Authors: Nora Eckert and David Shepardson
DETROIT (Reuters): General Motors had to exit its robotic cruise business, most Wall Street analysts agreed on Wednesday, but the automaker’s decision was still a disappointing end to an operation that GM had touted as a potential $50 revenue generator. billion dollars 2030.
The largest U.S. automaker withdrew from Cruise on Tuesday after assessing further investments needed in a competitive market, executives said, adding that they intend to transfer some of Cruise’s talent to GM to continue developing driver-assistance systems.
“We see this news as a step in the right direction for GM as we believe investors have lost patience with the massive spending (~$10 billion) associated with robotaxi development, with little to be said about the investment,” Garrett Nelson, analyst at CFRA Research wrote.
GM shares rose 3% in the after-hours on Tuesday immediately after the announcement, but gave up those gains during Wednesday’s regular session and closed up 1.3%.
Nelson said the announcement “damages the credibility of GM management, which told investors last year that the Cruise business could generate $50 billion in annual revenue by 2030.”
Speaking to reporters on Wednesday night, GM CEO Mary Barra explained why the automaker was targeting Cruise.
“At that time, we really felt like we were going to be rolling out our vehicles faster than before,” Barra said, adding that “there was definitely a regulatory element where we hadn’t built the right relationship with our regulators.”
Cruise came under scrutiny following an October 2023 accident in which one of San Francisco’s robotoxies struck and seriously injured a pedestrian after being struck by another vehicle. Last month, Cruise pleaded guilty to filing a false report to influence a federal investigation and agreed to pay a $500,000 fine as part of a U.S. Department of Justice deferred prosecution agreement.
To date, GM is well ahead of its competitors. In 2024, the company’s stock is up 45%, Ford (NYSE:) is down 14% and Stellantis (NYSE:) is down 37%.
“I hope you can see that we are actively making decisions,” Barra said, when also faced with other questions about the automaker’s cost-cutting efforts amid turbulent demand for electric vehicles, changing technology and a recent presidential administration .
GM recently scaled back electric vehicle plans, sold a stake in one of its joint venture battery plants and reported a $5 billion loss at its China operations amid a restructuring. GM is now focusing on its core business: producing pickup trucks and other immense gasoline-powered vehicles.
Analysts say Cruise’s competitors, including Alphabet’s (NASDAQ:) Waymo, Baidu (NASDAQ:) and Tesla (NASDAQ:)) are well-financed and may have better technology. Waymo, which develops autonomous passenger transportation services, still loses billions of dollars a year.
Barclays (LON:) noted that Alphabet, which generates more than $100 billion in profits annually, is able to absorb the costs associated with Waymo’s development. However, GM is expected to report 2024 profits of $14 billion to $15 billion.
“It is clear from Waymo that an AV robotics company is best run by an entity with deep pockets,” Barclays said.
CHINA, TRUMP AND Elon
Separately, Barra said GM has a future in China and can be profitable with its Buick and Cadillac portfolios there.
She also discussed Tesla CEO Elon Musk and President-elect Donald Trump, expressing hope that the pair would aid establish a federal framework for autonomous regulations.
“I think a federal framework will allow everyone to be more efficient. “I think there is an opportunity there,” Barra said.
Barra will again have to meet with Trump, who has publicly criticized her in the past for GM layoffs and U.S. plant closures. Barra said she hopes the president-elect will be open to discussing some of his proposed policies, such as limiting electric vehicle tax breaks or increasing tariffs on Mexico and Canada would affect the automaker.
“In my experience, he listens carefully,” she said.
Moreover, Microsoft (NASDAQ:) said on Wednesday that it expects an impairment charge of approximately $800 million in the second quarter of fiscal 2025 related to GM’s Cruise decision.
