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SoftBank Vision Fund to Invest $2.25 Billion in GM Cruise

PHOTO (select to view enlarged photo)
General Motors President Dan Ammann (left) and GM Chairman and CEO Mary Barra (right) give SoftBank Investment Advisers Managing Partner Michael Ronen a closer look at the Cruise AV on Wednesday, May 30, 2018 in Detroit, Michigan. (Photo by Steve Fecht for General Motors)

SEE ALSO: Bye Bye Car Companies

◾SoftBank and GM joining forces to drive large-scale AV deployment

◾Investment values GM Cruise at $11.5 billion

DETROIT May 31, 2018; General Motors announced today that the SoftBank Vision Fund will invest $2.25 billion in GM Cruise Holdings LLC (GM Cruise), further strengthening the company’s plans to commercialize AV technology at large scale. GM will also invest $1.1 billion in GM Cruise upon closing of the transaction.

“Our Cruise and GM teams together have made tremendous progress over the last two years,” said GM Chairman and CEO Mary Barra. “Teaming up with SoftBank adds an additional strong partner as we pursue our vision of zero crashes, zero emissions and zero congestion.”

“GM has made significant progress toward realizing the dream of completely automated driving to dramatically reduce fatalities, emissions and congestion,” said Michael Ronen, managing partner, SoftBank Investment Advisers. “The GM Cruise approach of a fully integrated hardware and software stack gives it a unique competitive advantage. We are very impressed by the advances made by the Cruise and GM teams, and are thrilled to help them lead a historic transformation of the automobile industry.”

“We’re excited to be joining forces with a tech leader who shares our belief that AV technology will change the world,” said GM President Dan Ammann. “We look forward to partnering with SoftBank as we work toward deploying this technology safely and in massive scale.”

The SoftBank Vision Fund investment will be made in two tranches. At the closing of the transaction, the Vision Fund will invest the first tranche of $900 million. At the time that Cruise AVs are ready for commercial deployment, the Vision Fund will complete the second tranche of $1.35 billion, subject to regulatory approval. Together, this will result in the SoftBank Vision Fund owning a 19.6-percent equity stake in GM Cruise and will afford GM increased flexibility with respect to capital allocation.

The GM and SoftBank Vision Fund investments are expected to provide the capital necessary to reach commercialization at scale beginning in 2019.

Transcript Of GM SoftBank Press Conference



Ladies and gentlemen, thank you for standing by. Welcome to the General Motors Investor Conference Call. During the opening remarks, all participants will be in a listen-only mode. After the opening remarks, we will conduct a question-and-answer session [Operator Instructions]. As a reminder, this conference call is being recorded Thursday, May 31, 2018.

I would now like to turn the conference over to Dhivya Suryadevara, Vice President of Corporate Finance. Please go ahead, ma'am.

Dhivya Suryadevara

Thanks, operator. Good morning and thank you for joining us today. We’re here to discuss our announcement the SoftBank Vision Fund will invest $2.25 billion in GM Cruise. This investment, together with an additional $1.1 billion investment from GM, will give GM Cruise the capital expenditures it needs to successfully commercialize autonomous vehicles at scale. A press release was issued this morning, and our conference call materials are available on the GM Investor Relations Web site. We're also broadcasting this call via webcast.

This morning, Mary Barra, GM's Chairman and CEO and Dan Ammann, GM' President will cover some prepared materials. We also have Michael Ronen, Managing partner at SoftBank Investment Advisors here with us to make a few comments. Following the opening remarks we will open the lines for Mary and Dan to answer questions from the analyst community.

Before we begin, I would like to direct your attention to the forward-looking statements on the second page of the chart set. The content of our call will be governed by this language.

I will now turn the call over to Mary Barra.

Mary Barra

Thanks, Dhivya, and thanks everybody for joining. General Motors has a world view and a commitment to create a world with zero crashes, zero emissions and zero congestion. And today with the announcement that we made with SoftBank, we are demonstrating our commitment to that vision. And having a strong ability to partner with SoftBank who shares our vision of creating this world, we are very excited, because they are one of the largest tech if not the largest tech investor and also has significant influence in this area. And we believe that it is a very strong signal to the work that we are doing and the AV journey that we are on.

When we look at what we've announced in the past, we are still on track with our plan to launch a bright sharing vehicle and -- the autonomous vehicle in a ridesharing network in 2019. Our rate of change and progress continues to keep us on that journey. But as always, we will be gated by safety.

