Skip to Content
Stock Analyst Update

GM-Honda North American Alliance May Free Up Capital

We are not changing our fair value estimate for either firm.

Mentioned: ,

General Motors (GM) and Honda (HMC) announced a nonbinding North American alliance on Sept. 3. We are not changing our fair value estimate for either firm until we see more details on what profits the alliance may yield, but we like the potential scale benefits around combined purchasing, research, and vehicle development, including sharing common vehicle platforms. No equity stake in each company will be made by the other. Planning discussions begin immediately with engineering work starting early next year. GM and Honda have a history of cooperation, having worked together on hydrogen fuel cells and electric vehicle cell module assembly. Honda invested in GM’s Cruise in 2018 and contributed work to the Cruise Origin autonomous vehicle unveiled this year, while also committing to a $2.75 billion Cruise investment over 12 years. In April, GM announced it will provide batteries to two North American Honda electric vehicles that will be made in GM factories for the 2024 model year.

One way we think the alliance can make sense is by focusing on what each firm is good at, and there is a complement between the two there. GM excels at light-truck models such as full-size pickups and full-size SUVs; Honda does not have a vehicle in those segments. Honda could use GM to develop something, though those segments are dominated by the Detroit Three and GM has over half the SUV segment in the U.S., so it will be interesting to see if GM lets Honda into this area. Battery electric vehicles and connectivity make more sense as Honda needs GM’s Ultium battery expertise and GM’s OnStar. In exchange, perhaps GM will use Honda’s small-car expertise to replace the subcompact Chevrolet Sonic, which is ending Michigan production soon, or eventually move the Chevrolet Malibu midsize sedan to a Honda platform. We see the agreement as a low-risk and potentially high-reward move for both firms, and their prior history lowers the risk of tension and poor cooperation.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

David Whiston does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.