SoftBank invests $2.25bn in General Motors’s autonomous-vehicle unit
Southfield — SoftBank is pouring $2.25bn into General Motors’s autonomous-vehicle unit as the world’s biggest technology fund and America’s largest vehicle maker join forces to take on Google in the battle to dominate the self-driving car business.
SoftBank Vision Fund will invest in GM Cruise Holdings in two phases, with $1.35bn going in once Cruise deploys autonomous vehicles in an app-based ride-hailing service next year. Once SoftBank completes the investment, it’ll own 19.6% of GM Cruise, valuing the unit at $11.5 billion. GM jumped the most since the car maker’s November 2010 IPO.
The deal combines two key players in the emerging technology of self-driving cars and services. GM intends to be the first vehicle maker to bring an autonomous taxi service to public roads next year, positioning the company alongside Waymo, the unit of Google owner Alphabet, among the leaders in the rapidly growing field.
SoftBank also can lend expertise and connections to fuel GM’s ambitions, as it’s invested in major ride-hailing companies including Uber Technologies and China’s Didi Chuxing.
"This gives GM Cruise the capital necessary to commercialise at scale," GM Chief Executive Officer Mary Barra told reporters at a briefing in Detroit. An additional $1.1 billion investment by GM will boost the total injection for Cruise to $3.35 billion.
GM shares climbed as much as 12% and were up 11% to $41.87 before midday in New York. The stock was down 7.7% this year.
Cruise’s value is on the rise since GM acquired the company two years ago for $581m in cash. Adding in bonuses and other payments to key employees, the deal was said to have cost closer to $1bn.
GM’s stake in Cruise is now worth about $9.2bn, Joseph Spak, an analyst at RBC Capital Markets, said in a note to clients. While it is difficult to assess who is winning the autonomous race, he has argued that GM "has a meaningful seat at the table" and said the SoftBank deal "affirms that view".
Run by SoftBank Group CEO Masayoshi Son, the SoftBank Vision Fund has about $100bn 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 and driver-behaviour tracker Nauto.
"We were blown away by 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 and invested will carry GM and Cruise 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, Ammann told analysts, 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 has opined that the business could be worth $30bn, wrote in a report on Thursday that its value may climb to more than $60bn in the long run and that GM’s shares could more than double.