By Mike Colias and Tim Higgins
Some of the world's biggest companies are raising their bets on
the future of personal transportation.
Japan's SoftBank Group Corp. and Google parent Alphabet Inc. on
Thursday revealed plans to invest billions of dollars in two
separate deals with auto makers that highlight the global race to
transform the way people get around.
SoftBank said its $92 billion Vision Fund would invest $2.25
billion in General Motors Co.'s driverless-car unit, while
Alphabet's self-driving car subsidiary Waymo LLC said it would buy
as many as 62,000 minivans from Fiat Chrysler Automobiles NV as
part of a plan to dramatically increase the number of driverless
cars it has on the road in coming years. The tech company didn't
disclose a purchase price.
If all the vehicles were purchased, the total could amount to
more than $2 billion, said a person familiar with the matter.
Auto makers, technology giants and investors are scrambling to
plant stakes in a transportation landscape that is swiftly being
reshaped by technology, where future success could be tied less to
putting vehicles in people's garages and more to selling mobility
as a service. Electric vehicles, autonomous driving and
ride-hailing already have changed consumer's relationship to cars,
creating unlikely alliances between companies and nontraditional
investors.
Warren Buffett, who famously eschewed tech investing in the
past, earlier this year sought to invest $3 billion in Uber
Technologies Inc. through his Berkshire Hathaway Inc., but the two
sides couldn't agree on the terms, said a person familiar with the
matter. "Some of the reported details are not correct but it's true
that Berkshire had discussions with Uber," Mr. Buffett on Thursday
said in a statement.
SoftBank is buying a 19.6% stake in GM Cruise Holdings LLC, a
newly formed entity primarily made up of Cruise Automation, the
driverless-car developer that GM acquired in early 2016.
GM investors endorsed the SoftBank deal, sending the auto
maker's shares up 13% to close at $42.70 on Thursday -- a rare move
for a stock that lately has struggled to garner investor enthusiasm
despite back-to-back years of record operating profits. For years,
GM's shares have languished as valuations for upstarts such as
electric-car maker Tesla Inc. and Uber soared on expectations of
heady growth.
GM executives recently outlined to Wall Street a business
strategy based on revenue-per-mile from future autonomous taxi
fleets, a significant shift in strategy from the Detroit company's
metal-bending heritage.
The auto maker next year plans to launch a robot ride-hailing
service in several U.S. cities, the start of what GM executives
believe could be a business that eventually out-earns its core
enterprise, which earned $12.8 billion in operating profit last
year.
GM executives expect services tied to driverless vehicles to
eventually become a multitrillion-dollar market.
The SoftBank investment provides additional credibility to GM's
plans. Although the GM Cruise deal marks a direct entry for the
Japanese investor into the autonomous-vehicle space, its Vision
Fund already has invested around $20 billion globally in
ride-hailing companies, including Uber and China's Didi Chuxing
Technology Co. Over the longer term, SoftBank Chief Executive
Masayoshi Son wants to build a global network of ride-sharing
companies that use fleets of self-driving vehicles, said people
briefed on his strategy.
GM, which in 2016 invested $500 million in Uber rival Lyft, has
left open the question of whether it eventually will partner with a
ride-hailing company or launch its own transportation service. On
an analyst call Thursday, GM President Dan Ammann said SoftBank's
extensive ride-hailing portfolio brings "a unique set of
relationships and an ecosystem to the table."
The Vision Fund's investment values GM Cruise at $11.5 billion
-- about one-fifth the market value of GM, which has been around
for 110 years and generated nearly $150 billion in revenue last
year. GM purchased Cruise, a San Francisco-based startup, in early
2016 for around $1 billion, including milestone payments.
By creating a holding company for Cruise, GM cleared the way for
a private investor like SoftBank to bet on a fast-growing part of
the company separate from the relatively low-margin,
capital-intensive business of making cars.
Chief Executive Mary Barra told reporters Thursday that GM was
able to fund the commercialization of the driverless technology on
its own, but the SoftBank infusion would provide the auto maker
greater flexibility to invest in the traditional part of its
business.
GM said it had planned to invest about $1.1 billion in
autonomous-vehicle development this year, roughly 12% of its
overall capital spending. GM said it would retain an 80.4% stake in
GM Cruise after the Vision Fund investments go through.
SoftBank Vision Fund has some holdings related to self-driving
cars, including an investment in chip maker Nvidia Corp., which has
an artificial-intelligence computing platform for driverless cars
and a $164 million investment in Mapbox Inc., a startup that
provides mapping and location-search technology.
Michael Ronen, managing partner of SoftBank Investment Advisers,
said the fund was attracted to the speed of GM's progress since
acquiring Cruise and believes GM's ability to produce driverless
cars at scale in its own factory will be a "huge differentiator" as
GM vies for leadership in the space with Waymo and others.
Waymo has planned to acquire thousands of vehicles to build out
a robot taxi fleet it plans to launch this year. The tech company
already has begun deploying Chrysler Pacifica minivans equipped
with its sensors and software.
Ford Motor Co. is investing $1 billion over five years in
Pittsburgh startup Argo AI and plans to initially focus on
autonomous vehicles for commercial deliveries, starting in
2021.
GM Cruise has grown to more than 800 employees, from about 40,
and is testing about 180 autonomous Chevrolet Bolt electric
vehicles in various U.S. cities.
Many analysts have tabbed Waymo and GM Cruise as the leaders in
deploying a technology that likely will take years to reach a large
scale, given technical and regulatory hurdles.
Mr. Ronen cited GM's focus on safety as "first and foremost" in
the Vision Fund's interest in the company.
--Mayumi Negishi and Nicole Friedman contributed to this
article.
Write to Mike Colias at Mike.Colias@wsj.com and Tim Higgins at
Tim.Higgins@WSJ.com
(END) Dow Jones Newswires
May 31, 2018 20:10 ET (00:10 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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