Honda Motor Co. Ltd. (NYSE: HMC) and General Motors Co. (NYSE: GM) announced Wednesday that Honda will make a $750 million equity investment in GM’s Cruise autonomous vehicle subsidiary and contribute $2 billion over the next 12 years to “explore global opportunities for commercial deployment of the Cruise network.”
GM acquired Cruise in 2016 for $1 billion and early this year sold a 19.6% stake in the firm to Softbank for $2.25 billion. At that time, GM Cruise, as it is now known, was valued at $11.5 billion. In Wednesday’s announcement, Cruise’s valuation was said to be $14.6 billion, including the Softbank investment. At the current valuation, Honda’s stake in Cruise totals around 5.7%.
GM CEO Mary Barra said of the Honda investment:
This is the logical next step in General Motors and Honda’s relationship, given our joint work on electric vehicles, and our close integration with Cruise. Together, we can provide Cruise with the world’s best design, engineering and manufacturing expertise, and global reach to establish them as the leader in autonomous vehicle technology – while they move to deploy self-driving vehicles at scale.
Honda Executive Vice President, Representative Director and Chief Operating Officer Seiji Kuraishi said:
Honda chose to collaborate with Cruise and General Motors based on their leadership in autonomous and electric vehicle technology and our shared vision of a zero-emissions and zero-collision world. We will complement their strengths through our expertise in space efficiency and design to develop the most desirable and effective shared autonomous vehicle.
Cruise CEO Kyle Vogt added:
The Honda partnership paves the way for massive scale by bringing a beautiful, efficient, and purpose-built vehicle to our network of shared autonomous vehicles.
GM plans to launch a fleet of driverless cars based on the Chevy Volt sometime next year in a city that has yet to be named.
Honda and GM already have teamed up to develop fuel-cell technology and invested $85 million last year in a joint fuel-cell manufacturing venture at GM’s battery assembly plant in Michigan.
Honda’s stock traded down 2.5% early Wednesday at $29.68, in a 52-week range of $28.00 to $37.29. The consensus price target on the stock is $35.21.
GM stock traded up about 3.3%, at $34.41 in a 52-week range of $33.20 to $46.76. The low was posted Tuesday after a poor report on the company’s September sales. The consensus price target on the stock is $45.63.