When we look at the importance of AV technology to safety and look at the fact that 94% of all traffic fatalities are caused by human error, we see AV technology as critical to achieving our zero crashes goal. When we also look at from a congestion perspective, AV technology will play a very significant role in reducing and/or eliminating congestion. When look at the amount of time today people spend in traffic and we also look at the way people look for parking places and the way cities are formed, you can imagine it will change dramatically when AV technology is available and how cities can be constructed to be better for business, better for those living there and for the environment overall.

When we look at General Motors’ approached to AV, we have a very integrated approach. We’re focused on developing first the safest capability from an autonomous vehicle perspective. And with that, we bring our knowledge of putting vehicles on the road for 100 years, as well as a deep understanding of what it means to be automotive grade. We have demonstrated capability with our manufacturing to scale technology as it's developed and as it meets our requirements very quickly.

We are testing in a complex urban environment, and this gives us a dramatic increase in the rate of learning that we have with our autonomous vehicle. And this is supporting the rate of change or the rate of iteration that we have to develop safe autonomous vehicles. So everything under one roof is unique in this space, and we think it is a very important ingredient to have the speed at which we can develop these vehicles safely.

So with that, I’d now like to turn it over to Dan to make some comments.

Dan Ammann

Great. Thanks, Mary. Good morning, everybody. For those following along on the slides, I am on the Slide 11. I just want to recap for a minute the progress that we’ve made, especially over the last couple of years on our journey to large scale commercialization of AV technology. We obviously made the Cruise acquisition just about exactly two years ago.

And between that time and now, the core tenant of our purchase of this work has been about our ability to have a very high rate of development and a very high rate of iteration as we develop this technology and prepare to bring it to market. And what that’s been enabled by is the very unique construct that we have of having all of this capability under one roof between the software expertise and development on the Cruise team, all of the vehicle side, engineering and knowhow and integration and validation on the GM side.

And having those teams work together in a very seamless way gives us, we believe, a very unique capability, not just in terms of the speed of development but also in terms of our overall approach to safety and our ability to control the entire system, and elevate the entire system and obviously, our ability ultimately to scale the technology. So we’ve made a lot of progress over the last couple of years, but we’re even more excited about the potential to continue this journey and even accelerate this journey as we move forward.

So just to recap on the overall very high big picture headline of the transaction. As already mentioned, SoftBank will be investing $2.25 billion into GM Cruise, or 19.6% stake, so just under 20% stake that values GM Cruise today at $11.5 billion, which obviously recognizes the progress we’ve made over the last couple of years, but I think even more importantly, it recognizes the scale of the potential opportunity that lies ahead of us as we bring the technology to reality and deploy it in large scale. In addition, General Motors will also be investing $1.1 billion into GM Cruise in parallel and all together, we think that fully funds our plan from through sale or commercialization.

Let me spend a minute now on Slide 13, on the strategic rationale for this transaction from a General Motors perspective. Obviously, we were on a path to fully fund this technology development ourselves, and we’re absolutely prepared to do this. But in our discussions with SoftBank, they have gone on over the course of several months. We have found a partner that shares a very aligned vision of what this technology can do for the world, the impact that it can have, and also around the long-term business opportunity. So we weren’t looking for a partner, but we found one and we found one that was uniquely aligned with our long-term perspective.

Obviously, having the perspective of the world’s largest technology investor and having SoftBank on our team is a tremendous advantage for us, and we’re very excited about that. We also believe that the structure created by this investment will give us an ability to further accelerate our rate of talent acquisition and to bring the best talent in the world on to our team. As many of you know, the Cruise team has grown very rapidly from around 40 people at the time of the acquisition to 20 times that today, so over 800 today. We also have a similar size number people on the General Motors side, working full-time on this.

And we believe that this transaction, this investment, this partnership, will only accelerate our ability to bring the best talent to bear on the opportunity. Obviously, it also affords us a new source of capital as we look to scale this business, and a different source of capital from the mainstream corporate balance sheet. And then finally, Softbank obviously brings a unique set of relationships and an ecosystem to the table that gives us increased flexibility and optionality around commercialization, and even beyond that. So we're excited about that as well. So we see a lot of very significant strategic benefits to us to what we're announcing here.

Let me spend a second on just the highlights of the transaction; the $2.25 billion will be invested in a, what I'd describe, is a very conventional style VC style convertible preferred security; it'll be invested in two tranches, $900 million at closing together with the $1.1 billion investment by us, to give us $2 billion of additional capitalization; then at the time that the Cruise AV is ready for commercial deployment, SoftBank formed its second tranche of $1.35 billion and that will bring it up to the 19.6% ownership stake.

