US clears SoftBank’s $2.25bn investment in GM-backed Cruise

The Cruise autonomous vehicle. Softbank’s investment in Cruise is one of the biggest and most high-profile investments in self-driving technology. (AFP)
Updated 07 July 2019
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US clears SoftBank’s $2.25bn investment in GM-backed Cruise

  • Japanese fund had been under scrutiny over ties to Chinese firms in face of escalating trade and technology war

NEW YORK: Cruise, a US self-driving vehicle company majority-owned by General Motors Co, told Reuters that a US national security panel approved a $2.25 billion investment in the firm by Japan’s SoftBank Corp.
SoftBank has come under increasing US scrutiny over its ties to Chinese firms in the face of an escalating trade and technology war between Washington and Beijing. It is in the process of raising its second $100 billion investment vehicle, dubbed Vision Fund, after deploying its first one of equal size.
The Committee on Foreign Investment in the US (CFIUS), which reviews deals for potential national security concerns, approved the investment based on fresh assurances that Cruise’s technology would be completely off limits to SoftBank, a source familiar with the matter said.
A SoftBank spokesman declined to comment. The Treasury Department, which leads CFIUS, did not respond immediately to a request for comment.
The approval unlocks a seat for SoftBank on Cruise’s board, formalizing its oversight, and cements key financing for Cruise, which has raised $7.25 billion in capital since last year, the company said.
“Today’s news is another important step toward achieving our goal to develop and deploy self-driving vehicles at massive scale,” Cruise CEO Dan Ammann said in a statement to Reuters.
However, approval for the deal did not always appear certain as CFIUS scrutinized it closely, according to two people close to the deal.
The $2.25 billion investment was unveiled by SoftBank in May 2018 amid a wave of investments by the Japanese technology and telecommunications conglomerate in artificial intelligence, data analytics, financial services and self-driving cars.
The investment raised red flags with CFIUS because SoftBank invests in numerous mobility units, some based in China, and encourages companies it invests in to share information.
CFIUS was especially concerned about SoftBank’s co-investments with Tencent Holdings, a Chinese social media and gaming giant, and its investment in China ride-hailing firm Didi, which it fears could take technology from Cruise, sources said.
The committee, emboldened by a law last year aimed at strengthening the inter-agency panel, has flexed its muscles increasingly against Chinese companies as Beijing and Washington remain locked in a heated trade and technology row.
Reuters reported that Chinese gaming company Beijing Kunlun Techhas been seeking to sell Grindr, the popular gay dating app, after CFIUS said its ownership posed a national security risk.

FASTFACT

SoftBank’s Vision Fund is the world’s largest technology fund

CFIUS halted a plan last year by Ant Financial, owned by the chairman of China’s Internet conglomerate Alibaba, to acquire MoneyGram International Inc.
The Cruise deal was structured to allow $900 million of the investment to be disbursed initially, with the remainder provided once Cruise AVs are ready for commercial deployment and contingent on regulatory approval. The two tranches would combine to give SoftBank a nearly 20 percent stake in Cruise.
However, the Japanese firm separately announced a joint investment with GM, T. Rowe Price, and Honda of $1.15 billion earlier this year, further boosting its stake.
Softbank’s investment, followed by Honda’s announcement in October that it will pour $2.75 billion into Cruise, is still one of the biggest and most high-profile investments in self-driving technology.
Its Vision Fund, the world’s largest technology fund, unveiled a $1.5 billion investment in China’s top used car platform, Chehauduo Group, in February. Reuters reported in December that the same fund was hiring an investment team based in China to boost its presence in one of the world’s most vibrant tech markets.
It is not the first time SoftBank has gone through a protracted CFIUS review. It has had to accept US restrictions on how it runs some of its companies, including wireless carrier Sprint Corp. and investment firm Fortress Investment Group.
SoftBank lost its claim to two seats on the board of Uber Inc. when the ride-hailing giant floated in the stock market in May. SoftBank never received permission for the board seats from CFIUS following an agreement in 2017 to invest $9 billion in Uber.
The autonomous vehicle industry could revolutionize transportation but faces engineering, safety and regulatory challenges, as well as skepticism among potential users.
GM Cruise and Alphabet Inc’s Waymo are often described as leading the pack of technology and auto companies competing to create self-driving cars and integrate them into ride services fleets.


