GM and Honda Plan Gasoline Engine Partnership

(Bloomberg) -- General Motors Co. and Honda Motor Co. are laying the groundwork for a deeper partnership in North America to jointly develop gasoline engines and crossover SUVs, seeking to cut costs in their core businesses as the auto industry moves toward electric vehicles.

The two automakers signed a non-binding memorandum of understanding to establish a North American automotive alliance, they said in a statement Thursday. While each manufacturer will sell vehicles under its own brands, the companies will cooperate in areas such as parts and materials purchasing, research activities and connected-car services.

While terms of the deal are still being worked out and the two companies don’t plan a capital tie-up, it marks a major step in the integration of operations at two of the world’s largest automakers. And it signals the industry’s struggle to fund next-generation electric, driverless and connected technologies while still keeping their existing gas-powered car and truck businesses flush.

“This alliance will help both companies accelerate investment in future mobility innovation by freeing up additional resources,” Mark Reuss, GM’s president, said in a statement.

Shares of GM rose 0.7% to a six-month high of $31.18 as of 9:58 a.m. in New York.

GM and Honda plan to jointly develop four crossover SUVs for the North American market, freeing up cash for battery-powered vehicles. GM is planning to sell at least 20 EVs globally by 2023, and Honda will develop two plug-in models using the Detroit carmaker’s Ultium battery pack.

The tighter collaboration to conserve capital comes as electric-car leader Tesla Inc. has benefited from an upswell in demand for its shares and as several private and recently publicly listed EV startups have captured the imagination of investors.

Over the past decade, carmakers have been forging increasingly close partnerships to help handle the costs of developing technology. Ford Motor Co. and Volkswagen AG have joined forces to develop electric vehicles and self-driving cars.

GM and Honda also will face off against other major partnerships, including the shaky alliance among Nissan Motor Co., Renault SA and Mitsubishi Motors Corp. They also will contend with the combined strength of Peugeot owner PSA Group and Fiat Chrysler Automobiles NV, which plan to merge next year.

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