GM Cuts in Front of Waymo to Seal Self-Driving Deal With Honda

(Bloomberg) -- Honda Motor Co. spent roughly two years checking out the technology belonging to the hottest name in autonomous vehicles: Google’s Waymo. But on Wednesday it surprised the industry and went another route, investing $2.75 billion with General Motors Co.’s self-driving unit.

Honda’s decision was a big victory for GM, and a potentially revealing development for those trying to discern who’s in the pole position in the self-driving car race. GM’s Cruise unit and Waymo have been locked in close competition: The two have been doing ample road testing and have set similar goals for deploying self-driving cars into robotaxi fleets.

Now, both are squaring off in a battle for leadership, having made splashes with two big-name partners. GM won backing from SoftBank Vision Fund a few months before securing Honda’s investment, while Waymo has teamed up with Tata Motors Ltd.’s Jaguar and expanded its alliance with Fiat Chrysler Automobiles NV this year.

“It’s a big vote of confidence in General Motors and Cruise and their technology,” said Mike Ramsey, auto analyst for researcher Gartner Inc. “Every major car company is working on this technology. This really seems to separate GM and Google from the pack.”

Honda wouldn’t talk about what happened to negotiations with Waymo. The Alphabet Inc. unit said it’s still discussing opportunities to work with the Japanese automaker and others.

Honda will make a $750 million equity investment in GM Cruise LLC, plus spend $2 billion over 12 years on jointly developing and deploying autonomous vehicles, the companies said Wednesday in a joint statement.

GM shares jumped as much as 5.3 percent, the biggest intraday advance since it announced SoftBank’s backing. Honda rose as much as 1.9 percent in Tokyo, and was up 1.3 percent as of 9:14 a.m. Honda will get a 5.7 percent stake in Cruise in an investment valuing Cruise at $14.6 billion. That’s up from $11.5 billion when SoftBank made its initial wager.

Honda’s investment marks a sudden turnabout. In April, Waymo Chief Executive Officer John Krafcik said he was nearing a deal with the Tokyo-based carmaker. He told Bloomberg News that the partnership would focus on the delivery and logistics market, rather than human passengers. The vehicle he described at the time was futuristic, too: smaller than a truck and potentially coming without a steering wheel or brake pedal.

Android Factor

Exactly how that potential deal has unraveled isn’t clear. But Waymo’s lineage may not have helped matters. Even though it’s no longer part of Google, Waymo is still owned by Google parent Alphabet -- and the concern is that it has retained some of Google’s tendency to act as a competitor even to its own partners.

The example most often cited is Google’s Android. Smartphone makers get the operating system free, but are left to make slim profit margins on the hardware while Google rakes in billions of dollars from the software and services that come pre-installed on the phones.

Krafcik, 57, is an auto industry veteran who’s worked hard to calm such concerns, but car manufacturers don’t want to be caught on the wrong side of that type of relationship.

Other tech companies also are less-than-ideal potential partners for Honda. Uber Technologies Inc., for instance, is also developing self-driving vehicles. But the ride-hailing giant put its testing on hold when one of its SUVs killed a pedestrian earlier this year.

‘They Want Everything’

Waymo has been experimenting with prices and finalizing its business model before unleashing its autonomous-vehicle fleet in the Phoenix area this year. The company may still be ahead of companies like Cruise in technology, rendering it a more demanding partner to work with, Gartner’s Ramsey said.

“When it comes down to it, the level of IP that Google has puts them in a situation where they’re difficult to work with because they want everything,” Ramsey said. “You would be in a very junior position to them.”

For GM, its close work with Honda on battery and hydrogen fuel-cell technology as part of a years-long partnership contributed to the two companies comfort with working together on autonomy, President Dan Ammann said Wednesday.

“Honda has an existing relationship with General Motors and they probably just felt more confident that this would work out better for them than working with Google,” Ramsey said.

The new partnership has the potential to boost the global scale of GM’s self-driving car technology and accelerate deployment of autonomous vehicles for Honda.

GM will manufacture the car, which will be an electric vehicle, Ammann said. The companies haven’t decided what kind of vehicle they will jointly build, he said.

Meanwhile, GM is still racing to deploy self-driving cars in a ride-hailing service in the U.S. next year, Ammann added. That car is based on GM’s electric Chevrolet Bolt.

--With assistance from Esha Dey and Sophie Caronello.

To contact the reporters on this story: David Welch in Southfield at dwelch12@bloomberg.net;Keith Naughton in Southfield, Michigan at knaughton3@bloomberg.net;Alistair Barr in San Francisco at abarr18@bloomberg.net

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, ;David Papadopoulos at papadopoulos@bloomberg.net, Larry Reibstein

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