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Honda and General Motors Ink Strategic Deal in North America

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Honda Motor Co. (HMC - Free Report) and General Motors (GM - Free Report) recently signed a non-binding memorandum of understanding for establishing a strategic alliance in North America. The agreement followed a series of exploratory discussions between the two companies. With the proposed agreement, the companies aim to collaborate and create a range of cars to be sold under their respective brand names and to achieve synergy in purchase, research and development (“R&D”) and other connected services.
The companies will immediately commence the combined planning discussions for the new cars with the joint engineering work expected to begin in early 2021. The companies will share common vehicle platforms with both electrified and internal-combustion engines that are in sync with the vehicle platform for a variety of core segments in North America.

The Japan-based auto giant and Detroit auto maker were fierce rivals back in the 1970s and 80s until they started working together more than 20 years ago. Their recent collaborations involve fuel cells, batteries and autonomous vehicles.  This new tie-up expands upon the agreement between the companies in April to co-build two new all electric Honda vehicles based on General Motors’ Ultium battery-powered EV platform.

The proposed alliance will result in reduction of purchasing costs as the companies will focus on joint sourcing of materials, logistics and localization strategies. It will also involve collaborated R&D efforts between the two companies relating to advanced technology areas, including development of electrical vehicle, advanced driver assist systems, and vehicle-to-everything communication.

Thus, through this partnership both the companies will achieve substantial cost efficiencies in North America, which will help them to releasetheir additional resources. This will aid them to enhance investments in future mobility advanced technology. Given their history of successful collaboration, the companies could achieve a strong harmony in combined development of vehicles having advanced and next-generation technologies, thus building a robust vehicle portfolio.

The new GM-Honda tie-up is parallel to the alliance entered between Ford Motor (F - Free Report) and Volkswagen AG (VWAGY - Free Report) , announced in 2019, per which Ford will build an all-electric car on Volkswagen's Modular Electric Toolkit EV platform starting from 2023.

Zacks Rank

Honda is a leading manufacturer of automobiles and one of the largest producers of motorcycles in the world. It currently carries a Zacks Rank #4 (Sell). One of the world’s largest automakers, General Motors, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Honda and General Motors have declined 10.7% and 19.5%, respectively, on a year-to-date basis.


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