Tag: Waymo

OM in the News: Honda to Invest $2.75 Billion in GM’s Self-Driving Cars

Honda’s investment will give the auto maker a 5.7% stake in GM Cruise.

Honda is investing $2.75 billion in GM’s self-driving car unit, for the joint development of a mass-produced fully autonomous car, writes The Wall Street Journal (Oct. 7, 2018). Auto makers and technology giants have been scrambling to plant stakes in a transportation landscape that is swiftly being reshaped by technology. Honda will work with GM Cruise LLC to develop a driverless car from the ground up that can be manufactured in high volumes and deployed globally. (GM set up Cruise as a separate business unit to draw in investors who don’t want exposure to the cyclical, low-margin business of manufacturing cars).

Honda’s decision to invest in GM’s self-driving arm reflects a culture change under way at the Japanese car maker, which long prided itself on its engineering prowess, shunning technologies developed by outside companies. One industry analyst said he expects only a handful of “winners” to emerge from the race to commercialize driverless vehicles. That prospect and the large capital outlays required to develop the technology could lead to more collaboration among automotive competitors.

Car companies have been teaming up with tech firms and suppliers to develop driverless technology. GM’s pact with Honda is a further sign that traditional auto makers will look to join forces with one another as they try to fend off Waymo and others vying to lead in a technology that could upend the transportation sector.

Fiat Chrysler has joined a BMW-led consortium to develop self-driving car technology with the aim of producing fully automated vehicles by 2021. BMW launched the partnership with Intel and Israeli car-camera software provider Mobileye. Toyota just announced it would invest $500 million in Uber to work jointly on autonomous vehicles. Uber will integrate its self-driving technology into Toyota minivans for use in Uber’s ride-hailing network.

Classroom questions:

  1. Name other companies that are forming “alliances” ( a topic in Chapter 5).
  2. Why are such alliances useful in designing goods and services?

OM in the News: Autonomous Cars May Not Need a Driver, But They Still Need a Good Mechanic

One of the cars being used by Waymo in the Phoenix area to test driverless technology

Waymo, one of the leading forces in self-driving technology, is enlisting the largest auto retailer in the U.S., AutoNation, to maintain and repair the growing number of driverless vehicles Waymo is testing around the country. Waymo — a unit of Google’s parent, Alphabet — is moving a step closer to putting driverless vehicles into ride-hailing fleets that would serve the general public, not just its own employees. Maintaining expensive and technology-packed self-driving vehicles is a main challenge for using them in moneymaking businesses, like ride-hailing fleets, writes The New York Times (Nov. 3, 2017). 

Says AutoNation’s CEO. “In most cases, driverless vehicles in such fleets will have to be on the road almost around the clock to offset the cost of the sensors, computer chips, software and other systems that allow them to drive safely and reach their destinations without human operators. These vehicles need to be in service for hundreds of thousands of miles, much more than personal-use vehicles, to make them economically viable. To do that, you have to do much more proactive, preventative maintenance than what a normal person would do on a car.”

Because the vehicles are intended to operate without drivers, breakdowns have to be avoided and parts replaced when signs of wear first appear, not when they fail or when a warning light comes on. They need to work not 99% of the time, but 100% of the time.

Auto dealers, like AutoNation, sell cars, but a big chunk of their profits comes from servicing vehicles. They are looking for ways to become more relevant if car usage becomes more of a shared service.

Classroom discussion questions:

  1. How is this an OM decision by Waymo?
  2. How will the auto industry be impacted by driverless cars?