GM's autonomous vehicle unit gets $2.25bn boost

Detroit, Michigan – SoftBank Vision Fund, a prominent technology investment firm, is investing $2.25 billion in Cruise Automation, General Motors' autonomous vehicle operation.

The investment will provide financial backing for the auto maker's plan to begin launching self-driving vehicles on a volume basis in 2019, GM said May 31.

GM shares surged 12.9 percent to close at $42.70 on May 31, the same day that saw the Dow Jones industrial average plummet by 252 points to 24,416.

"This is a very historic day when we look at the future of personal mobility. We are pleased to partner with Softbank," GM CEO Mary Barra told journalists at the company's headquarters. "We're 100 percent committed to this mission and creating safe autonomous vehicles at large scale."

The deal will give SoftBank Vision a 19.6 percent stake in GM Cruise, which includes Cruise and Strobe Inc., a lidar company GM acquired in October.

The investment values the two operations at $11.5 billion. GM President Dan Ammann said the valuation "recognizes" the progress the company has made in autonomous vehicles over the last two years.

Ammann, during a call with investors May 31, said the auto maker was "on a path" to fully fund the operations and "wasn't looking for a partner" but through discussions over the last several months decided the tie-up was the best decision.

As part of the deal, GM will also invest $1.1 billion in GM Cruise upon closing of the transaction, which is expected by the end of June. GM's investment includes some of the auto maker's previously announced plan to invest $1.1 billion in autonomous vehicles in 2018. GM says it has already invested upward of $500 million in the technology so far this year.

The investment from SoftBank Vision will be made in two installments. At the close of the transaction, the Vision Fund will make a first outlay of $900 million. At the time that Cruise AVs are ready for commercial deployment, the Vision Fund will complete the second investment of $1.35 billion, subject to regulatory approval.

'Unique set of relationships'

SoftBank Vision, which has substantial investments in other mobility providers, such as chipmaker Nvidia Corp. and ride-hailing giant Uber Inc., is a part of SoftBank Group Corp., a global conglomerate holding company based in Tokyo.

"We're just really excited to be partnering with SoftBank to bring this vision to life," Ammann said. The deal opens GM to a "unique set of relations" and additional options for commercialization of self-driving vehicles, he said.

Michael Ronen, managing partner of SoftBank Investment Advisers, said the company has been monitoring the autonomous vehicle space for several years. He said the firm decided to invest in GM and Cruise "for several reasons," including the auto maker's capability to quickly manufacture the vehicles at scale and "seamless partnership" between the Detroit auto maker and San Francisco-based Cruise.

The deal is multifaceted. SoftBank's stake includes any future robotaxi business and monetization of any in-car experiences or data.

Seven years into the deal, SoftBank can exchange its stake in GM Cruise for liquidity or GM can seek to have the company transfer its interest into GM shares. Until then, GM holds decision rights over liquidity.

SoftBank Vision also will receive one of six director seats for GM Cruise, which GM will begin reporting as a separate segment when reporting its earnings.

Potential spin-off?

The deal and separate reporting could be a foundation for GM to eventually spin off the autonomous vehicle operations, which some analysts have speculated could be valued as much as $30 billion.

Ammann and Barra said the company is focused on safely developing and deploying the self-driving vehicles and declined to directly comment on the possibility of GM Cruise becoming a standalone operation.

"As we move forward, we're going to evaluate opportunities," Barra told investors, adding GM will do what's in the best interest of its shareholders.

A federal filing detailing the SoftBank Vision deal does address the potential for an initial public offering for GM Cruise.

GM, which has touted having all operations under one roof, acquired Cruise Automation in March 2016.

Since then, GM has grown to be considered a leader in the development and deployment of self-driving vehicles along with Google spinoff Waymo. It is predominately testing the self-driving cars in San Francisco as well as Arizona and Michigan. GM previously said testing is expected to expand to New York in 2018.

GM executives on Thursday declined to provide additional details regarding where and when it plans to launch the fleets in 2019.

The auto maker is producing the self-driving cars at its Orion Assembly plant in suburban Detroit. It is the only mass-production facility to manufacture such vehicles.

Cruise, from Dec. 1, 2016, to Nov. 30, 2017, drove 131,676 miles on San Francisco's city streets in 94 Cruise AV cars, which are based on the Chevrolet Bolt EV.