GM, Softbank fund team against Google for driverless autos

General Motors Co., fueled by a $2.25 billion investment from SoftBank Vision Fund, is putting serious heat on Google in the race to usher in the autonomous-driving future.

GM announced that the SoftBank fund would take a stake in its Cruise autonomous-car unit; the announcement came just hours before Alphabet Inc.'s Waymo expanded its partnership with Fiat Chrysler Automobiles NV. The major powers are squaring off into alliances to ensure they claim a stake in the future of the transportation industry, where machines will rule the road and old business models could vanish.

"This gives GM Cruise the capital necessary to commercialize at scale," GM Chief Executive Officer Mary Barra told reporters. SoftBank's backing sent GM's shares surging by the most since the November 2010 initial public offering.

GM intends to be the first automaker to bring an autonomous taxi service to public roads next year, positioning the company alongside Waymo, the Alphabet company formed from Google's self-driving car project, among the leaders in the burgeoning field. SoftBank can lend expertise and connections to fuel GM's ambitions, as it's invested in major ride-hailing companies including Uber Technologies Inc. and China's Didi Chuxing.

Cruise's value is on the rise since GM acquired the company two years ago for $581 million in cash. Adding in bonuses and other payments to key employees, the deal was said to have cost closer to $1 billion.

GM's stake in Cruise is now worth about $9.2 billion, Joseph Spak, an analyst at RBC Capital Markets, said in a note to clients. While it's difficult to assess who's winning the autonomous race, he's argued that GM "has a meaningful seat at the table" and said the SoftBank deal "affirms that view."

Run by SoftBank Group Corp. CEO Masayoshi Son, the SoftBank Vision Fund has about $100 billion in contributions mostly from sovereign wealth funds in Saudi Arabia and the United Arab Emirates. In addition to Uber and Didi, the fund has invested in the likes of India's ride-hailing leader Ola, chipmaker Nvidia Corp. and driver-behavior tracker Nauto Inc.

"We were blown away by the ability of the Cruise team to integrate quickly," said Michael Ronen, managing partner of SoftBank Investment Advisers. "The ability of GM to put production to work and make this a success was the last piece of the due diligence.

The capital raised from SoftBank and another $1.1 billion that GM will invest in Cruise will carry it through the phase of making a business out of self-driving cars, GM President Dan Ammann said. Both GM and SoftBank will be prevented from selling their stakes in Cruise for seven years, and GM will report the unit's financial results in quarterly reports.

Some analysts are applying escalating values to GM's future in autonomous driving and services. Deutsche Bank's Rod Lache, who's opined that that the business could be worth $30 billion, wrote in a report Thursday that its value may climb to more than $60 billion in the long run and that GM's shares could more than double.

Waymo, the driverless-technology company spun out of Google, has agreed to purchase as many as 62,000 minivans from Fiat Chrysler Automobiles for use in a ride-hailing service set to begin commercial operations later this year.

The announcement Thursday is the latest sign that Waymo is counting on a rapid liftoff for the service. In March, it agreed to purchase up to 20,000 compact cars for the service from Jaguar Land Rover beginning in 2019.

Both the Chrysler Pacifica minivans and the Jaguar cars will be equipped with the radars, cameras and sensors that Waymo has developed to enable the vehicles to drive themselves on public roads. Waymo plans to start its service in Phoenix, then expand to the San Francisco area and to other cities across the country.

Waymo began working with Fiat Chrysler in 2016 and has built a fleet of driverless minivans that it has been testing and Phoenix; Mountain View, California; Austin, Texas, and Kirkland, Washington.

"We're excited to deepen our relationship with F.C.A. that will support the launch of our driverless service, and explore future products that support Waymo's mission," Waymo's chief executive, John Krafcik, said in a statement.

Waymo, a unit of Google's parent company, Alphabet, will begin purchasing the minivans late this year. It gave no details on how many minivans it expects to purchase this year or next, or what period the purchase agreement covers

Information for this article was contributed by David Welch, Molly Schuetz, David Westin and Esha Dey of Bloomberg News and by Neal E. Boudette of The New York Times.

Business on 06/01/2018

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