Navigating Turbulent Waters: The Perilous Trajectory of Cruise as GM's Latest Trendy Venture

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Business / Saturday, 16 December 2023 13:39

Navigating Stormy Seas: GM's Cruise Venture Faces Turbulence Amidst Autonomous Vehicle Challenges

In a quest to diversify its portfolio, General Motors ventured into trendy industries such as ridesharing and "mobility" ventures in 2016. However, these growth areas, including Cruise, GM's majority-owned autonomous vehicle subsidiary, have encountered setbacks, raising concerns about Cruise becoming GM's latest high-profile venture that fails to deliver.

Once considered a significant business opportunity, Cruise has now transformed into a growing liability for GM. The turning point was an October 2 accident in San Francisco, where a pedestrian was dragged by a Cruise self-driving vehicle after being struck by another vehicle. This incident triggered a series of problems and investigations, prompting the grounding of Cruise's robotaxi fleet and a comprehensive safety review. The aftermath saw a leadership shakeup, with co-founders resigning and nine other leaders ousted. GM responded by slashing spending and growth plans, including a pause in the production of a new robotaxi, and announced a 24% reduction in Cruise's workforce.

As GM grapples with economic concerns and shifts its focus back to core business for profitability, Cruise's future remains uncertain. Despite CEO Mary Barra expressing confidence in Cruise's team and commitment to its long-term success, industry-wide doubts about the profitability of autonomous vehicles (AVs) as a business rather than a niche project loom large. Sam Abuelsamid, a principal research analyst at Guidehouse Insights, remarked, "AV technology, while they've made a lot of progress with it, is unlikely to be profitable anytime in the foreseeable future, certainly not this decade.

With skepticism growing not only around GM and Cruise but the entire AV industry, the challenges faced by Cruise underscore the uphill battle of making autonomous vehicles a commercially viable enterprise.

GM's Cruise Revival: Can the Detroit Automaker Navigate Autonomous Challenges?

As General Motors grapples with the turbulence surrounding its autonomous vehicle subsidiary, Cruise, Wall Street analysts express a cautious optimism that GM, under the leadership of CEO Mary Barra, can steer Cruise towards success. With GM adopting a more hands-on approach to address the myriad challenges, including leadership shake-ups, safety concerns, and workforce reductions, the company is expected to provide crucial updates at an investor event in March.

While some analysts, like Morgan Stanley's John Murphy, see GM's plan to pause Cruise operations and reduce spending as initial steps, skepticism persists. The success of these measures remains uncertain until addressed comprehensively during the capital markets day in early 2024. However, if GM fails to turn the operations around, Cruise could join a list of past defunct growth businesses and investments, including ventures into personal autonomous vehicles and evaluations of "flying cars.

GM, which launched about 20 initiatives targeting $1.3 trillion in new total addressable markets in 2021, faces the challenge of prioritizing and navigating the complexities of Cruise, a venture that has proven both ambitious and costly. Sam Abuelsamid, a principal research analyst at Guidehouse Insights, underscores the need for GM to take a thorough look at its priorities and make strategic decisions about Cruise's future.

Notably, not all of GM's noncore businesses have met similar fates. GM Energy and the BrightDrop commercial EV unit continue to operate, with BrightDrop recently brought in-house as part of GM's cost-cutting measures. While GM's financial arm maintains its insurance business launched in late 2020, CFO Paul Jacobson emphasizes the importance of reprioritization and reducing unnecessary expenses.

Amidst the uncertainties, the question of whether GM will integrate Cruise into the automaker remains unanswered. GM's existing autonomous vehicle unit, along with recent leadership appointments, adds an intriguing layer to the ongoing narrative of GM's venture into the autonomous vehicle landscape. The road ahead for Cruise and GM promises to be a challenging yet pivotal journey as they navigate the complexities of autonomous technology and strive to redefine the future of mobility.

