GM General Motors Company

By Adrienne Roberts and Sean McLain 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 4, 2018).

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 coming years, for the joint development of a mass-produced fully autonomous car.

Auto makers and technology giants have been scrambling to plant stakes in a transportation landscape that is swiftly being reshaped by technology.

Honda will work with GM Cruise LLC to develop a 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 GM President Dan Ammann, who has been minding the company's autonomous-vehicle efforts.

In 2013, the two 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 will invest the $750 million in GM Cruise immediately, 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.

Japan's SoftBank Group Corp. took a 19.6% stake in Cruise in June with an investment of $2.2 billion . Together, the Honda and SoftBank equity investments bring GM's valuation to $14.6 billion.

The Detroit auto maker set up Cruise as a separate business unit to draw in investors who don't want exposure to the cyclical, low-margin business of manufacturing cars. Ford Motor Co. in July created a similar setup for its autonomous-vehicle business.

The funding from SoftBank and Honda also allows GM to continue developing driverless-vehicle services without siphoning capital away from its traditional car-making business. Previously, GM said the infusion from SoftBank would enable Cruise to launch a robot-taxi service in an undisclosed city sometime in 2019.

GM shares rose 2.1% to $34.01 on Wednesday.

Honda's decision to invest in GM's self-driving arm reflects a culture change under way at the Japanese car maker, which long prided itself on its engineering prowess, shunning technologies developed by outside companies. Honda Chief Executive Takahiro Hachigo has been on a deal-making spree, with particular focus on electric and autonomous vehicles.

The deal with GM Cruise is a bit surprising as Honda has been in talks to partner with Alphabet Inc.'s driverless-car firm Waymo for nearly two years. Honda disclosed the talks with Waymo in December 2016, but the two companies have yet to announce concrete plans.

In a statement, Waymo, which began as Google's autonomous-vehicle program, said it continues to discuss opportunities with Honda, as well as other auto makers.

Car companies have been teaming up with tech firms and suppliers to develop driverless technology. GM's pact with Honda is a further sign that traditional auto makers will look to join forces with one another as they try to fend off Waymo and others vying to lead in a technology that could upend the transportation sector.

The Honda deal also shows that the Cruise and its underlying technology can attract interest from industry rivals.

In a note to investors in May, Piper Jaffray & Co. said it expects only a handful of "winners" to emerge from the race to commercialize driverless vehicles. That prospect and the large capital outlays required to develop the technology could lead to more collaboration among automotive competitors.

Fiat Chrysler Automobiles NV has joined a BMW AG-led consortium to develop self-driving car technology with the aim of producing fully automated vehicles by 2021. BMW launched the partnership with Intel Corp. and Israeli car-camera software provider Mobileye NV in 2016.

Toyota Motor Corp. 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.

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.

Honda also has close ties with SoftBank. The auto maker is working with SoftBank-backed Cocoro SB to develop artificial intelligence software for self-driving cars, which will allow those vehicles to understand and emulate human emotions.

Piper Jaffray analyst Alexander Potter said GM is better positioned than other auto makers and even large technology companies because of the progress with Cruise and GM's experience with mass production.

"We think GM has a structural advantage over peers, including Silicon Valley disruptors," Mr. Potter wrote.

--Mike Colias contributed to this article.

Write to Adrienne Roberts at Adrienne.Roberts@wsj.com and Sean McLain at sean.mclain@wsj.com

Corrections & Amplifications Honda will make a $750 million investment in GM Cruise LLC immediately. An earlier version of this article incorrectly stated the amount as $750. (Oct. 3, 2018)

(END) Dow Jones Newswires

October 04, 2018 02:47 ET (06:47 GMT)

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