OM in the News: GM and Honda Now in Strategic Alliance

In Chapter 5, Design of Goods and Services, we note that as the speed of new products and their technological sophistication increases, so do risks.  One way to mitigate this risk is via alliances (page 175). This is exactly  what GM and Honda are doing as they invest billions in an “automotive alliance” in the North American market, including plans to co-develop a range of vehicles to be individually branded by each partner.

GM and Honda plan to share vehicle platforms, including both electric and internal combustion propulsion systems. Earlier this year they agreed to jointly develop two EVs to be branded by Honda, based on the General Motors’ EV platform and powered by its Ultium battery technology.

The two automakers have been partners in selected projects over more than 20 years, including their recent collaboration fuel cell and battery technologies and production, and the Cruise Origin autonomous vehicle.  Beyond the new vehicle technologies, GM and Honda will work to coordinate materials purchasing, logistics services, and localization activities, to create cost efficiencies by leveraging respective scale, insights, and best practices, reports American Machinist (Sept. 3, 2020). And, the two organizations will explore combining R&D related to advanced technology areas, including electrical architecture, advanced driver assist systems, infotainment, connectivity and vehicle-to-everything communication.

“Combining the strengths of each company, and by carefully determining what we will do on our own and what we will do in collaboration, we will strive to build a win-win relationship to create new value for our customers,” said Honda’s VP.

Classroom discussion questions:

1. What is the definition of an ‘alliance’?
2. What are the risks to GM and Honda when they establish such alliances?