GM's Complex Landscape: Navigating Autonomous Setbacks Amidst Diverse Ventures

General Motors (GM) faces a complex scenario as it grapples with the challenges surrounding Cruise, its majority-owned autonomous vehicle subsidiary. Despite setbacks in the autonomous realm, GM continues to operate a military defense unit and a fuel cell business, both securing recent contracts and partnerships. The company, however, doesn't disclose revenue or earnings for these units.

GM maintains a bullish outlook on its software initiatives and joint ventures for electric vehicles (EVs), exemplified by a significant investment exceeding $1 billion with POSCO Future M to enhance production capacity for key battery elements in North America. While Cruise's acquisition in 2016 aimed to address Wall Street concerns about traditional automakers competing with tech giants like Apple and Google, the commercialization of autonomous vehicles has proven more challenging than anticipated.

Cruise, once considered a front-runner in the U.S. for robotaxis alongside Alphabet-backed Waymo, now faces industry-wide headwinds as others, including Lyft, Uber, and Ford Motor/Volkswagen-backed Argo AI, have exited the autonomous vehicle arena. Stellantis has formed partnerships with BMW and Waymo but hasn't pursued ventures on the scale of Cruise and Argo.

As GM assesses the future of Cruise, Morningstar analyst David Whiston emphasizes the need for a clear strategy to resume commercial services for consumers safely. The substantial investments and losses associated with Cruise, totaling more than $8 billion since 2016, raise questions about the viability of autonomous ventures in the current market landscape. As GM confronts mounting challenges, the company's strategic decisions and ability to navigate these complexities will significantly shape its trajectory in the evolving landscape of autonomous technology and diverse business ventures.

Charting a New Course: GM's Evolving Cruise Strategy Amidst Funding Realities

In the evolving landscape of autonomous vehicles, General Motors (GM) faces strategic shifts with its autonomous vehicle subsidiary, Cruise. Since GM's acquisition of Cruise in 2016, the company attracted notable investors like Honda Motor, SoftBank Vision Fund, and, more recently, Walmart and Microsoft. However, the trajectory took a turn last year when GM acquired SoftBank's equity ownership stake for $2.1 billion.

Despite initial optimism, GM now plans significant spending cuts for Cruise. CEO Mary Barra, who leads Cruise's board of directors, refrained from disclosing the future budget for Cruise, emphasizing the need to complete assessments and formulate a strategic plan. Cruise, which ended the third quarter with $1.7 billion in cash, sufficient to last through a majority of the next year at the current burn rate, stands at a crucial juncture.

As GM navigates funding realities and evaluates the role of Cruise in its future portfolio, Barra remains committed to overcoming challenges. The broader vision of autonomous vehicles, championed by Barra and others, emphasizes their potential to reduce crashes and fatalities while providing transportation for those unable to drive.

The uncertainties surrounding Cruise reflect the complex landscape of autonomous technology, requiring GM to chart a new course, develop a robust plan, and allocate resources judiciously. CNBC's Michael Bloom and Hayden Field contributed valuable insights to this report.

In conclusion, General Motors (GM) stands at a critical juncture as it grapples with the future of its autonomous vehicle subsidiary, Cruise. Having attracted significant investments and partnerships, Cruise's trajectory has faced challenges, leading to strategic shifts and a plan for substantial spending cuts. GM's acquisition of SoftBank's equity stake last year marked a pivotal moment in this evolution.

CEO Mary Barra, who leads Cruise's board of directors, remains optimistic about overcoming the current challenges. While not disclosing specific budgetary commitments for Cruise's future, Barra emphasizes the importance of completing assessments and formulating a strategic plan to ensure a viable path forward.

The complexities of the autonomous vehicle landscape, coupled with the financial realities and evolving market dynamics, underscore the need for GM to chart a new course for Cruise. As the company evaluates the role of autonomous technology in its future portfolio, the commitment to addressing challenges and the potential benefits of self-driving cars in enhancing safety and accessibility remain key focal points.

The journey ahead for GM and Cruise entails careful navigation through uncertainties, strategic decision-making, and a commitment to a vision where autonomous vehicles play a transformative role in transportation. With crucial assessments and plans in the works, GM's approach to Cruise will significantly shape its role in the rapidly evolving landscape of autonomous technology.