From a governance point of view, SoftBank will receive one of six board seats on the GM Cruise board. And then in terms of the liquidity horizon here and I think this is an important point. In the investment structure, we have SoftBank agreed to a seven year horizon in terms of the amount of time it can go by before either SoftBank will complete liquidity or we could seek to have SoftBank optionally convert into GM stock. I think that time horizon reflects the magnitude of the opportunity and the timeline and resources to really scale into this in a significant way. So this is a long term partnership, a long term commitment, and I think the terms reflect the magnitude that we see of the potential here.

Let me spend a second on what is in the GM Cruise business scope, that's summarized on Slide 15; it's obviously the AV rideshare business; it’s monetization of the in-car experience that comes from that; monetization and all the opportunities that arise from the data that will be generated from the Cruise vehicles in the rideshare network; and it obviously expands beyond just moving people to moving goods and any other mode of shared network monetization of AV technology. So that's the scope of what is inside of GM Cruise.

We're also announcing today that we will be, from beginning in the second quarter of this year, reporting GM Cruise as a separate segment in our segment reporting; that's all about giving you more transparency on this part of our business; that change will not affect our other business unit segments here.

So just to wrap up, obviously, we believe that autonomous vehicle technology has the potential to have a profound impact on the world. We believe our integrated approach of having a full stack of capability, hardware, software, integration, validation, everything around that is the unique approach and is required to do this safely and to do it with speed and to do it with scale. And we're just really excited to be partnering with SoftBank to bring this opportunity to life.

So with that, I'm going to introduce Michael Ronen and given him opportunity to share a few perspectives with you.

Michael Ronen

Thank you, Dan and thank you Mary and the entire GM team. On behalf of myself and the entire SoftBank team, we’re thrilled to be here in Detroit to announce the existing important partnership with GM. It’s not every day that we get to partner with one of the most important companies in the world on what is one of the most exciting technological opportunities of our life time.

We are proud to become partners with GM, and look forward to many years of joint success as we work together to achieve our common vision. Our mission at SoftBank is to accelerate the advancement of technology to benefit humanity. We invest across various sectors to achieve this mission. Our capital base and our global perspective provide us with a unique opportunity to take a differentiated and informed long-term view in what is uncertain market. While these are early days in the transportation evolution, we believe today's investment in Cruise and partnership with GM perfectly represents SoftBank's unique value-add to the U.S. and global economy.

Let me make the few comments about the rationale and timing for this investment. As investors on this call very well know, the automobile industry is undergoing historic transformation with three macro trends converging to disrupt the traditional business model; AI and autonomous driving; electrification and displacement of the gas engines; and the emergence of ridesharing networks as alternatives to ownership. While these are still early days and much as still to come, the path towards GM's vision, which we share of zero emissions, zero fatalities and zero congestion, is clear. It’s not a matter of if but of when for it to materialize.

We have been monitoring the AV landscape over the past couple years, and have tremendous admiration for the talent and capabilities that many of the companies are taking on this challenge. While we look closely at many of these companies and performed extensive technical and financial due diligence over many months, we ultimately chose to invest with GM and Cruise for several reasons.

First, like GM, we believe that a vertical solution where hardware and software are integrated and iterated seamlessly provides a strong competitive advantage. The Cruise team is brilliant and agile, and it's stability to quickly iterate across the technology stack, software and hardware, to drive the business forward is unique. GM' best-in-class manufacturing expertise also gives Cruise the unique ability to scale production rapidly.

We were also impressed by the seamless partnership between Kyle and his team at Cruise and Mary and Dan and the team of GM. It is rare to see such alignment and close partnership developed between such diverse partners; the young disruptive start-up on the one hand and an established industry leader on the other hand. The common vision and the shared sense of purpose are clear, and they form the basis for many years of continued success.

Lastly, GM's commitment and experience in vehicle safety is paramount to the success I just mentioned. AVs will be the first instant where humans will literally put their lives in the hands of robots on a daily basis. Achieving better than human safety levels is the core foundation of this effort. There is no viable business opportunity prior to achieving this milestone. There is no other company in the world that has both the technology shops and the experience to lead this industry on this front.

In summary, I would like to thank Mary. Dan and Kyle, for the trust they've put in us as a partner. We’re proud to join the GM family and to our investment in this iconic American company to drive economic growth, job creation and U.S. technology leadership. One final thought, I recall reading about GM's acquisition of Cruise a few years ago and recognizing this could be one that changes everything.

Now, that we've been on the insight, I believe it will. Here from now GM’s investment in Cruise will be looked at as one of the most transformative tech acquisitions ever. We are thrilled now to become part of this success. Thank you.

Dan Ammann

Thanks, Michael. And so I think we’re now ready to open it up for questions that Mary and I would be happy to take

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