Employees work on a production line of Dongfeng Honda in Wuhan, capital of Hubei province. (Photo: China Daily)
General Motors and Honda are moving toward an alliance in North America to share vehicle development and technology costs as the industry moves toward electric and autonomous vehicles.
The nonbinding memorandum of understanding was announced Thursday, and the companies say they plan to share vehicle underpinnings as well as engines and transmissions.
It's another sign of increasing consolidation in the automotive business as companies face huge capital outlays to develop current products as well battery-powered and self-driving vehicles.
"The auto industry has a long history of being pressured by costs and lower (profit) margins," said Edward Jones analyst Jeff Windau.
"They're trying to get to the other side of an expensive vehicle development process and do it as efficiently as possible."
No details were given on which vehicles would be developed jointly, but the companies said in a statement that planning work will start immediately and include vehicles powered by both electricity and internal combustion engines. Engineering work will begin early next year.
GM and Honda also will cooperate on manufacturing, parts purchasing, research and connected services.
Earlier this year, crosstown rival Ford finalized a similar deal with Germany's Volkswagen, while Italian-American automaker Fiat Chrysler is heading toward a merger with France's PSA Peugeot set for early 2021.
In the GM-Honda deal, the companies say they'll collaborate on a "range of vehicles sold under each company's distinct brands."
The announcement builds on work the companies have been doing jointly on electric and hydrogen fuel cell vehicles, as well as an autonomous vehicle. In April, the companies announced they would jointly develop two electric vehicles for Honda based on GM's global electric vehicle platform. Windau said the fuel cell work started in 2013, so it's no surprise that the cooperation would be broadened.
"The alliance will help both companies accelerate their investment in future mobility innovation by freeing up additional resources,"GM President Mark Reuss said last Thursday in a statement. He said the companies would get "significant synergies" in developing vehicles.
"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," Honda Executive Vice-President Seiji Kuraishi said in the statement.
The alliance will be governed by a joint committee of senior executives from both companies, the statement said.
Windau said the alliance could extend to one company making vehicles for the other at one of its factories in the US, where GM has excess manufacturing capacity.
It would be relatively simple to build a Honda on a GM assembly line if the vehicles were built on the same platform and had the same powertrains, he said.