General Motors’ (GM) autonomous vehicle division, Cruise, is facing regulatory suspensions and a significant loss in revenue, raising uncertainty about the company’s bet on autonomy. Shortly after CEO Mary Barra touted Cruise as an undervalued asset, the California Department of Motor Vehicles suspended its robotaxi license, citing concerns over public safety. Cruise subsequently announced the cessation of operations in all four cities where it offered rides, further undermining its revenue potential. This setback has led investors to question the viability of Barra’s autonomy strategy.
The current situation presents a challenging dilemma for Barra, as Cruise has already depleted $1.4 billion of its $1.7 billion cash reserves this year. Consequently, GM will need to inject new funds within three quarters to sustain the division. Moreover, if Cruise fails to regain its license, Alphabet Inc.’s Waymo will be the only self-driving taxi business operating in California, the prime market for this technology.
GM’s acquisition of Cruise for $1.1 billion in 2016 has proven costly. Since 2018, the division has incurred a total cost of $5.7 billion. At its peak, Cruise operated 400 robotaxis in San Francisco and a total of 200 in Austin, Houston, and Phoenix. However, the recent suspension in California stemmed from an incident in which a Cruise vehicle hit a pedestrian. Although the vehicle initially stopped, it later dragged the pedestrian for 20 feet before coming to a complete halt. Cruise placed blame on the human driver of another vehicle, failing to acknowledge the extent of the pedestrian’s injuries.
While no fatalities have occurred in Cruise vehicles or other self-driving cars to date, Tesla’s autopilot system, for example, has been implicated in 17 deaths and is currently under investigation by the National Highway Traffic Safety Administration (NHTSA). Despite this, the California DMV had no choice but to halt Cruise’s operations due to the incident involving the pedestrian.
The troubles for Cruise extend beyond safety concerns. The company’s vehicles have caused traffic disruptions and impeded the progress of emergency response vehicles. In Austin, several vehicles unexpectedly stopped, causing gridlock, while in San Francisco, Cruise cars obstructed an intersection for over an hour. These incidents have raised questions about the adequacy of Cruise’s processes.
As a result of these challenges, Cruise has experienced a wave of executive departures this year. Senior Vice President of Government Affairs Robert Grant and Chief Communications Officer Kristine Boyden both left, followed by Oliver Cameron, former Vice President of Product. CFO Bill Nash also stepped down, along with Hussein Mehanna, Head of AI and Machine Learning.
With Cruise’s operations suspended, it may temporarily reduce cash burn. However, Barra must reconcile this money-losing venture with her vision of exiting unprofitable businesses domestically and abroad. While GM has seen record profits and maintained strong margins during Barra’s tenure as CEO, the Cruise division’s setbacks may undermine her accomplishments.
To rebuild public trust and address the regulatory, legal, and reputational challenges, Cruise has vowed to take steps internally, even if they are uncomfortable or difficult. The company aims to demonstrate a commitment to risk mitigation, safety, and public trust. However, its ability to regain its suspended permits and navigate the increasingly competitive autonomous vehicle industry remains uncertain.
In conclusion, GM’s Cruise division faces a regulatory suspension and a significant loss in revenue, casting doubt on the potential payoff of Barra’s bet on autonomy. With mounting challenges and executive departures, Cruise must restore public trust and compliance with regulatory requirements to salvage its autonomy ambitions.
