GM’s Cruise, its majority-owned autonomous vehicle subsidiary, is increasingly looking like it might be falling flat. Cruise is the latest to become a liability for GM. It seems GMs plans to diversify its business through trendy industries such as ridesharing and other “mobility” ventures or startups have largely fallen flat since the automaker started investing in such growth areas in 2016.
GM’s subsidiary Cruise has quickly gone from one of its https://www.industryleadersmagazine.com/how-ceo-can-build-successful-business/greatest business opportunities to a growing liability. Cruise, of which GM owns more than 80%, has confronted a wave of problems and investigations. This was sparked by an Oct 2 GM Cruise accident in which a pedestrian in San Francisco was dragged 20 feet by a Cruise self-driving vehicle after the person was struck by another vehicle.
GM Cruise’s robotaxi grounded
Since the GM Cruise accident, robotaxi fleet has been grounded, pending the results of independent safety probes. Its leadership has been gutted, including its cofounders resigning and nine other leaders being ousted. GM is massively cutting spending and growth plans for the business, including pausing production of a new robotaxi. Local and federal governments have launched their own investigations. Cruise has decided to layoff 24% of its workforce.
Can GM turn around Cruise?
There’s growing concern across the industry, not just with GM and Cruise, about the viability of autonomous vehicles (AV), as a business. There are few Wall Street analysts that are holding out hope that GM and Barra can turn Cruise around and eventually refocus on growing the business. This is as GM takes a more hands-on approach with Cruise. Several are expecting updates at an investor event in March.
“The plan to pause Cruise operations and reduce spending on Cruise in 2024 are only first steps. Once again, we expect these concerns to be addressed and cured at the capital markets day in early 2024 but expect skepticism to remain in the interim,” As per Morgan Stanley’s analyst John Murphy.
Past defunct businesses
If GM can’t turn the operations around, Cruise would join a list of its past defunct growth businesses, partnerships and investments since 2016.
The list includes:
2016-20: A “Maven” mobility brand that offered carsharing from the company as well as peer-to-peer.
Starting 2016: Partnerships with Uber and Lyft, including a $500 million investment stake in the latter. (GM made $78 million off its Lyft investment.)
2017-22: In-vehicle Marketplace app
2017-18: Book by Cadillac, a vehicle subscription service
2018-20: E-bikes
2019-21: Tie-ups with EV startups Nikola and Lordstown Motors.
GM pipelined projects
The automaker also has discussed personal autonomous vehicles as early as mid-decade and evaluating “flying cars” for the mid-2030s, among other things that have been de-emphasized more recently. In 2021, the company said it had about 20 initiatives in its pipeline that targeted $1.3 trillion in new total addressable markets.
“Cruise has been both vastly more ambitious and vastly more costly than any of those other programs,” Abuelsamid said. “It certainly could end up on the trash heap. They’ve got to take a long hard look at what they want to prioritize.”
GM continues to operate a military defense unit and fuel cell business that have both recently announced new contracts or partnerships. The company does not report revenue or earnings for these units.
GM says it remains bullish on its software initiatives and investments in joint ventures for EVs — for example, an investment projected to exceed $1 billion with POSCO Future M to increase production capacity of key battery elements in North America.
