Honda and GM are teaming up to work on vehicles together

Honda and GM are teaming up to work on vehicles together

The FINANCIAL -- General Motors and Honda announced that they had signed a non-binding memorandum of understanding following extensive preliminary discussions toward establishing a North American automotive alliance. The scope of the proposed alliance includes a range of vehicles to be sold under each company’s distinct brands, as well as cooperation in purchasing, research and development, and connected services. Under the proposed alliance, Honda and GM would collaborate on a variety of segments in North America, intending to share common vehicle platforms, including both electrified and internal combustion propulsion systems that align with the vehicle platforms. Co-development planning discussions will begin immediately, with engineering work beginning in early 2021.

The announcement builds on the agreement signed between the companies in April to jointly develop two all-new electric vehicles for Honda based on GM’s highly flexible global EV platform powered by Ultium batteries. The GM-Honda relationship, which began more than two decades ago, includes recent collaboration between the companies on fuel cells, batteries and the Cruise Origin shared autonomous vehicle. 

This alliance will help both companies accelerate investment in future mobility innovation by freeing up additional resources. Given our strong track record of collaboration, the companies would realize significant synergies in the development of today’s vehicle portfolio,” said Mark Reuss, president of General Motors.

Executive vice president of Honda Motor Co., Ltd. – Seiji Kuraishi said that through this new alliance with GM, they can achieve substantial cost efficiencies in North America that will enable them to invest in future mobility technology, while maintaining their own distinct and competitive offerings. “Combining the strengths of each company, and by carefully determining what we will do on our own and what we will do in collaboration, we will strive to build a win-win relationship to create new value for our customers. In this way, Honda will continue making steady progress in solidifying our existing business by realizing strong products, strong manufacturing capability and a strong business structure,” – He added.

No details were given on what vehicles would be developed jointly, but the companies said in a statement that planning work will start immediately and include vehicles powered by both electricity and internal combustion engines. Engineering work would begin early next year. They also will cooperate on manufacturing, parts purchasing, research and connected services. In the GM-Honda deal, the companies say they'll collaborate on a “range of vehicles sold under each company's distinct brands.” The announcement builds on work the companies have been doing jointly on electric and hydrogen fuel cell vehicles, as well as an autonomous vehicle. In April the companies announced they would jointly develop two electric vehicles for Honda based on GM's global electric vehicle platform, according to ABC News.

A joint press release said the venture would save money from shared vehicle platforms and propulsion systems, joint purchasing and shared research and development spending.  GM's US rival Ford has teamed up with German giant Volkswagen to jointly develop electric and self-driving vehicles, and a pending merger between Fiat Chrysler and Peugeot also aims to hold costs down. Morningstar analyst David Whiston said there few details offered on the extent of the financial savings to either firm, but that "the alliance can make sense" if Honda makes headway in some of the truck segments where it lags and GM benefits from Honda's expertise with smaller cars. "We see the agreement as a low-risk and potentially high-reward move for both firms, and their prior history lowers the risk of tension and poor cooperation," Whiston said, as reported by Yahoo News.

GM and Honda started working together more than 20 years ago. Recent joint projects include fuel cells, batteries, and autonomous cars. Thursday's memorandum of understanding expands upon a previous agreement from April to create two new all-electric Hondas that are built on GM's Ultium battery-powered platform. What's interesting about the alliance isn't the fact of its existence. It's that the newly signed "memorandum of understanding" outlines a North American alliance. Honda has been selling and manufacturing vehicles in the US for decades; GM, the number one US automaker by sales volume, has been around for more than a century. The North American market, comprising the US and Canada, is the world's most competitive. But it has also calcified in terms of market share. GM leads with just under 20% of new vehicle sales. Honda has a little more than 15%. The percentages never change much, and long-term, going back to the 1950s, GM has seen its once-dominant 50% share steadily eroded, Business Insider wrote.

Tesla soared around 50% after company announced its 5 for 1 stock split

Author: The FINANCIAL