In April 2022, General Motors (GM) -) and Honda announced plans to expand their relationship "to a new chapter" by jointly developing a series of affordable electric vehicles.
The companies are working together to enable global production of millions of EVs starting in 2027, including compact crossover vehicles, which they segment was the largest in the world, with annual volumes of more than 13 million vehicles.
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“GM and Honda will share our best technology, design and manufacturing strategies to deliver affordable and desirable EVs on a global scale, including our key markets in North America, South America and China,” Mary Barra, GM chair and CEO, said in a statement.
Toshihiro Mibe, Honda president and CEO, said the two automakers “will build on our successful technology collaboration to help achieve a dramatic expansion in the sales of electric vehicles.”
But things have changed in the last year and the two companies said on Oct. 25 that they are scrapping the plan, according to Reuters.
Enhance EV profitability
"After conducting some research and analyses, both parties decided to end the development," Honda said in a statement. "Each company will continue to work towards offering affordable models to the EV market."
The Japanese company said there was no change in its plan to sell only electrified vehicles by 2040.
This news comes as GM said it was scrubbing a self-imposed target to build 400,000 electric vehicles by mid-2024, a target Barra was committed to as recently as July of this year.
GM, which reported much stronger-than-expected fourth quarter earnings, pulled its full-year profit forecast amid surging costs related to the United Autoworkers Union strike, which expanded the walkouts to a 5,000-worker factory in Irving, Texas.
Barra said that she believes "the offer we have on the table with the UAW is better than the contracts that employees at companies like Caterpillar, UPS, and Kaiser Permanente have ratified."
"The current offer is the most significant that GM has ever purposed to the UAW," she said.
UAW president Shawn Fain said "it's time GM workers, and the whole working class, get their fair share."
Regarding electric vehicles, Barra said GM was "taking immediate steps to enhance the profitability of our EV portfolio and adjust to slowing near-term growth."
"These steps include moderating the pace of our EV acceleration in 2024 and 2025 to maintain strong pricing," she during a conference call with analysts, according to a transcript of the call.
Transformation 'a bit bumpy'
“As we get further into the transformation to EV, it's a bit bumpy, which is not unexpected, Barra said. "And I believe our portfolio that we have that looks at the most important segments, and make sure that we have the right entries. We're already seeing strong demand for entries when we have EVs that people actually want to buy."
Chief Financial Officer Paul Jacobsen said the strike was costing the company about $200 million per week.
"We are not providing new targets, but are moving to a more agile approach to continually evaluate EV demand and adjust production schedules to maximize profitability," Jacobsen said.
He noted that the "observation about slowing EV demand growth is something that everybody's been talking about." he said.
"We've seen it in competitor earnings profiles, etc., but I want to be clear, we're not seeing that in our portfolio right now," Jacobsen said.
GM recently said it would delay production by a year of Chevrolet Silverado and GMC Sierra electric pickup trucks at a plant in Michigan, while Ford (F) -) said it would temporarily cut one of three shifts at the plant that builds its electric F-150 Lightning pickup truck.
Tesla (TSLA) -) posted disappointing third quarters earnings and CEO Elon Musk noted that “stormy” economic conditions, rising interest rates and uncertain demand have clouded the company's near-term outlook, but held to his target of delivering 1.8 million vehicles this year.
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