A Cruise autonomous taxi in San Francisco, California, US, on Thursday Aug. 10, 2023.
David Paul Morris | Bloomberg | Getty Images
DETROIT — For years, General Motors CEO and Chair Mary Barra has promised a new future for the company, away from a stodgy metal-bending automaker into a tech-driven, forward-thinking company poised for growth.
Part of the plan was for GM’s innovation division to identify trillions — yes, trillions — of dollars in new market opportunities such as electric commercial vehicles, auto insurance, military defense, autonomous vehicles and even, eventually, the potential for “flying cars,” also known as urban air mobility.
“We are creating world-class technology solutions and services that will change the way people move, along with new fleet solutions and entirely new business models,” Barra said during a virtual CES keynote in January 2022.
While GM has declined to disclose how much revenue such businesses have produced, Barra, with the ending of its Cruise robotaxi operations on Tuesday, made it clear that the automaker’s growth priorities have shifted amid a broader, industrywide retrench to preserve capital. Companies including GM are now focused on more “core” operations and adjacent business opportunities, including software, EVs and “personal autonomous vehicles.”
“You’ve got to really understand the cost of running a robotaxi fleet, which is fairly significant, and, again, not our core business,” Barra said during a Tuesday call with Wall Street analysts.
The driverless ride-hailing service was supposed to be the shining star of GM’s growth opportunities, with executives just a few years ago referring to it as an $8 trillion market opportunity that the automaker would lead. That included former executives touting $50 billion in revenue by the end of this decade, and Cruise being valued at more than $30 billion.
Instead, after spending more than $10 billion on Cruise since acquiring it in 2016, GM is ending the robotaxi business and folding Cruise’s operations and an undetermined number of its nearly 2,300 employees into the automaker.
Alphabet-backed Waymo, which is now the last entity with any notable public operations. Others, most notably Tesla, have ambitions for robotaxi businesses, but have failed to commercialize those operations thus far.
To GM’s credit, Wall Street, which previously pushed for such growth businesses, applauded the decision to end Cruise’s robotaxi ambitions. Shares of the company were initially higher, before ending the week level with when the announcement was made.
GM stock since Dec. 9, 2024
GM, like other companies, has quickly shifted from trying to impress Wall Street with growth initiatives, including generating $280 billion in new businesses by 2030, to refocusing efforts on its core business to generate profits amid economic and recessionary concerns.
Analysts largely viewed GM’s decision as positive, saving the automaker more than $1 billion in capital annually, which they expect could be used for additional share buybacks, including a target to lower its outstanding shares to under 1 billion.
“It has been apparent for some time now that most investors have removed Cruise from their GM valuations, so today’s news comes as less of a surprise,” Wells Fargo analyst Colin Langan wrote in a Tuesday investor note.
trendy term used previously by the industry for growth initiatives — or startups have largely fallen flat since the automaker started investing in such growth areas in 2016.
The automaker earlier this year folded its BrightDrop EV commercial vans into Chevrolet amid lackluster sales. It’s also failed to announce any meaningful plans for fuel cells for tie-ups with boats, trains and airplanes, and it’s shuttered several prior “mobility” businesses.
Not all of GM’s noncore businesses that were launched in recent years have failed. GM Energy and the BrightDrop commercial EV unit continue to operate under the automaker’s” Envolve” fleet business.
GM’s financial arm, meanwhile, continues to operate an insurance business that was launched in late 2020 as part of its growth initiatives with its OnStar telematics and data unit. GM on Friday said the operations are now in 12 states, and remain “well positioned for long-term success.”
GM also continues to operate a military defense unit and fuel cell business that have both recently announced new contracts or partnerships. That includes hundreds of millions of dollars in contracts for GM Defense.
