Today Honda and General Motors signed a memo of understanding forming an alliance for a number of goals. The memo states it is an understanding to develop a range of vehicles, share purchasing, research and development, and platforms. That sounds more like the cusp of a merger than an alliance. So, are GM and Honda merging?

According to the agreement, all of this will start in the first part of 2021. But GM and Honda already have a “partnership” agreement. Signed just this last April it calls for GM to develop two new EVs for Honda using GM’s Ultium batteries. As all companies look to be consolidating this follows that scenario.

Recently both Volkswagen and Ford signed agreements to share technology and platforms

Recently both Volkswagen and Ford signed agreements to share technology and platforms. But this GM and Honda agreement seems like the precursor to a merger. How wild would that be? 

GM has already announced it will spend over $20 billion on EV and autonomous vehicle development before 2025. It has said that Cadillac will consist entirely of EVs before 2030. And it will be launching 20 EVs globally by 2023. 

“This alliance will help both companies accelerate investment in future mobility innovation by freeing up additional resources,” Mark Reuss, president of General Motors, said in a joint statement.  “Given our strong track record of collaboration, the companies would realize significant synergies in the development of today’s vehicle portfolio.”

The objective is to raise the efficiency of operations in North America

Honda spokesman Koji Watanabe told Automotive News the agreement does require a capital outlay or purchasing stock shares. The objective, he said, is to raise the efficiency of operations in North America. So capital expenditure was never part of the discussions.  

Digging into the agreement deeper, both companies will coordinate on new technologies, vehicle platforms, connectivity, propulsion systems, joint purchasing and manufacturing, and more. Combined purchasing would go for materials, logistics, and localization strategies, the companies said. “Through this new alliance with GM, 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.

Automotive News says that the two companies are among the continent’s biggest-selling car manufacturers. Even as GM cut options and delayed other future development to weather the COVID-19 pandemic. In spite of that GM says it has not delayed or cut back on EV production and planning. 

GM’s current product lineup of trucks and SUVs is funding EV and autonomous development

Essentially, GM’s current product lineup of trucks and SUVs is funding the future EV and autonomous development. We expect to see continued consolidation in anticipation of autonomous development and to help spread EV costs and platform development among different companies. 

So, are GM and Honda merging? Not at this juncture, but the two companies will be a lot more intertwined. Even though the agreement is non-binding, it looks like whatever advantages the two saw in April they are now expanding. How far that goes we’ll have to wait and see what the future holds.