GM’s Cruise Draws $2.75 Billion From Honda in Self-Driving Pact

General Motors Co.’s self-driving car unit drew its second major investment in a matter of months, with Honda Motor Co. committing to spend $2.75 billion on backing the company and joining forces to bring autonomous vehicles to market.

Honda’s partnership will strengthen GM’s position as one of the front-runners in the packed race to bring self-driving vehicles to market. The Japanese carmaker will make a $750 million equity investment in GM Cruise LLC, plus spend $2 billion over 12 years on jointly developing and deploying autonomous vehicles, according to a statement.

GM shares jumped after the investment from Honda, which will get a 5.7 percent stake in Cruise. The U.S. carmaker is a serious contender along with Waymo, Alphabet Inc.’s Google autonomous-vehicle unit. Analysts at Morgan Stanley have pegged the potential enterprise value of Waymo — widely perceived to be a leader in the space — at $175 billion.

“It’s a clear indicator that market consolidation has begun,” said Grayson Brulte, co-founder of the autonomy consulting firm Brulte & Co., in an interview. “The autonomous ecosystem is not a winner takes all scenario and we don’t need 20 different autonomous systems. Partners will have to be on the same team with a common goal of deploying multiple types of autonomous vehicles based on consumer wants and needs.”

GM’s stock gain of as much as 5.3 percent Wednesday was the biggest intraday jump since May 31, the day Cruise got a $2.25 billion investment from SoftBank Vision Fund. The stock was up 2 percent to $33.97 as of 10:16 a.m. in New York.

The deal with GM and Cruise is exclusive, Honda Chief Operating Officer Seiji Kuraishi said on a conference call with reporters. That raises questions about what happened to Honda’s plans to work with Waymo. While the two company announced talks in late 2016, details of what the two would do together have been sparse.

Kuraishi wouldn’t discuss what happened to negotiations between Honda and Waymo during the call.

Honda’s investment values Cruise at $14.6 billion, up from $11.5 billion when SoftBank made its initial wager earlier this year. Cruise’s worth has been on the rise since GM acquired the company about two years ago for $581 million in cash. Adding in bonuses and other payments to key employees, the deal was said to have cost the company closer to $1 billion.

The new partnership has the potential to boost the global scale of GM’s self-driving car technology and accelerate deployment of autonomous vehicles for Honda. The two automakers will develop a self-driving model that can be used in a variety of ways and will be deployed in a Cruise autonomous network.

GM will manufacture the car, which will be an electric vehicle, GM President Dan Ammann said. The companies haven’t decided what kind of vehicle they will jointly build, he said.

GM is still racing to deploy self-driving cars in a ride-hailing service in the U.S. next year, Ammann added. That car is based on GM’s electric Chevrolet Bolt.

Honda and GM already collaborate on battery technology and hydrogen fuel cells. The carmakers could even develop a self-driving car using hydrogen fuel cell technology, though no decision to do so has been made, said Mark Reuss, GM’s executive vice president of product development.

It would make sense, Reuss said, because a car with a set route in a limited area could have a hydrogen fueling station placed strategically in the area. Since fuel cells can refuel much faster than electric cars, it could be a good solution, he said.

“The pieces are all there,” Reuss said. “The refueling times would be much smaller.”

Earlier this year, GM met with investment bankers to look at long-term future options, such as issuing a tracking stock to list shares in Cruise or to eventually sell stock to the public. No decision was made at the time as GM was evaluating future options, people familiar with the matter said then.

As featured in Bloomberg on October 3, 2018

To Find China’s Best Driverless Technology, Look in Silicon Valley

China’s homegrown search giant, much like its U.S. counterpart, has a division focused entirely on driverless vehicles. And just like its rival, Google-born Waymo, both efforts are based in Silicon Valley.

It’s not only Baidu with a toehold in Northern California. China’s self-driving startups are sprouting major R&D outposts 6,000 miles from Beijing. China’s congested megacities may have a need for self-driving cars, but the expertise is elsewhere.

Just ask Pony.ai founders James Peng and Tiancheng Lou. When they decided over a drink in Beijing three years ago that it was time to leave Baidu’s self-driving car unit, the plan was always to start in California. “Silicon Valley is definitely the place to be,” Peng said in an interview. “That’s where all the talent is. China has a lot of raw talent, but with hardcore artificial intelligence, it takes years to build up. China has work to do.”

