General Motors' robotaxi business is the latest faltering growth initiative

DETROIT – For years, GM CEO and Chairman Mary Barra has promised a new future for the company, away from a heavy-duty metal-bending automaker to a forward-thinking, technology-driven company poised for growth.

Part of the plan was for GM's innovation department to identify trillions — yes, trillions — of dollars in new market opportunities such as electric commercial vehicles, auto insurance, military defense, self-driving vehicles, and even, eventually, the possibility of “flying cars.” “. Also known as urban air mobility.

“We are working to create 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 keynote at CES in January 2022.

While GM declined to disclose how much revenue these companies generated, Barra made clear, with the end of its robotaxi operations on Tuesday, that the automaker's growth priorities have shifted amid a broader industry-wide cutback to preserve capital. Companies including GM are now focusing on more “core” operations and adjacent business opportunities, including software, electric vehicles and “self-driving personal vehicles.”

“You have to really understand the cost of operating a robotaxi fleet, which is fairly important and, again, not our core business,” Barra said during a call Tuesday with Wall Street analysts.

Driverless ride-hailing was supposed to be the shining star of GM's growth opportunities, with executives pointing out just a few years ago that it was an $8 trillion market opportunity that the automaker would drive. This included former CEOs who had generated $50 billion in revenue by the end of the decade, and Cruise is estimated to be worth more than $30 billion.

Instead, after spending more than $10 billion on Cruise since its 2016 acquisition, GM is winding down its robotaxi business and merging Cruise operations and an unspecified number of its roughly 2,300 employees into the automaker.

As part of the liquidation process, GM is expected to disclose additional expenses from employee separation packages and buybacks of stock investments from outside investors, among other costs, next year.

GM cited an increasingly competitive robotics market, capital allocation priorities, and the significant time and resources needed to grow the business as reasons for its decision.

The main competitor was the automobile industry alphabet-Waymo supported, which is now the last entity with any notable public operations. Others, most notably Teslahas ambitions in the robotaxi business, but has failed to commercialize these operations so far.

To GM's credit, Wall Street, which has previously pushed for such growth companies, applauded the decision to end Cruise's robotaxi ambitions. The company's shares were initially high, before ending the week's level when the announcement was made.

GM, like other companies, has quickly shifted from trying to impress Wall Street on growth initiatives, including generating $280 billion in new business by 2030, to refocusing efforts on its core business to generate profits amid economic concerns and the recession.

Analysts largely viewed GM's decision as a positive, saving the automaker more than $1 billion in capital annually, which they expect will be used for additional stock buybacks, including a goal of reducing its outstanding shares to less than $1 billion.

“It has been clear for some time that most investors have removed Cruz from their GM ratings, so today's news comes as no surprise,” Wells Fargo analyst Colin Langan wrote in an investment note Tuesday.

GM will merge majority-owned Cruise LLC with GM's technical teams. Barra repeatedly said last week that the automaker would not give up car autonomy. It will focus on autonomous personal vehicles rather than robotaxis.

But it's hard to ignore that Cruise is GM's latest mobility project or growth business to falter or fall short of expectations.

GM's plans to diversify its business through trendy industries such as ride-sharing and other “mobility” ventures — a trendy term the industry previously used for growth initiatives — or startups have largely subsided since the automaker began investing in these growth areas in 2016. .

The automaker earlier this year integrated its BrightDrop EV commercial vans into Chevrolet amid lackluster sales. It has also failed to announce any meaningful plans for fuel cells that could be attached to boats, trains and planes, and has shut down several former “mobility” companies.

Not all of GM's non-core businesses launched in recent years have failed. GM Energy and its BrightDrop electric vehicle business continue to operate within the automaker's “Envolve” fleet business.

Meanwhile, GM's finance arm continues to run the insurance business it launched in late 2020 as part of its growth initiatives through its OnStar telematics and data unit. GM said Friday that operations are now in 12 states and remain “well-positioned for long-term success.”

GM also continues to operate its military defense unit and fuel cell business, which recently announced new contracts or partnerships. This includes hundreds of millions of dollars in contracts for GM Defense.

Other than saving capital, the silver lining for GM eliminating its Cruise robotaxi business is that it sees more promise in continuing to develop its advanced hands-free driver-assistance system Super Cruise. This includes more semi-automated and eventually autonomous capabilities.

General Motors was the first automaker to offer such a hands-free system in 2016. However, it was very slow until recently, when the automaker began rolling it out across its lineup. That began in 2021 and has continued to expand to include more than 20 models, including full-size vehicles like full-size pickup trucks and SUVs.

“The strategic shift demonstrates that GM continues to believe in the potential of autonomous vehicle technology for personal vehicles. Going forward, GM will focus on improving SuperCruise capabilities, which will be further enabled by continued technological advances including artificial intelligence (AI),” John said. Murphy of Bank of America Securities in an investment note on Wednesday.

On the other side of the coin, Murphy also points out that this move could imply that other companies like Waymo and… Tesla “has better technology and/or the market may not be as attractive to subsequent entrants.”

GM was not expected to be a “later entrant” in robotaxis. In fact, it was the first to offer such rides to the public, and many believed it was one of the pioneers until last year, when the company halted its driverless operations in October 2023 following a collision with a pedestrian in San Francisco.

The National Highway Traffic Safety Administration fined Cruise $1.5 million after the company failed to disclose details of the accident, which involved a pedestrian being dragged 20 feet by a robotaxi after being struck by a separate vehicle.

A third-party investigation into the accident ordered by GM and Cruise found that culture issues, incompetence and poor leadership fueled the organizational oversight that led to the accident. The investigation also investigated allegations of a cover-up by Cruz's leadership, but found no evidence to support the allegations.

The report identifies multiple instances in which CEO and co-founder Kyle Vogt, who resigned from the company in November 2023, made final calls to withhold information, particularly regarding media.

Vogt was not enthusiastic about GM's decision to end its robotaxi operations. He posted on X after the announcement, “In case it wasn't clear before, it's clear now: GM is a bunch of dummies.”

Vogt earlier this year pointed to GM's history of having a technology leadership advantage, as it did with Cruise and Super Cruise, and squandering it. GM has had a similar path with electric vehicle technology, such as the EV1 — a battery electric car produced in the 1990s — and the Chevrolet Volt hybrid electric car in the 2000s, both of which the company has abandoned.

GM follows several other companies in abandoning robotaxis, including its closest crosstown rival ford motorwhich shut down its Argo AI self-driving vehicle unit with Volkswagen in 2022.

Waymo remains the leading robotaxi company in the United States, which continues to expand operations of its publicly available fleet in Los Angeles, Phoenix and San Francisco, and will soon debut in Miami, Atlanta and Austin, Texas.

“In many ways this announcement highlights the economic challenges of scaling a robo-taxi network and the role ride-sharing platforms can play when self-driving vehicles try to commercialize them (a bullish sign), but we believe the more tangible impact now is on the partnership ecosystem.” Because Waymo is already expanding despite the costs, Tesla has ambitions to do so as well, Bernstein analyst Daniel Roeska said in a note to investors last week.