It’s an alliance of automotive titans. The best of Motown and the best of Japan.
General Motors and Honda have a deal to share vehicle platforms and technology in North America starting next year, The Detroit Free Press reported.
On Thursday the automakers said they signed a non-binding memorandum of understanding to establish a North American automotive alliance. The deal came together after extensive discussions, the report said.
The proposed alliance will include sharing 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.
Honda and GM plan to collaborate on purchasing supplies by leveraging their scale to gain costs savings. Purchasing collaboration would focus on joint sourcing of materials, logistics and localization strategies, GM said.
The alliance will help GM and Honda achieve substantial cost savings, and allow them to continue to invest in developing future products, the report said.
“This alliance will help both companies accelerate investment in future mobility innovation by freeing up additional resources,” GM President Mark Reuss said in a statement. “Given our strong track record of collaboration, the companies would realize significant synergies in the development of today’s vehicle portfolio.”
Reuss said GM and Honda will work “immediately toward completing definitive agreements and will have more details to share regarding financial benefits once those agreements are finalized,” the report said.
In April, GM and Honda announced an agreement to jointly develop two all-new electric vehicles for Honda. Those vehicles will be on GM’s global EV platform powered by proprietary Ultium batteries, but Honda will design the vehicle exteriors and interiors.
The platform will be engineered to match the way Honda vehicles handle on the road. At the time, GM said this was “another step” toward its vision of an all-electric future.
The GM-Honda relationship, which began more than two decades ago, includes recent collaborations on fuel cells, batteries and the Cruise Origin shared autonomous vehicle, the report said.
Under the latest 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.
“Through this new alliance with GM, we can achieve substantial cost efficiencies in North America that will enable us to invest in future mobility technology, while maintaining our own distinct and competitive product offerings,” said Seiji Kuraishi, executive vice president of Honda Motor Co. Ltd.
“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.”
Analysts said the deal makes sense given the industry has been seeing and likely will continue to see more of these kinds of joint ventures and strategic alliances to achieve costly technological advancements to compete. It is better to “share than go it alone,” said Michelle Krebs, executive analyst for Autotrader in Detroit.
“This is very significant news. GM and Honda have been working on a number of projects over the years,” Krebs said. “This takes their relationship to a whole new level. What’s notable about Honda is that it has remained fervently independent while others merge or do joint ventures.”
It is a low-risk and potentially high-reward move for both automakers, said David Whiston, auto analyst for Morningstar.
“If they focus on where each is strong, that brings up interesting scenarios for GM’s car business. Will GM use a Honda platform to keep a subcompact offering after the Sonic ends? Will the Malibu move to an Accord platform?” Whiston said.
He noted that Honda excels at making cars and GM is good at light trucks. There’s overlap in SUVs and midsize pickups.
“But GM could also give Honda help in a full-size pickup or a full-size SUV, which Honda does not have offerings in either segment, in exchange for help in purchasing or sedans,” Whiston said.
“Not sure GM wants to let Honda into those highly profitable Detroit Three dominated segments though. Honda definitely needs GM’s battery and OnStar expertise so they’ll have to give something up in return.”
GM has been throwing billions into its quest to become an all-electric automaker.
In March, GM CEO Mary Barra said GM will spend US$20 billion between now and 2025, about $3 billion a year, on EV development. GM said it will launch at least 20 new all-electric vehicles by 2023.
In a separate statement, Reuss said Honda makes the perfect partner because of a shared worldview.
“We both aim to leave a better, cleaner planet for our children, and their children. That’s what drives our plan for an all-electric future, and today’s announcement brings us a step closer to it, by starting the creation of synergies that can help make it happen,” Reuss said.