Japan’s SoftBank Group Corp will invest $2.25 billion in General Motors Co’s autonomous vehicle unit Cruise, the companies said on Thursday, a deal that validates the venerable Detroit automaker’s leadership in self-driving cars and sent GM shares up more than 10 percent.
The move by SoftBank’s $100-billion Vision Fund is one of the largest investments to date in self-driving technology by one of the highest-profile global technology investors.
It gives GM funds for wide-scale deployment of self-driving cars, which GM aims to roll out next year. The partnership values Cruise at $11.5 billion, a triumph for GM, which was criticized for overpaying an estimated $1 billion for the startup two years ago.
The GM share jump on Thursday was the stock’s largest one-day gain since the company re-listed after its 2009 bankruptcy.
Self-driving cars are expected to revolutionize the way people use vehicles and fundamentally change the business model of building and selling them. GM and Alphabet Inc’s Waymo are often cited as the two top contenders. Alphabet, which plans to launch a robo taxi service later this year, underscored its own ambitions on Thursday, announcing a deal to buy up to 62,000 minivans from Fiat Chrysler Automobiles for its self-driving fleet.
GM Chief Executive Officer Mary Barra said the company is still "on track" to begin deploying its Cruise AVs in commercial ride-sharing fleets in 2019. Barra said GM plans to launch its own ride and delivery services business, but said it might also explore "other opportunities" with some of the companies that SoftBank has funded, including Uber, Didi, Ola and Grab.
Shares of GM rose 10.3 percent to $41.72 in early afternoon trade.
GM’s initial purchase of Cruise ignited a deal frenzy in Silicon Valley, which may accelerate after the SoftBank partnership.
Cruise operated with an unusual amount of autonomy after the purchase by GM, although Cruise CEO Kyle Vogt last year told a Fortune event that it was "not smooth sailing" at first. “It took us probably six months to a year to really figure out how to work well together and to achieve what we have now, which is mutual respect," he said last July.
Investing in startups
SoftBank also has invested billions of dollars in "dozens" of transportation-related startups, including many involved in some aspect of self-driving technology.
RBC Capital Markets analyst Joseph Spak said the deal affirmed that GM was one of the top contenders to deploy self-driving ride hailing. “GM has a meaningful seat at the table," he said.
GM will also invest $1.1 billion in the unit after the deal closes, the company said.
SoftBank Vision Fund will own a 19.6-percent stake in GM Cruise once the transaction is completed, and will hold one of six seats on the company’s board. Its investment will be held in a preferred security that can be converted to GM common stock after seven years.
SoftBank will initially invest $900 million and a further $1.35 billion when Cruise vehicles are ready for commercial deployment, subject to regulatory approval.
GM said it would break out reporting on GM Cruise financials as a standalone segment, starting in the second quarter. The automaker said it expects to spend about a billion dollars this year and next on self-driving vehicle development and commercialization.
Many self-driving car contenders expect ride hailing services will be the main users of the technology. Tesla Inc has talked about creating a network of self-driving cars, Alphabet’s Waymo is rolling out its plan, and Uber Technologies Inc sees self-driving technology as key to its future. New Chief Executive Dara Khosrowshahi on Wednesday also said he was in talks to use Waymo technology on the Uber network.
SoftBank will take a stake in a newly-created unit, GM Cruise Holdings, whose assets include Cruise Automation, the self-driving vehicle unit based in San Francisco, and Strobe, a small self-driving sensor developer that Cruise acquired last year.
GM President Dan Ammann said GM Cruise also would oversee monetization of data generated by the company’s self-driving vehicles, which he has said could provide greater margins than GM’s traditional business of buying and selling cars.