Baidu recognized this fact back in 2014 when it created an office in Sunnyvale, California, with 200 engineers and scientists working on A.I. and self-driving software. The tech giant said it’s currently adding 150 more people in a second facility in the same town. That research hub has been an overseas incubator for Chinese programmers and engineers, many of whom gain skills from U.S. institutions and colleagues before returning to China. But some leave Baidu and launch startups such as Pony and two other Chinese-backed self-driving firms, Roadstar.ai and Jingchi.ai, while poaching from elite U.S. tech companies.

The push into self-driving cars is part of China President Xi’s mission to make dominance in artificial intelligence a pillar of the country’s economic future. To get there, however, many of China’s biggest tech giants and most interesting startups need Silicon Valley’s knowledge. Engineers working in the U.S.—some Chinese visa holders who went overseas for degrees, some American hires—are a major part of China’s push to develop autonomous vehicles. Didi Chuxing, the ride-hailing giant that pushed Uber out of China, also keeps most of its driverless research in the U.S.

New tariffs imposed by the U.S. have come with a threat to block any company with 25 percent Chinese ownership from buying any American company that makes “ industrially significant technology.” But the trans-Pacific nature of these driverless efforts makes President Donald Trump’s push to wall off American technology difficult, if not impossible.

Trump has also made intellectual property a trade issue, and U.S companies worry about theft. In July, U.S. federal prosecutors accused former Apple engineer Zhang Xiaolang of downloading files containing proprietary information on driverless cars and selling it to a Chinese startup.

Regardless of Trump’s concerns, the Chinese tech companies are already here. Even if the Trump administration succeeds in stopping deals, it won’t prevent Chinese companies from hiring data scientists, software engineers and technical leaders from the likes of Alphabet Inc., Tesla Inc., and other major players in the driverless field. Qing Lu, the chief financial officer of Jingchi, came from Velodyne Lidar. Liang Heng, Roadstar’s chief technical officer, worked at Google and Tesla.

Peng started Pony two years ago with about 20 people in Fremont, near Tesla’s car factory, and now has more than 100 engineers working on cars that drive themselves. He has raised $214 million from investors in both the U.S. and China, with the latest being led by China-based ClearVue Partners and Eight Roads Ventures, an offshoot of Fidelity Management.

The company’s test cars can navigate traffic and drive at highway speeds. Those cars have been on public roads thanks to superior testing conditions found in the U.S. China until very recently had a strict ban on driverless test vehicles. Next year, Peng said, Pony will deploy a test fleet of robotaxis in Guangzhou—about the same time General Motors plans to start a driverless ride-hailing business, most likely in San Francisco. Pony plans to deploy the technology commercially, in either ride-hailing or delivery fleets, within three to five years.

Peng exemplifies the way China’s tech leaders come into their own through contact with U.S. institutions and employers. After an education in both China and the U.S., he worked for seven years at Google as a software engineer developing big data applications and artificial intelligence. He was lured away in 2012 by Baidu, where he led its autonomous-vehicle project in Sunnyvale. That’s where he met Pony co-founder Lou, who worked to develop self-driving cars at Google before the formation of the Waymo autonomous unit.

“I was always fascinated by cars and mechanical things,” Peng said. “The potential really fascinated me.”

Roadstar had a similar path. Founder Xianqiao Tong is a Chinese engineer who got started in autonomy by working on Nvidia’s driver assistance systems and then at Apple before joining Baidu.

To lure more talent, Tong set up a large R&D center in Cupertino, where Apple is based, and gave that office responsibility for self-driving tech. Roadstar is targeting 2020 to deploy thousands of robotaxis in Guangzhou, Tong said in an interview. The cars will be able to drive in Level 4, which means they will be fully autonomous within a mapped-out area.

“The Chinese startups are spending money to hire talent and they are attracting top talent,” said Grayson Brulte, co-founder of autonomous vehicle consulting firm Brulte & Co. “By setting up in Silicon Valley, they are getting the knowledge that they don’t have and they can export it back home.”

Roadstar is working with Renovo.auto, a Silicon Valley company that creates the operating system for self-driving cars, to connect its software to lidar, cameras and other sensors, said Renovo CEO Christopher Heiser. The operating system takes what the hardware sees and sends it to Roadstar’s computer brain, which then drives the car. Renovo can also connect Roadstar’s cars to mapping systems and even to a ride-hailing system like Uber or Lyft.

