cars

GM and Honda to Establish Strategic Alliance in North America

The tie-up includes a range of vehicles to be sold under each company’s distinct brands, as well as cooperation in purchasing, research and development, and connected services

Pickup truck side panels sit on the assembly line at the General Motors Co. plant in Flint, Michigan, U.S., on Tuesday, Feb. 5, 2019.
Photographer: Jeff Kowalsky/Bloomberg via Getty Images 

General Motors and Honda Motor have signed a non-binding memorandum of understanding toward establishing a North American automotive alliance that includes collaborating on future vehicles and sharing purchasing costs.

The companies said they’ll immediately start planning for the new vehicles with engineering work expected to begin in early 2021.

The alliance, according to the companies, will include a “range of vehicles to be sold under each company’s distinct brands, as well as cooperation in purchasing, research and development, and connected services.”

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The combined efficiencies of the companies are expected to free up cash for both companies to invest in advanced and next-generation autonomous and electric vehicle technologies.

“This alliance will help both companies accelerate investment in future mobility innovation by freeing up additional resources,” GM President Mark Reuss said in a statement Thursday.

The announcement did little for shares of Honda and GM, which were both trading up less than 1% as the market opened Thursday.

Reuss said the companies expect “significant cost savings” as a result of the alliance, although they didn’t disclose any financial information, saying those details will be released when the deal is finalized.

“Through this new alliance with GM, we can achieve substantial cost efficiencies in North America that will enable us to invest in future mobility technology, while maintaining our own distinct and competitive product offerings,” Seji Kuraishi, Honda executive vice president, said in a statement.

All facets of the alliance will be governed by a joint committee, comprising senior executives from both companies.

The tie-up builds upon an announced agreement between the companies in April to jointly develop two new electric vehicles for Honda based on GM’s highly upcoming global EV platform and Ultium battery technology. The companies also have partnerships on fuel cell technologies, batteries and GM’s majority-owned subsidiary Cruise, which Honda is a minority owner of following a $2.75 billion investment announced in 2018.

This story first appeared on CNBC.com. More from CNBC:

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