General Motors Co (GM) is having early discussions internally and with banks about strategic options for its self-driving car unit Cruise Automation, people familiar with the matter said.
The largest US automaker is researching possibilities including a public offering of shares, listing a separate tracking stock to reflect its value, or spinning off the unit, said the people, who asked not to be identified because the discussions are private.
GM would not make a decision until Cruise is further along in development and might not take any action for a couple of years, if at all, they said.
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The company, whose autonomous vehicle prototypes are still in the testing phase, wants to demonstrate commercial viability and build out a business before moving forward with any plans, two of the people said.
GM declined to comment.
GM chief executive Mary Barra sees Cruise, which develops self-driving cars in San Francisco, as a huge strategic asset and a potential source of profits.
Last month, Softbank Vision Fund announced plans to invest US$2.25 billion in Cruise at an US$11.5 billion valuation.
The Softbank fund is putting an initial US$900 million into Cruise this year, followed by US$1.35 billion once its autonomous vehicles are ready for business use. The fund is to own 19.6 percent of Cruise once the entire investment is completed.
If the unit does not have an initial public offering, spinoff, sale or dissolution within seven years of closing the Softbank investment, the fund may convert its stake into GM common stock, a regulatory filing said.
“Softbank’s investment is a huge mile marker for them in this process,” Bank of America Merrill Lynch auto analyst John Murphy said in a speech in Detroit on Thursday.
“GM is way out in the lead” on autonomous vehicles, he said.
GM in 2016 acquired Cruise for US$581 million in cash. The value of the deal was nearly US$1 billion including incentives for key talent, including Cruise CEO Kyle Vogt.
The purchase was a coup for company, which is racing Alphabet Inc’s Waymo and others to develop self-driving vehicle technology that has the potential to transform transportation.
Cruise has been testing autonomous Chevrolet Bolt prototypes in San Francisco and Phoenix, and outside Detroit.
Of the options that GM is considering, it is unlikely to spin off Cruise, because that would risk ceding control and leaving the more than century-old automaker with less of a tech story to tell.
An offering of less than 20 percent of Cruise’s equity would enable the automaker to maintain control while potentially making it easier for the unit to hire talent or make acquisitions.
The Softbank deal ensured that Cruise will have the funding it needs for the next several years. GM’s future moves with the unit will depend on how quickly the public embraces the technology and its use for the ride-hailing business.
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