The idea is that even if Roadstar is starting out far behind American tech leaders such as GM’s Cruise or Waymo, the partnership with Renovo could speed up deployment. Roadstar, Heiser said, “learned a great deal working on AV tech in the Valley and have now built an international company that combines Chinese and Silicon Valley features.”

Will the Chinese startups succeed? Several new Chinese automakers made a similar play in electric vehicles in recent years, with mixed results. Faraday Future, based in Los Angeles and partly owned by indebted Chinese billionaire Yueting Jia, has delayed plans to build a plant amid financial trouble and recently started retrofitting an old tire plant. Karma, which was acquired by a Chinese industrialist, is building a luxury plug-in hybrid but sells cars in small numbers.

Earlier this month, however, Chinese-backed EV startup NIO kicked off a $1 billion initial public offering in the U.S. NIO’s chief financial officer, Louis Hsieh, said the company will be in Silicon Valley to develop autonomous vehicles. “There’s not the talent currently in China for autonomous driving,” Hsieh said. “You need lidar for Level 4 autonomy. Most of the talent in the area is in Silicon Valley.”

Thanks to tax credits from the government from the government, China’s automakers have become competitive players in the EV game. Now those same companies, alongside China’s overseas tech firms, are fishing in Silicon Valley’s limited pool for self-driving talent. That will pressure U.S. automakers like GM and Ford Motor.

“With the Chinese entering the market for A.I. and autonomy skills,” said Eric Noble, president of consulting firm The CarLab in Orange, California, “the automakers are having to make exceptions to their normally low pay for engineers. They have to pay up.”

As featured in Bloomberg on September 23, 2018

GM Puts Pieces in Place for Robo-Taxis in San Francisco

General Motors Co. has created its own ride-hailing platform and quietly built one of the largest charging stations in the U.S. to get its Cruise self-driving car unit ready to enter the robo-taxi business next year.

Cruise has installed 18 fast chargers in a parking facility near San Francisco’s Embarcadero, the well-trafficked boulevard along the city’s eastern shoreline where Uber Technologies Inc. and Lyft Inc. have busy drivers. And GM’s self-driving car unit has been testing its own Cruise Anywhere ride-hailing app and fleet-management system, said people familiar with the matter.

The largest U.S. automaker has long planned to start a ride-hailing business using self-driving cars by 2019, but it hasn’t said where the service would start or whether it will work with a partner. These latest moves show that the Golden Gate City is where GM is assembling the pieces to launch its own rival to Alphabet Inc.’s Waymo next year if the Detroit-based company decides against working with an established livery app like Uber’s or Lyft’s.

“It’s an indication that Cruise is getting ready to commercialize autonomous ride-hailing services for the public and it will be in San Francisco,” said Grayson Brulte, co-founder of autonomy consulting firm Brulte & Co. “I imagine they would want to own and operate the service.”

A GM spokesman said only that the automaker is still working toward commercializing its self-driving car service and that the company hasn’t decided whether to own the business or find partners. He declined to comment on the location.

What’s clear is that GM is building the resources to manage both the cars and the interface with consumers. Its ride-sharing platform could be used on its own or be tailored to interface with a partner, one person said.

Cruise has emerged as one of Chief Executive Officer Mary Barra’s top initiatives since GM acquired it in 2016. The business got a big boost in late May when Japan’s SoftBank Vision Fund agreed to buy a 19.6 percent stake in Cruise for $2.25 billion — more than half of which is contingent on having autonomous vehicles prepared for commercial use.

The automaker is also doing some early exploration into whether a tracking stock or an initial public offering would make sense once the business is established, people familiar with the matter said in June.

GM’s fast chargers are near the Embarcadero because it’s a popular location for ride-hailing services. The site will help Cruise quickly recharge its self-driving cars, which are heavily modified Chevrolet Bolt electric vehicles.

In addition to Cruise, GM has been testing new business models beyond traditional automaking. Its Maven car-sharing unit rents Bolts to Lyft and Uber drivers, helping the company learn to use electric vehicles for business fleets, said Sam Abuelsamid, senior analyst with Navigant Research.

“We can expect to see more of this as GM launches automated mobility services,” Abuelsamid said.

GM invested $500 million in Lyft in January 2016. Dan Ammann, the automaker’s president, sat on the ride-hailing company’s board until June.

