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The Significance Of North American Alliance Deal Between GM And Honda

SACHA PFEIFFER, HOST:

If you can't beat them, make a deal to join them. That's what American automotive giant General Motors plans to do with the Japanese carmaker Honda. The deal establishes a North American alliance between the two companies. That would let GM and Honda collaborate on purchasing supplies and manufacturing new vehicles. Michelle Krebs is an executive analyst for Cox Automotive and joins us now to talk about the deal.

Hi, Michelle.

MICHELLE KREBS: Hi.

PFEIFFER: First, this is being described, as we said, as an alliance, not a merger. How is this different than a straight merger?

KREBS: Well, a merger would be one company taking over the other, or there could be an arrangement where one owns a stake - owns shares in the other. And that is not what they have done here. They're looking at what vehicles they can develop together. In other words, they would put the same platforms, propulsion systems under the vehicles, but they'd still be sold as a Chevy or a Honda, for example. But further out, what this is really about is to jointly move forward with electrification.

PFEIFFER: Right - electrification. We think about the future of the auto business being electric cars and self-driving cars. Where is GM on that, and how does this deal help?

KREBS: They have laid out a very aggressive electric vehicle strategy, and they're skipping right over hybrids and plug-in hybrids and want to go straight to electric. Now, GM has developed some very interesting battery technologies, and those batteries will also be used on Hondas. Batteries are very expensive to develop. GM wants to sort of license that technology and then also spread the use of batteries because if you get high volume, then that will bring the cost down and make it more affordable for more people to buy electric vehicles.

PFEIFFER: And what about Honda? What does Honda see as advantages for it?

KREBS: I think what it boils down to is neither company can do this on its own. All companies have found this is a very expensive venture to do on their own, and we don't know when the payback is. So Honda will gain immediate access to these batteries and will be able to electrify its vehicles more quickly as well.

PFEIFFER: I'm thinking about, for example, Honda excelling at making cars, GM being very good at light trucks. Does this mean we could see more Honda trucks and GM cars?

KREBS: Well, that's certainly a possibility. They haven't said what vehicles will be what, but General Motors has pulled out of the car market, to some extent. They've eliminated vehicles like the Chevy Cruze, which was a nice, affordable little car. But Honda has the Civic and the Accord, which are smaller vehicles that are very popular. So we may see some sharing of car platforms.

On the other hand, Honda's only got one truck. It's not a big truck. It's the Ridgeline. GM sells more trucks than anybody in the United States, both midsize and large. So we may well see some sharing there as well. So they have very complementary product lines.

PFEIFFER: Michelle, there are certainly Americans for whom it's very important to drive an American car. Do you think this deal between GM and Honda could blur the brands at all in a way that people might not like?

KREBS: It will not blur the brands. They will still continue - you'll go to your Honda dealership to buy your Accord. You'll go to your Chevy dealership to buy your Silverado. They will not blur those brands. However, anyone who thinks they're buying an American car needs to do some research because the most American vehicles - and if you measure by parts and content - are things like, well, Tesla being No. 1 and Honda's Acura division. So the lines have long been blurred about what's truly an American vehicle.

PFEIFFER: Michelle Krebs is an executive analyst for Cox Automotive.

Thanks, Michelle.

KREBS: Thank you.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.