- Honda is taking a stake in General Motors subsidiary Cruise Holdings.
- The two automakers will work together to build an autonomous vehicle.
- The investment of $2.8 billion over the next 12 years includes Honda paying GM $750 million immediately as it takes a 5.7 percent stake in Cruise Holdings.
The investment of $2.8 billion over the next 12 years includes Honda paying GM $750 million immediately as it takes a 5.7 percent stake in Cruise Holdings.
General Motors said the Honda investment puts the Cruise valuation at $14.6 billion, or about a third of GM's $48 billion market value. It comes just months after Softbank's Vision Fund invested $2.25 billion in the GM unit.
GM shares jumped as much as 7 percent on the news in premarket trading but by mid-morning the stock was up less than 2 percent. The Detroit automaker's shares are down more than 21 percent over the past year.
Honda's U.S. shares were down more than 3 percent in trading Wednesday.
Together, GM and Honda will develop and build a wide-use autonomous vehicle intended to be deployed worldwide. The vehicle will be manufactured at a General Motors plant, though no date has been set for deployment of the vehicle.
"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," said General Motors Chairman and CEO Mary Barra.
"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."
The move comes at a time when automakers around the world are making multibillion investments and long-range plans for rolling out autonomous vehicles. Many analysts believe the widespread adoption of these vehicles will likely start to pick up in 2021 or 2022.
"When you think about how much it costs to develop these future technologies — it's immense," said Michelle Krebs, an executive analyst at Autotrader on "Closing Bell." "And we don't know when they'll be ubiquitous, when they'll get any return on that investment. So they're sharing the cost. They're sharing the risk."