Most charging stations have a handful of stalls for cars, making GM’s San Francisco site one of the bigger banks in the country, Abuelsamid said. The largest in the U.S. is Tesla’s station in Kettleman City, California, with 40 chargers, said Steve Loveday, a writer and editor with InsideEVs.com, a website covering the electric car market. Tesla has a few others with more than 20 ports, he said.

GM has also been working with California to get rules in place to facilitate its commercialization pilot. In May, the California Public Utilities Commission cleared the way for companies like Cruise to test self-driving vehicles with the public, but they rejected the request to let companies bill people for rides. Cruise is still seeking approval to do so, said one person.

While most autonomous vehicles, such as those being tested by Uber, have human monitors on board, GM has said it plans to launch its pilot using a version of its Cruise AV with no steering wheel or pedals if they feel the car is safe for public use. It also depends on California regulations allowing the service to run without a safety driver, the company said.

Cruise is also hiring for some key positions. On its website, the unit lists an opening for a head of business operations who will help develop GM’s commercialization strategy for self-driving cars. Cruise is also recruiting for several fleet-management jobs.

The first program will start late next year. GM will gauge progress and look to expand if it’s successful.

“Barra is trying to transform GM from car company to mobility-services company,” Brulte said. “She’s building her legacy.”

As featured in Bloomberg on July 3, 2018

How Driverless Cars Are Going to Change Cities

Self-driving cars could mean better public transit, more green space and less congestion.

As the arrival of driverless cars gets closer, cities are scrambling to get ready. And for good reason: The driverless car promises to reshape the urban landscape as we know it.

Little wonder, then, that the potential changes are creating excitement—and fear—among city planners. As they host test fleets of robot vehicles and figure out how to rework ordinances to prepare for the autonomous future, they’re imagining what life is going to be like when the streets are filled with cars that can largely think for themselves.

ome see an opportunity to create on-demand public transit that gets people where they’re going faster and reaches more of the population. Or open up streets for more green space and greater walkability. Or redirect traffic to make it easier to hold functions like farmers markets.

But, even as they acknowledge the promise, others see possible problems. They warn that robot cars could encourage greater urban sprawl and cut into funding for public transit, widening the divide between the haves and have-nots. And driverless cars won’t be replacing all human-driven cars overnight, meaning an awkward mix of robots and humans sharing roadways.

Whatever the future holds, it will very likely be arriving soon.

“It wouldn’t surprise me if by the end of 2019 we have autonomous vehicles readily part of people’s lives,” says Steve Adler, the mayor of Austin. His city was the first outside of California where Alphabet Inc.’s Waymo, then a Google project, tested early versions of its self-driving technology. He adds, “The technology is coming sooner than people think.”

Here’s a look at some of the changes that may be in store for cities.

Smarter public transportation
Some urban planners envision integrating autonomous cars with existing public transit, making the whole system more flexible and responsive.

A likely starting place is on-call robot taxis married with smartphone apps that let users plan the most efficient routes across town. For instance, a commuter might check the app and see that the quickest path is taking a rental bike to the train station, riding for 20 minutes, then finishing up with a robot taxi for the final 2 miles to the destination.

In another combination of autonomous vehicles and transit, vehicles would actually anticipate commuters’ needs. The startup Moovit, which tracks anonymized user data to create a real-time picture of public-transit use, could use such data to help robot taxis know where and when to deploy to meet demand, predicts co-founder and Chief Executive Nir Erez. The operating system might see that 300 people are on board a commuter train set to arrive at noon. So it would send enough robot taxis to the station to cover the probable number of taxi riders, based on past usage statistics.

Robot cars could also help riders in underserved areas. After being used for private trips during rush hours, the cars could be deployed in parts of the city with limited public transportation so that residents could use them for essential travel, perhaps even subsidized by the city to reduce cost.

These setups offer a rare chance for a strong public-private partnership in transit—because companies have a financial stake in keeping the cars as full as possible, just as cities want to offer residents as many commuting options as they can.

“We’re going to want [that car] running all of the time at capacity,” says Glen De Vos, chief technology officer at auto-tech supplier Aptiv PLC. “If you can bolt on public-transportation services on top of [private service], it gives you a bigger customer base and more opportunity to essentially be running those vehicles at capacity all time.”

