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OM in the News: Honda to Invest $2.75 Billion in GM’s Self-Driving Cars

October 11, 2018

Honda’s investment will give the auto maker a 5.7% stake in GM Cruise.

Honda is investing $2.75 billion in GM’s self-driving car unit, for the joint development of a mass-produced fully autonomous car, writes The Wall Street Journal (Oct. 7, 2018). 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. (GM 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).

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. One industry analyst said he 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.

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.

Fiat Chrysler has joined a BMW-led consortium to develop self-driving car technology with the aim of producing fully automated vehicles by 2021. BMW launched the partnership with Intel and Israeli car-camera software provider Mobileye. Toyota just announced it would invest $500 million in Uber to work jointly on autonomous vehicles. Uber will integrate its self-driving technology into Toyota minivans for use in Uber’s ride-hailing network.

Classroom questions:

  1. Name other companies that are forming “alliances” ( a topic in Chapter 5).
  2. Why are such alliances useful in designing goods and services?
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