Detroit- General MotorsPlans to diversify its business into popular industries such as ride-sharing and other “mobility” companies or startups have largely evaporated since the automaker began investing in such growth areas in 2016.
Cruise, its self-driving car subsidiary, is increasingly likely to be next.
The unit quickly went from one of GM’s biggest business opportunities to a growing liability. Cruise, owned more than 80% by General Motors, faces a series of questions and investigations stemming from an Oct. 2 crash. In the incident, a pedestrian in San Francisco was struck 20 feet by a Cruise self-driving car. Another car.
Cruise’s fleet of robotaxis has been grounded since the incident, pending the outcome of an independent safety investigation. Its leadership has been destroyed, including the resignation of its co-founder and the ouster of nine other leaders.General Motors is making massive cuts to business spending and growth plans, Including suspending production of new robotaxis. Local and federal governments have launched their own investigations. The joint venture will reduce its workforce by 24%.
Like other companies, GM has quickly pivoted from trying to impress Wall Street with growth plans, including creating $80 billion in new business by 2030, to refocusing efforts on its core business amid economic and recession concerns. to create profits.
Still, GM seems confident it can eventually move forward with the Cruise project. GM Chief Executive Mary Barra told the Automotive Press Association conference in Detroit on December 4 that the automaker is “very focused on turning things around” on Cruise.
“We have full confidence in this team and are committed to supporting Cruise as their focus on trust, accountability and transparency sets the company up for long-term success,” GM said in a statement Thursday related to Cruise’s announcement of layoffs. .”
past projects
But the industry as a whole (not just GM and Cruise) is increasingly worried about the viability of autonomous vehicles (AVs) as a business rather than as a niche science project.
“While AV technology has come a long way, it’s unlikely to be profitable in the foreseeable future, especially this decade,” said Sam Abuelsamid, principal research analyst at Guidehouse Insights. “If they need to lay off employees, robotaxis will It seemed like the obvious choice.”
Some Wall Street analysts are hopeful that GM and Barra can turn around Cruise and eventually refocus on growing the business as the Detroit automaker takes a more hands-on approach to the company. Some are looking forward to getting the latest news at the investor event in March.
“Plans to suspend cruise operations and reduce cruise spending in 2024 are just the first step. Again we expect these concerns to be addressed and resolved at capital markets days in early 2024, but expect skepticism to remain in the interim,” Morgan said. Lee analyst John Murphy said in a Nov. 29 investor note.
If GM fails to turn around its operations, Cruise will join the ranks of its growth businesses, partnerships and investments that have ceased to exist since 2016. These include:
- 2016-20： A “Maven” mobility brand offering corporate and peer-to-peer car sharing services
- Starting in 2016: Partnerships with Uber and Lyft, including $500 million investment in latter
- 2017-22： In-vehicle market application
- 2017-18： Book through Cadillac, vehicle subscription service
- 2018-20： electric bicycle
- 2019-21： Cooperation with electric vehicle startups Nikola and Lordstown Motors, in which it owned an equity stake as part of a deal to sell the Ohio plant, and reported that invest in Rivian The result didn’t happen
The automaker has discussed personal self-driving cars as early as the mid-2000s and evaluated “flying cars” in the mid-2030s, among other things it has recently de-emphasized. The company said it has about 20 initiatives in the pipeline with the goal of reaching $1.3 trillion in new total addressable markets by 2021.
“The cruise plan is ambitious and much more expensive than any other plan,” Abu Samid said. “It could end up on the trash heap… They have to take a hard look at what they want to prioritize. “
Not all of the non-core businesses GM has launched in recent years have failed.GM Energy and BrightDrop commercial electric vehicle units continue to operate; however, GM recently brought Inside BrightDrop From becoming a wholly-owned subsidiary.
GM’s financial unit continues to operate the insurance business it launched in late 2020 as part of its growth plans.
General Motors Chief Financial Officer Paul Jacobson briefed the media on November 30 on the company’s overall cost-cutting measures, including “significant” reductions in expenses. All that needs to be done is its Energy and BrightDrop units.
Brightdrop EV600 van
Source: Brightdrop
Jacobson said Brightdrop’s changes were made to reduce layoffs and cut costs as the business case changed. BrightDrop is expected to generate $1 billion in revenue this year; it’s unclear exactly how that will happen.
Jacobson declined to say whether GM could bring Cruise into the fold of the automaker, which has its own autonomous vehicle unit and recently appointed Anantha Cancella from meta platform The newly created position of Vice President of Advanced Driver Assistance Systems.
GM continues to operate its military defense segment and fuel cell business, both of which have recently announced new contracts or partnerships. The company does not report revenue or earnings from these segments.
General Motors said it remains optimistic about its software plans and investments in electric vehicle joint ventures. For example, it expects to invest more than $1 billion with POSCO Future M to increase production capacity of key battery components in North America.
Are self-driving cars feasible?
General Motors acquired Cruise in 2016. At the time, the company was trying to calm Wall Street concerns that legacy automakers couldn’t compete with emerging rivals. apple and Google, as well as emerging “mobile” companies such as Lyft, Uber and a long list of other startups poised to disrupt traditional car ownership.
But commercializing self-driving cars hasn’t been a success for most, and it’s more challenging than many predicted just a few years ago. The challenges have led to consolidation in the industry after years of enthusiastically touting the technology as the next multi-trillion-dollar market for transportation companies.
Cruise is considered one of two remaining frontrunners in U.S. robo-taxis, along with letterWaymo, which invested, also operates a limited fleet of self-driving cars for consumers. AmazonSupported Zoox also continues to test self-driving cars in several states.
A rendering of General Motors’ Cadillac Halo package, which includes concepts for an autonomous shuttle (right) and an electric vertical takeoff and landing (eVTOL) aircraft, also known as an aerial vehicle.
Screenshot from GM
Other competitors such as Lyft, Uber and Ford/ Volkswagen-backed Argo AI has ended their self-driving car project, citing the need for heavy investment in an unprofitable and untested industry. Stellantis has announced partnerships with BMW and Waymo, but not similar partnerships with Cruise and Argo.
“I wonder what steps are needed to allow Cruise to return to commercial service for consumers in a safe manner,” said Morningstar analyst David Whiston. “Then, by not operating a consumer business, Maybe by not developing in other cities for the time being, how much cost can you save? Because the losses are already quite large.”
GM’s investment in Cruise and its share of the company’s losses have cost the automaker more than $8 billion since 2016, according to annual public filings. Losses have been mounting, reaching $1.9 billion as of the third quarter of this year.
After acquiring Cruise, GM attracted investors such as Honda Motor Co., SoftBank Vision Fund and, most recently, Walmart and Microsoft. However, last year General Motors acquired SoftBank’s stake for $2.1 billion.
General Motors said it would slash Cruise spending. Barra, who leads Cruise’s board, declined to say at a Press Association meeting on Dec. 4 how much the automaker is willing to spend on Cruise until it completes its review and develops a plan to move forward.
Cruise had $1.7 billion in cash as of the end of the third quarter, enough to last through much of next year at its current cash burn rate.
Barra and other proponents of autonomous vehicles have touted their ability to significantly reduce crashes and road fatalities while also providing transportation for those who may not be able to drive themselves.
On December 4, Barra said: “We will solve the challenges that Cruise currently faces. We have to have the right plan in place.”
– CNBC Michael Bloom and heidenfield contributed to this report.
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