For cities, which often don’t have the latest technology, creating the infrastructure to allow such a network takes preparation. In Las Vegas, Aptiv has joined with Lyft Inc. to test self-driving cars to better understand what’s required to make a ride-hailing system work with robots.

“A lot of times, people completely overlook that the municipality will play a critical role in how all of this is implemented,” according to Mr. De Vos.

One of the open questions about how the technology will ultimately be used is whether robot vehicles will be more like a public utility, with cities deciding where and when the vehicles operate, or whether these vehicles will be more akin to chauffeured cars operated by private fleets.

In January, Ford Motor Co. announced it acquired a startup called Autonomic to help create a so-called Transportation Mobility Cloud that could essentially serve as an air-traffic control center for a city trying to manage different transportation providers, such as public buses and privately owned robot taxis.

Traditionally, each mode of transportation has been trying to ensure it is working in the most efficient way possible, says Marcy Klevorn, president of Ford Mobility.

“You can’t solve the problem by having everything optimized for itself,” she says. “One of the things we want to do is help the different modes of transportation talk to each other.”

Less parking, more space
Autonomous cars can drop people off and then go somewhere else to park—or to shuttle other people around. That means less need for parking space, which could open up huge possibilities for space-crunched downtowns. Some cities have as much as 30% of land devoted to cars for roads and parking, according to Brooks Rainwater, director of the Center for City Solutions at the National League of Cities.

Some see the advent of autonomous cars as the spark to reimagine a city with pedestrians at the center of development—whether that involves making wider sidewalks, adding green space and parks or converting former downtown parking-garage towers into housing or retail space.

Another change could be in the design of buildings. Half of a new building’s footprint is typically devoted to parking, says Ryan Snyder, a principal at consultancy Transpo Group and a faculty member at the University of California, Los Angeles, urban-planning department. If fewer spaces are needed for autonomous cars, those spaces could be turned into retail or living space—potentially leading to lower costs for residents and businesses.

Changing streetscapes
As autonomous vehicles take over the roads, they will learn to coordinate traffic flow. Autonomous vehicles could be directed to pull out of the way of emergency vehicles or public buses to create virtual lanes for those higher-priority vehicles, for instance.

But cities could also begin to use streets and sidewalks in a more flexible way, changing the dynamic of communities, Mr. Snyder says. For instance, streets could more easily be used for events like farmers markets, because automated vehicles could find routes around the blocked-off areas without causing traffic jams.

Sidewalks might also change in front of large office buildings, as robot taxis and shuttles pick up and drop off huge numbers of passengers. Planners may create wider pick-up and drop-off zones, perhaps indented to allow traffic to flow easily around them. The curbs may also have sensors that can notify an autonomous vehicle when it is safe to pull over, says Grayson Brulte, who advises governments on driverless technology.

The congestion question
Some proponents of driverless cars believe the shared vehicles will cut down on clogged streets.

Research by Larry Burns, the former head of research and development for GM and a consultant for Waymo, suggests that a community needs only a small number of robot taxis to handle its transportation needs. In research for Columbia University’s Earth Institute, he found that if a city’s population density is greater than 750 people per square mile—the level of most U.S. cities—then it can ensure service with a fleet of robot vehicles amounting to just 15% of its current total of conventional cars.

But some experts aren’t so sure robotic cars will ease congestion. Bruce Schaller, an expert in transportation planning, published a report last year that suggested ride-hailing services in New York City added to congestion on the road, even as the number of taxi trips decreased, as people gravitated away from public transportation. He says that there’s a real concern that autonomous vehicles will lead to lower fares and more riders, creating “more trips in already-congested cities.”

In Austin, Mr. Adler says he’s generally positive about autonomous technology’s potential benefits but says he could envision it leading to greater congestion problems. For instance, he imagines a resident who typically takes three children to different events and runs errands in a single vehicle. In a future with driverless cars, the resident might decide to send each child to those activities in separate robot cars while using another vehicle to run the family errands.

New revenue streams
Governments, which already tax gasoline and car purchases, may likely turn to taxing autonomous vehicles for using the roads, through perhaps a usage fee.

One idea that’s emerged is a so-called zombie-cars tax, which was first proposed in Massachusetts last year, that would aim to tax vehicles on a per-mile fee to avoid people letting their cars drive around empty.

