SoftBank exists its bet in the Self Driving Unit Cruise, while General Motors invests $3.5 billion on the loss-making unit. The Japanese company departures as it struggles to keep up with its debts, and investors question the profitability of the self-driving unit, Cruise. It is said that GM might have to dig deep to get investments for its self-driving unit.
GM said on Friday that it has agreed to pay $2.1 billion to buy the SoftBank Vision Fund stake in Cruise and to make a separate $1.35 billion investment in the unit that SoftBank had committed to making in 2018. Combined, the transactions will bring GM’s stake in Cruise to 80%, GM said. Other remaining shareholders in Cruise include Microsoft, Walmart, and Honda Motor Co.
In 2018, SoftBank invested $900 million in Cruise and said it would invest another $1.35 billion when Cruise’s autonomous vehicles were ready for commercial deployment, potentially bringing its stake to 20%. As recently as last month, Cruise said SoftBank would invest $1.35 billion in the company as outlined in 2018. A person briefed on the matter said SoftBank, including follow-on fundraising rounds after 2018, invested about $1.2 billion in Cruise in total. The person declined to be identified because the information was not public.
Self-driving cars
The SoftBank exit comes as Cruise awaits a regulatory permit to allow it to charge riders for a driverless ride-hailing service launched in San Francisco. “Based on the experience that we have seen from Alphabet’s Waymo in Arizona, the revenue that you will generate from that deployment will be very, very small,” said Raj Rajkumar, professor of electrical and computer engineering at Carnegie Mellon University, referring to a project developed by the parent of Google.
“It is a long road ahead,” he said, adding that GM and partners like Honda may have to “dig deep into their pockets” to fund the unit for the time being. SoftBank has its own internal problems to deal with. The value of marquee companies in the tech investor’s portfolio has tumbled, hit by China’s crackdown on tech companies, the prospect of higher interest rates, and war in Ukraine. “We will definitely be selling a good chunk of assets,” SoftBank CEO Masayoshi Son said last month, as he pivots from the collapse of the sale of chip designer Arm to a plan to list it in the United States. In a statement, GM CEO Marry Barra said, “GM is leveraging the strength of its balance sheet to capitalize on the opportunity to increase its equity investment in Cruise and advance our integrated autonomous vehicle strategy.”
Credits- Reuters
