Cruise was supposed to generate $50 billion in revenues by 2030, according to GM’s former hype, which Wall Street ate up.
By Wolf Richter for WOLF STREET.
General Motors announced Tuesday afternoon, after blowing $10 billion on its misbegotten robotaxi-startup money-pit Cruise LLC which it had acquired for an undisclosed amount in 2016 amid enormous hype, that it would:
- No longer fund Cruise;
- Bring its ownership from the current 90% to 97% via “agreements with other shareholders”;
- Acquire the remaining shares;
- Shut down the robotaxi operation;
- Fold Cruise’s technical team into its own autonomous and assisted driving effort for personal vehicles which produces the “hands-off, eyes-on” driving feature now available on nearly two dozen GM models.
So adios, Cruise.
Until Cruise started to implode in October 2023, GM CEO Mary Barra had hyped Cruise’s financial potential at every twist and turn, expecting it to produce $1 billion in revenues by 2025 and $50 billion by 2030, which caused Wall Street to lick its chops.
Cruise costs GM currently about $2 billion a year. Today GM said in the statement that it “expects the restructuring to lower spending by more than $1 billion annually” when the restructuring is complete in the first half of 2025.
Following the announcement today, shares jumped initially by 3.6% afterhours but then gave up part of it.
Alphabet’s Waymo, among the adults in the robotaxi room, has been operating driverless robotaxis in San Francisco, Phoenix, and Los Angeles. Here in San Francisco, riding a Waymo – they’re retrofitted Jaguar SUVs – has become a must-do tourist attraction, along with riding a cable car. The Waymos are everywhere, especially in the touristy part of the City.
Amazingly for a lot of us erstwhile cynics, Waymos are working pretty well compared to the mess that human drivers are making out there. This year through October in San Francisco, human drivers have killed 20 pedestrians, 2 bicyclists, and 8 people in vehicles. Nationwide, humans cause about 40,000 traffic fatalities a year. Not to speak of the serious injuries they cause. Human drivers are terrible drivers.
Developing this autonomous driving technology is a very risky, very costly business. Even minor accidents become global clickbait. The reputational risks are huge, as GM found out, and as Uber found out when it scuttled its robotaxi development after one of its test vehicles killed someone pushing a bicycle across the street.
But the top people at Cruise, a San Francisco startup company founded in 2013, were a bunch of shoot-from-the-hip startup cowboys, living by the Silicon Valley motto, “fake it till you make it.”
And they didn’t make it. They collided with self-inflicted trouble in October 2023, just two months after Cruise had received the approval for 24/7 robotaxi operation in San Francisco. A human driver in San Francisco hit a pedestrian and knocked the woman into the path of a driverless Cruise, which ran over the woman and dragged her, trapped under the car, for more than 20 feet before pulling over. That was bad enough.
But what was worse were the shoot-from-the-hip fake-it-till-you-make-it cowboys running the place. They tried to cover up the incident by failing to report it properly, by then misreporting it, and by lying about it, which infuriated local regulators and got them into deep legal trouble with the US Department of Justice.
Following the incident, Cruise’s permit to operate in San Francisco was suspended in October 2023. Cruise then halted operations in the other cities it was operating in – Phoenix, Austin, Dallas, Houston, and Miami. In November 2023, it issued a recall for its 950 robotaxis and laid off a portion of its 4,000 employees. Among other housecleaning GM did at Cruise at the time, the founder and CEO Kyle Vogt plus nine executives were forced out.
Last month, under the fist of GM by then, Cruise admitted to the allegations by the DOJ, accepted the criminal charges brought against it by the DOJ, and settled with the DOJ.
During the call with analysts following the announcement today, Barra still tried to put lipstick on this pig and said, “Cruise was well on its way to a robotaxi business, but when you look at the fact that you’re deploying a fleet, there’s a whole operations piece of doing that.”
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