General Motors Corp. yesterday said it would buy low-emission V-6 engines and transmissions from Honda Motor Co. as part of a new "worldwide partnership" with the Japanese automaker that will allow GM to meet California's tough new emission standards.
So far, Honda is considered to be leading the race to meet the new standards, with its V-6 Ultra Low Emission Vehicle engines.
In exchange for Honda's engines, GM will provide the Japanese automaker with diesel engines for sale primarily in Europe. The engines will be produced by GM's joint venture with Isuzu Motors Ltd. in Canada.
It will be one of the first times in modern history that GM will put another manufacturer's engines in the company's cars sold in North America, a GM official said. GM manufacturers 2.2 million engines for all its U.S. product lines and buys engines from other carmakers in Europe and Latin America.
Although neither GM nor Honda would give a cost figure for the engine deal, sources close to the negotiations said it could amount to $2.1 billion over the next five years. The engine and transmission would cost GM about $4,200 a unit. GM said that initially the company did not expect to buy more than 100,000 units a year.
Even at $2.1 billion, the Honda partnership would save GM billions of dollars a year, which it could then apply to research on alternative-fuel engines. Honda, one of the world's smallest car companies, cannot, in turn, afford to independently develop alternative-fuel engines. It could benefit in the future from any engine products developed by GM.
GM President G. Richard Wagoner Jr. said in a statement that the new partnership reflects GM's strategy of using its global reach to bring new products to market quickly. "We have tremendous respect for Honda's technical heritage. Together we can strengthen our abilities to develop future technologies," Wagoner said.
The new alliance also appears to answer questions about Honda's ability to remain independent.
Hiroyuki Yoshino, president of Honda Motor Co., said in a statement that "Honda is firmly committed to an independent path. This relationship will strengthen our ability to maintain this course."
Arvin Mueller, the group vice president in charge of GM's powertrain operations, said the deal announced last night has been in the works for seven or eight months. He called the agreement the start of a "long-term relationship" between the two companies to work on several powertrain projects."
Mueller, like Honda, denied that this might be the first step toward a merger with Honda.
Precise details of how the engine agreement would work were not available last night. Mueller said the two companies have agreed in principle on the partnership but still must work out specifics.
He said it was not clear whether the V-6 engines would be manufactured at company plants in the United States or in Japan.
CAPTION: Honda and General Motors presidents Hiroyuki Yoshino, left, and G. Richard Wagoner Jr. said that no merger lies ahead.