General Motors Co. and Honda Motor Co. Ltd Form A Strategic Alliance In North America

General Motors Co. and Honda Motor Co. Ltd has signed a memorandum of understanding to establish a strategic partnership in North America in purchasing and product development. Under the North American automotive alliance, the companies will share vehicle technology and platforms starting 2021.

Increasing consolidation in the automotive industry

The automated, connected, and electric vehicles industry is a high-cost field, which means a lot of capital is needed when investing. This makes it hard for many automakers to stand alone. There have been team-ups in the industry in the past. For instance, Ford Motor Co. and Volkswagen AG have partnered to produce autonomous, commercial, and electric vehicles.

“Automakers are going to cooperate in this field but compete in another. It’s the uncertainty and the costs of working on some areas of technology. You don’t really know when it will pay off, so working jointly makes a great deal of sense,” said David Cole, chairman emeritus for the Center for Automotive Research.

General Motors’s nonbinding agreement with Honda came after extensive discussions and deliberations.

Under the proposed alliance, the companies will exchange several vehicles to be sold under each brand. In addition, the company will cooperate on research, development, purchasing, and connected services.

In terms of purchasing, the two companies will seek to reduce costs in their supply chain. Their partnership in purchasing will mainly focus on logistics, joint sourcing of materials, and localization strategies. Through the alliance, the two companies will seek to achieve significant cost savings and be able to invest in future projects.

Building on earlier partnerships

The two companies have had a long and successful partnership in the past, especially in electrified vehicles. In the past, automakers have shared vehicle propulsion systems and platforms. The companies have partnered on a range of vehicles in various key segments. They will also partner in potential manufacturing efficiencies and connected services to free up more capital for both companies.

According to sources close to the matter, the MoU will cover more than four vehicle brands, mainly mid-sized pick-ups and crossovers.

Neha Gupta
Neha Gupta
Neha Gupta has cleared CFA Level 2 from CFA Institute (USA). She has worked in diverse capacities from financial research to currency trading in a span of 10 years. Neha also covers technology, finance, retail, automotive, energy and other sectors news.