Wednesday, September 19, 2018

GM’s stock surges, fueled by $2.25 billion investment in its self-driving business

The Washington Post

General Motors announced Thursday that Japanís SoftBank will pour $2.25 billion in the automakerís self-driving business, in a significant deal experts say boosts GMís chances to be the first company to deploy autonomous cars nationwide.

In exchange for the investment, GM said the investment firm will receive a nearly 20 percent equity stake in GM Cruise, the Detroit companyís autonomous vehicle unit. GMís stock soared following the announcement, climbing more than 10 percent in morning trading.

The partnership comes as leading technology companies and automakers, including Alphabetís self-driving division Waymo, and Tesla are scrambling to pioneer the market for fully autonomous cars. GM said in a news release Thursday the investments are expected to provide the capital necessary to "reach commercialization at scale" next year.

"Weíre excited to be joining forces with a tech leader who shares our belief that AV technology will change the world," GM President Dan Ammann, said in a statement.

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The investment will come in two stages, GM said. SoftBank will offer the second, larger portion only if GM delivers autonomous vehicles "ready for commercial deployment." GM will also invest $1.1 billion in its self-driving business as part of the deal, which values GM Cruise at $11.5 billion.

Aside from the massive cash pile, experts say the deal offers GM membership in the SoftBank network. The technology fund holds significant stakes in several major ride-hailing platforms that could help GM develop self-driving app-based services. "If you combine GMís technology with the distribution network in some sense represented by Uber and Didi and Grab, it makes it more likely that GM will be the first to market with an autonomous taxi on demand," Arun Sundararajan, a professor at New York Universityís Stern School of Business, said.

"We hear a lot of about Tesla and Uber but their autonomous technology is significantly behind Waymo and GM. Apart from Waymo I donít see any other company that poses a significant threat to GM being the first to market at scale."

Brian Moody, executive editor at Autotrader, said the SoftBank partnership is significant because it shows that investors outside of the automotive industry see self-driving as a money making endeavor. Even as the technology for autonomous vehicles is already being deployed, he said car safety and reliability will have to continue to be refined by GM and others. "Itís still going to be a while before we see the fruits of this." The end of the dealís 2019 timeline, he said, "will be very telling."

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