GM & Honda Join Forces With An Eye Toward The Future

 

GM & Honda Join Forces With An Eye Toward The Future

General Motors and Honda have worked together in various capacities in the past, but they’ve recently been exploring a more formal partnership as both companies seek to find an answer for some of the difficulties posed by the coronavirus pandemic. Both companies have a long history of collaboration that stretches back more than two decades, but this step at least partly solidifies the partnership in a joint effort to deal with new challenges faced by the auto industry.

The agreement is nonbinding and came about after lengthy negotiations between the two to form a North American alliance that, at least in theory, should benefit both companies. Under the terms of the memorandum they will share a wide range of their businesses that includes research and development, connected vehicle technology, and certain models which can be individually marketed and sold under each respective brand. Additionally, they will join together the scope of their purchasing of supplies in an effort to further improve cost efficiency and reduce overall operating costs.

This type of agreement is not the first of its kind as Volkswagen and Ford came to a similar understand in 2019 when they partnered to advance their global interests in electric vehicles and autonomous driving. As part of their relationship, VW and Ford agreed to jointly invest in Argo AI, which is a company that focuses on autonomous driving vehicles with an eye towards global expansion. Though the memorandum between Honda and GM isn’t quite as grand in scope—it only applies to North American development—it has a similar end goal.

Since the beginning of the COVID-19 pandemic in the U.S., which began in March (roughly speaking), many automakers have struggled to deal with the new realities facing the industry. Moves such as the partnership between GM and Honda have since been made in an effort to thwart some of the difficulties that has caused, such as sagging sales and jobs within the industry.

Part of the appeal for Honda is that GM has a stake in Cruise, which is a company that develops self-driving technology, in which Honda is also an investor. With both companies tied to Cruise, perhaps the more important thing to note about the agreement is that both companies aim to increase their leverage and share within the auto industry. Though both GM and Honda have long established footholds in the North American market, both have recently lost some traction in terms of overall market share; something they hope the alliance will help stabilize.

Though there has been recent interest between competitors to join forces, it doesn’t always work out, which adds an element of risk, and perhaps explains the non-binding nature of the agreement between GM and Honda. Part of the current appeal of automakers comingling in the current climate is somewhat due to the coronavirus pandemic, but it also speaks to a bigger picture that every company no doubt has their eye on: the future of electric and autonomous vehicles. While it may seem to consumers that EVs have been making a strong push of late, the reality is that they still make up a very small share of overall auto sales. This no doubt explains the focus on such technologies in the partnership as companies battle for footing in what will no doubt be a highly competitive market in the very near future.