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GM Spends Big On Unknown Startup In Race For Autonomy

GM Spends Big On Unknown Startup In Race For Autonomy.

FCA Though Hangs Back, Conserving Capital.

“We estimate that in the past two months, GM has deployed cash resources accounting for nearly one third of this year’s projected cash flow”

General Motors, and to a lesser extent Ford, are accelerating their takeover of new technology companies, taking a view that unless they spend huge sums, they may well find themselves blind-sided and fatally weakened by ambitious companies like Google or Apple.

In contrast, Fiat Chrysler Automobiles (FCA) seems to taking the view that it doesn’t need to invest scarce resources in new technology, and will simply buy it in when it needs to without endangering its future.

Last week GM bought San Francisco autonomous vehicle start-up company Cruise, for an undisclosed amount, thought by some to maybe reach $1 billion. Cruise has received venture capital investments of around $20 million and was recently valued at $100 million, according to IHS Automotive. In the same week Ford set up a new subsidiary, Ford Smart Mobility focussed on autonomous car development. In January GM invested $500 million in Lyft, the ride-hailing wannabe, and launched its own car-sharing service Maven. Cruise will help GM develop a fleet of autonomous taxis for Lyft to operate.

“With the Lyft alliance, our Maven car-sharing brand and now Cruise, we have a lot of pieces of the puzzle that will enable us to define the future of mobility,” GM President Dan Ammann told the Financial Times.

Investment bank Morgan Stanley said GM and Ford’s move shows their recognition they need to attack to defend their future position, while FCA takes a different view.

“The moves are emblematic of the amount of capital heading towards autonomous vehicles,” Morgan Stanley analyst Adam Jonas said in a report.

“We estimate that in the past two months, GM has deployed cash resources accounting for nearly one third of this year’s projected cash flow towards expanding its portfolio of in-house expertise in shared, autonomous electric transport,” Jonas said.

End-game?
Jonas had this question for GM.

“What’s the end game? For GM to be the world leader in AV design and development? If that is the mission – how many billions should investors prepare to be spent on that endeavour,” Jonas said.

Jonas said that this contrasts with FCA’s policy, which he said was to commit no new capital to such ventures.

“While this means they may never be a leader in autonomous vehicles, we believe they can focus management resources on preserving portions of the value (of) its franchise to shareholders through a broad reconsideration of the brand portfolio,” he said.

IHS Automotive said GM’s move showed it was serious about developing the technology and controlling its own path to self-driving and driverless vehicles.

“Once complete, this is likely to be a good acquisition for GM and will speed up its development and deployment of autonomous driving vehicles – from partial autonomy to full autonomy,” IHS Automotive analyst Egil Juliussen said.

Juliussen said Cruise had developed an aftermarket product – Highway Auto Pilot priced at $10,000 – which could perform limited autonomy for the Audi A4 or Audi S4. The product consisted of a sensor on the roof and a computer in the boot.

“It is possible that Cruise has developed additional software technology since its aftermarket product was announced,” Juliussen said.

Juliussen said GM’s move was likely to spur other manufacturers to decide their strategy, which could be –

  • License Google’s self-driving and driverless software. Many manufacturers are considering this.
  • Acquire start-ups like Cruise.
  • Rely on big suppliers to develop autonomous technology.
  • Develop the technology on their own, like Toyota
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