The world of business partnerships is kicking off 2016 with a bang, bringing together the old world of cars with the new. GM, the occasionally troubled behemoth carmaker founded in 1908, and Lyft, the once-mustachioed ride-hailing service (that isn’t Uber) founded in 2012, are embarking together on a half-billion dollar plan to bring the future to a street near you.
As the New York Times reports, GM is investing $500 million in Lyft’s current $1 billion round of financing. That’s a lot of cash, and the two companies have big plans for what they will do with that money. It’s not just going to be business as usual for Lyft; there are two big changes coming.
The first is a series of “short-term car rental hubs” that finally once and for all proves how big a fiction the concept of “ride-sharing” apps really is. The idea with these is that people who do not own cars will be able to go to a Lyft hub, rent a (GM) car for a few hours, and use it to work for Lyft, making money. (One can only hope that the per-shift takings are likely to exceed the rental cost. Otherwise, drivers will be paying Lyft for the privilege of being contract workers.)
The other, however, is where we start to get into the stranger parts of living in the future: as part of the investment, GM will be developing an “on-demand network of self-driving cars,” according to the NYT. In this, GM suddenly finds itself entering the space where the best-known competitors so far are Google and Tesla, although Uber, Toyota, and others have all been making noise about autonomous vehicles in recent months as well.
At this point, our first collective thought about GM is less likely to be “innovation” and instead more likely to do with the fatal defect in the ignition switches GM used across most of their fleet, which they kept secret and covered up for the better part of ten years, leading to well over a hundred deaths and a criminal investigation. (But no class action lawsuits, thanks to their 2009 bankruptcy and restructuring.)
The partnership may feel strange, but from a business perspective it makes sense. Lyft can pocket millions or billions of dollars without worrying about pesky things like “labor law” if they can remove the drivers from their ride-hailing process entirely. And GM could really, really use some positive press as well as a partner helping them beat competitors and dive into the 21st century.
“The car industry is going to change more in the next five years than in the past 50,” GM president Dan Ammann said in a statement. “Even for GM, $500 million is a lot of money, but investing in different business models are going to be an important part of our future.”
G.M., Expecting Rapid Change, Invests $500 Million in Lyft [New York Times]