Mr. Snyder, the urban-planning consultant, for example, suggests cities might charge a fee to have curb access in high-traffic areas or give preference to vehicles with multiple people, such as a shuttle.

Driving the rich and poor apart
While some believe enhanced public transportation will provide benefits for communities that have limited public transit now, others worry the technology might favor the rich.

Lauren Kuby, a City Council member in Tempe, Ariz., which had seen a test fleet of Uber Technologies Inc.’s self-driving vehicles, says she’s intrigued by the possible benefits of the vehicles. But she fears that “AVs could encourage sprawl, especially if people own their own AVs.” In this scenario, Ms. Kuby says, “AVs could siphon off ridership from public transportation, eroding revenue, which then justifies cutting service, hurting those who depend on it but who cannot afford the higher cost of ride-sharing AVs.”

Similarly, Richard Florida, an expert in urban planning and a professor at the University of Toronto, expects that autonomous cars will push the poor from middle suburbs out to exurbs, because the ease of using the cars will lure wealthy people to move to suburbs that haven’t seen reinvestment in more than a generation.

“Self-driving cars are likely to make those [middle suburbs] more valuable and turn them from working-class areas to more upscale areas,” he says. “You’ll get a metropolitan area where more and more of the less-fortunate population is pushed out to the periphery.”

There are also concerns that self-driving vehicles will cost people their jobs, such as those who currently drive taxis, Ubers or public buses. But many companies believe that humans won’t be displaced entirely soon, noting that there will be a need for people to maintain the fleets and monitor them.

A matter of safety
Perhaps the biggest unknown for driverless vehicles—and the thing that could most delay their arrival—is safety, a renewed concern after a test vehicle by Uber was involved in a fatal crash earlier this year in Tempe.

Columbus, Ohio, was picked in 2016 by the U.S. Department of Transportation as a test city for advanced transportation technology. The city planned to deploy an autonomous shuttle around an indoor-outdoor shopping complex. But it has reconsidered the route after realizing some of the current technology’s limits.

The problem was that the vehicles they were looking at couldn’t go fast enough to keep up with traffic, and the city was concerned about the need to make a left-hand turn against traffic, a driving move that has proved difficult for developers to implement safely, says Brandi Braun, the city’s deputy innovation officer. The program is now re-evaluating where to deploy such shuttles.

As featured in the June 26, 2018 edition of the Wall Street Journal

Why GM and Waymo Rely on Allies in Self-Driving Race

The two leaders in autonomous vehicles get by with a lot of help from their friends.

An automaker like General Motors Co. brings two advantages to the development of self-driving vehicles: knowledge of how to build a car and the factories to do it. Silicon Valley’s biggest entrants into autonomous vehicles, particularly Alphabet Inc., have legions of coders and piles of cash.

Now GM and Alphabet have found someone else to handle the aspects of this historic undertaking that the companies are least adept at doing themselves.

Carmakers hate risking billions of dollars more than they do already to compete in a low-margin industry, and so SoftBank stepped forward on Thursday to drop $2.25 billion into GM’s Cruise Automation unit. That will help finance the rollout of a driverless ride-hailing business next year. Google’s parent company doesn’t run factories, and so on Thursday the tech giant agreed to buy tens of thousands of minivans made by Fiat Chrysler. The vehicles will be outfitted with autonomous systems designed by Alphabet’s Waymo unit.

“They both need to invest in these technologies but they won’t get a return for years,” said Eric Noble, president of the CarLab, a consulting firm in Orange, California. “Right now Waymo doesn’t need to build their own cars, and GM can spend $2 billion on vehicles that make money.”

The decision by SoftBank Vision Fund to buy nearly 20 percent of GM Cruise Holdings is a significant coup for the Detroit automaker. This is a company that pulled out of big car markets like Europe, Russia and India because the cash spent on new models there provided little return or losses.

Self-driving cars cost a fortune without generating any revenue at the moment, and GM Chief Executive Officer Mary Barra doesn’t want to invest in anything that falls short of her push for 10 percent operating margins. Money is less of a constraint for Waymo and its parent company, which has more than $100 billion in cash.

GM was already spending $1 billion a year to fund Cruise and, as part of the SoftBank deal, has moved to put in another $1.1 billion. Getting someone else to share the burden is a big help, and the huge tech investor also has stakes in ride-hailing giants Uber and Didi, opening the possibility of new alliances.