South Korea downgrades Japan trade status as dispute deepens

Updated 18 September 2019

South Korea downgrades Japan trade status as dispute deepens

  • The change comes a week after South Korea initiated a complaint to the World Trade Organization
  • The new measures in effect mean it might take up to 15 days for South Korean companies to gain approvals to export sensitive materials to Japan

SEOUL, South Korea: South Korea on Wednesday dropped Japan from a list of countries receiving fast-track approvals in trade, a reaction to Tokyo’s decision to downgrade Seoul’s trade status amid a tense diplomatic dispute.
South Korea’ trade ministry said Japan’s removal from a 29-member “white list” of nations enjoying minimum trade restrictions went into effect as Seoul rearranged its export control system covering hundreds of sensitive materials that can be used for both civilian and military purposes.
The change comes a week after South Korea initiated a complaint to the World Trade Organization over a separate Japanese move to tighten export controls on key chemicals South Korean companies use to manufacture semiconductors and displays.
Seoul has accused Tokyo of weaponizing trade to retaliate against South Korean court rulings ordering Japanese companies to offer reparations to South Koreans forced into labor during World War II. Tokyo’s measures struck a nerve in South Korea, where many still resent Japan’s brutal colonial rule from 1910 to 1945.
According to South Korean trade ministry, the new measures in effect mean it might take up to 15 days for South Korean companies to gain approvals to export sensitive materials to Japan, compared to the five days or less it took under a simpler inspection process provided for favored trade partners.
Lee Ho-hyeon, a South Korean trade ministry official, said the change would affect about 100 local firms that export items such as telecommunications security equipment, semiconductor materials and chemical products to Japan. He said Seoul will work to minimize disruption to South Korean companies.
Japan for decades has enjoyed a huge trade surplus with South Korea, an economy that’s much more dependent on exports. Many major manufacturers heavily rely on parts and materials imported from Japan.
But the dispute is taking a toll. Exports to South Korea from Japan fell 9.4% last month, Japan’s Finance Ministry reported Wednesday.
The trade dispute between the neighbors erupted in July, when Japan imposed tighter export controls on three chemicals South Korean companies use to produce semiconductors and displays for smartphones and TVs, major export items for South Korea. It cited unspecified security concerns over Seoul’s export controls.
A few weeks later, Japan dropped South Korea from its own trade “white list,” triggered a full-blown diplomatic dispute that took relations between the US allies to their worst in decades.
The dispute has spilled over to security issues, with Seoul declaring it plans to terminate a bilateral military intelligence-sharing pact with Japan that symbolized the countries’ three-way security cooperation with the United States in the face of North Korea’s nuclear threat and China’s growing influence.
Following an angry reaction from Washington, Seoul later said it could reconsider its decision to end the military agreement, which remains in effect until November, if Japan relists South Korea as a favored trade partner.
Seoul announced its plans to downgrade Tokyo’s trade status in August before holding a 20-day period to gather opinions on the decision, during which the Japanese government voiced opposition to the move it described as “arbitrary and retaliatory,” Lee said.
He said Seoul needs to strengthen controls on shipments to a country that’s “hard to cooperate with” and fails to uphold “basic international principles” while managing export controls on sensitive materials.
South Korea previously divided its trade partners into two groups in managing export controls on sensitive materials. Following Wednesday’s change, South Korea now has an in-between bracket where it placed only Japan, which would mostly receive the same treatment in trade as the non-favored nations in what had been the second group.