SoftBank invests $2.25 billion in GM’s self-driving cars; shares soar

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(Reuters) – Japan’s SoftBank Group Corp (9984.T) will invest $2.25 billion in General Motors Co’s (GM.N) autonomous vehicle unit, Cruise, the companies said on Thursday, announcing a deal that validates the venerable Detroit automaker’s leadership in self-driving cars and sent GM shares up 10 percent.

FILE PHOTO: A self-driving GM Bolt EV is seen during a media event where Cruise, GM’s autonomous car unit, showed off its self-driving cars in San Francisco, California, U.S. November 28, 2017. REUTERS/Elijah Nouvelage/File Photo

The partnership with SoftBank’s $100-billion Vision Fund – one of the largest investments to date in self-driving technology – will help GM fund wide-scale deployment of self-driving cars, GM told analysts on Thursday. The partnership values Cruise, bought by GM two years ago for an estimated $1 billion, at $11.5 billion.

GM is competing with technology companies and other carmakers to produce self-driving cars that 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 (GOOGL.O) Waymo are often cited as the two top contenders.

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 still 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.

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Shares of GM rose 10.7 percent to $41.88 in morning trade.

GM was criticized initially for paying too much for Cruise, but the share jump on Thursday was the largest one-day gain in GM stock since the company re-listed after its 2009 bankruptcy.

SoftBank also has invested billions of dollars in “dozens” of transportation-related startups, including many involved in some aspect of self-driving technology.

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.

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.

The SoftBank investment comes at a time when rivals Tesla Inc (TSLA.O), Alphabet’s Waymo and Uber Technologies Inc [UBER.UL] are stepping up efforts to gain the first-mover advantage in the autonomous vehicle market.

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.

Reporting by Sanjana Shivdas in Bengaluru and Paul Lienert in Detroit; Editing by Sriraj Kalluvila, Peter Henderson and Nick Zieminski

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