SoftBank approached the automaker and did exhaustive technological research before putting pen to paper on a deal, said a person familiar with the matter. While GM doesn’t necessarily need the cash, the company’s executives figured that bringing on SoftBank would represent a ringing endorsement in the tech world. In addition to backing a slate of ride-hailing startups, SoftBank has invested in two chipmakers supplying many autonomous efforts: Nvidia and ARM Holdings.

“SoftBank validates what Cruise has been doing,” said Grayson Brulte, co-founder of Brulte & Co., a consulting firm that specializes in autonomous strategy. That’s important, he added, because some in Silicon Valley see old industrial companies as dinosaurs driven by cautious engineers, not entrepreneurs.

Buying Cruise for $581 million in cash two years ago was GM’s way of catching up to Silicon Valley in the rush to bring artificial intelligence to cars, and the value of the San Francisco-based startup has been on the rise ever since. Adding in bonuses and other payments to key employees, the acquisition by GM was said to have cost closer to $1 billion. SoftBank’s investment values Cruise at $11.5 billion today.

“GM will obviously have the majority of the capital in Cruise,” said Michael Ronen, managing partner of SoftBank Investment Advisers. “The sale and the fact that there is an acquaintance should help make an introduction.”

While GM took in billions of dollars, Waymo moved to get more cars. The latest deal with Fiat could end up expanding Waymo’s existing fleet of Chrysler Pacifica minivans a hundredfold. The new vehicles will form the backbone of a driverless ride-hailing service, which is slated to debut later this year.

Questions remain about the timeline for expansion. A statement released Thursday said Waymo would buy “up to” 62,000 vehicles, without details on when. A fleet that size would be large enough to offer a scaled ride-hailing service in two to three markets, according to one industry insider.

John Krafcik, Waymo’s CEO, has a favorite catchphrase: “We’re not building cars; we’re building better drivers.” The slogan is a sales pitch for Waymo’s package of software and sensors, which many experts characterize as the best in class. It’s also a dog-whistle to the car industry—a way to dampen concerns that Alphabet, the world’s third largest company, is planning to manufacture its own vehicles.

That has left Waymo to create a fleet for its futuristic driverless business using existing vehicle models such as the Chrysler Pacifica and the Jaguar I-Pace. For now, at least, Waymo integrates its software into cars designed with gasoline engines and a driver in mind. GM uses a modified version of its own Chevrolet Bolt, an electric car that has more power on board to handle the intensive computing requirement. The version used by Cruise in current road tests is a third-generation car that will eventually have the steering wheel and pedals removed.

A new test of Waymo’s strategy of relying on partners to make cars could come soon. Krafcik has said a pending deal between Waymo and Honda will produce an entirely new vehicle designed for use in a driverless business. But that new vehicle hasn’t surfaced in the almost year and a half since the companies announced their talks.

For years before the project was re-branded as Waymo, Google weighed the option of making its own cars and even produced a prototype. Ultimately, Google’s co-founders opted to work with existing carmakers. In 2015, shortly after Krafcik joined, Waymo tried to cut a major deal with Ford. He told Bloomberg News earlier this year that the talks collapsed when Alphabet decided it bore too much capital risk in the arrangement.

Part of Waymo’s announcement on Thursday included a pledge to sell self-driving cars for private ownership, something GM hasn’t yet discussed. The technology is still extremely expensive, and some experts doubt ownership will be competitive with ride-hailing services built on driverless vehicles. “By the time personal car ownership is feasible, it won’t be desirable,” said Anne Widera, a self-driving consultant who has worked at Waymo and Uber. Selling cars outfitted with self-driving sensors would also risk that the intellectual property on board could be copied.

In a way, Waymo’s tactic of finding someone else to make its cars fits the classic mold of its parent business: controlling the valuable artificial intelligence and data running through self-driving cars, without making the hardware. That may change, though, as parts of Alphabet’s empire have recently shifted toward creating more hardware—Google’s own gadgets and cloud-computing chips, as well as Waymo’s sensors—to exert more control over the product.

For GM, on the other hand, seeking a partner with deep pockets is consistent with its established practice of not risking billions in cash on profits that are years away. Both leaders in self-driving cars are sticking to what they already know and getting help from others.

“You can’t go it alone in autonomy,” said Brulte. “It’s too expensive and only a few players even have the capabilities.”

As featured in Bloomberg on June 1, 2018