Cruise to launch a fleet of autonomous driving services. He added, "The longstanding relationship we have with Honda will allow us to accelerate our efforts very quickly."

In January, GM filed a petition seeking US government approval for a fully autonomous car – without a steering wheel, brake pedal or accelerator pedal – to enter the automaker's first shared car fleet. 2019.

Ammann declined Wednesday to provide a more accurate schedule for the vehicle.

GM has been "very selective in our approach" towards investors in Cruise and "we will evaluate other investment opportunities as they arise," he said.

Ammann told analysts: "We are moving as quickly as we can to get to the point where we can initially deploy the technology and then adapt it at an advanced pace. It is an effort that requires very, very important resources.

Ammann said Honda would bring its engineering know – how and help Cruise GM develop its global driving business.

GM Cruise and Waymo are often described as technology industry leaders and automakers competing for the creation of autonomous cars and their integration into fleets of transportation services.

Seiji Kuraishi, Honda CEO, said, "This investment is based on a shared vision and superior technologies (from GM and Cruise) in this area."

GM Cruise has a test fleet of more than 100 versions of the self-driving Chevrolet Bolt, rebadged as an AV Cruise.

Mary Barra, CEO of GM, said the automaker was still working on testing autonomous vehicles in San Francisco before expanding into other markets.

Waymo has signed agreements with Fiat Chrysler Automobiles (FCHA.MI) and Jaguar Land Rover [TAMOJL.UL] to buy and equip tens of thousands of vehicles with its self-driving systems.

Autotrader analyst Michelle Krebs said the GM-Honda deal "demonstrates that global partnerships like these are needed to tackle these costly ventures that are likely to yield no short-term profit. "

BMW (BMWG.DE), which maintains a development partnership with Intel Corp suppliers (INTC.O), Aptiv PLC (APTV.N) and Magna International (MG.TO), expect some competitors and transport companies to join its consortium to develop autonomous cars while the profits of the automotive industry are under increasing pressure, said Tuesday the board member Klaus Froehlich.

Wednesday, at the Paris Motor Show, the leaders of Daimler AG (DAIGn.DE) and Renault (RENA.PA) stated that the two companies could expand their cooperation on batteries, autonomous vehicles and mobility services.

The announcement of GM-Honda extends a partnership that includes the joint development of hydrogen-powered electric vehicles that are expected to be commercialized in 2020. In June, Honda also announced that it would buy advanced batteries at GM to reduce the cost of future electric vehicles in both manufacturers after 2020.