Industry analysts cite various factors for Cruise’s failure, including a pedestrian accident, executive departures and regulatory scrutiny.GM’s decision reflects a broader trend in the automotive industry, with companies like Ford and Volkswagen also scaling back their autonomous vehicle ambitions.While GM’s investment in Cruise did not yield the desired outcome, the company gained valuable experience and insights into autonomous technology.
General Motors had high hopes for its self-driving subsidiary, Cruise, with company leaders boasting that it would one day be a multibillion-dollar revenue stream. But it never made a penny. Instead, GM poured billions into it until the automaker finally cut the cord and rolled it into its engineering division this past week.
Experts identify a number of reasons why Cruise went from the promise of being a cash cow to its reality: a money pit.
Industry insiders say poor leadership, extensive capital investment, regulatory hurdles and consumer safety concerns were all likely factors that prompted GM to end its Cruise experiment. A pedestrian accident that prompted a nationwide recall of all Cruise vehicles, the resignations of top Cruise executives and regulatory concerns about an initial lack of transparency by Cruise certainly didn’t help the company’s public image. But the real reason to cut a potentially profitable business model, experts say, is the discovery of a problem to which you have no solution — or at least, aren’t willing to shell out the cash to figure it out.
GM completed its purchase of the remaining 3% of Cruise stock and laid off half its remaining workforce Feb. 4, impacting 1,000 jobs, the majority of which were in the Bay area. At its peak, Cruise operated in San Francisco, Austin, Texas, and Phoenix.
Also reportedly let go this week were Cruise CEO Marc Whitten, Chief Human Resources Officer Nilka Thomas, Chief Safety Officer Steve Kenner and Chief Government Affairs Officer Rob Grant.
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The company’s president and chief tech officer Mo Elshenawy will remain at Cruise through the end of April to aid in the transition.
Money pit
GM leaders had expected Cruise would generate $50 billion per year by 2030. But Cruise actually cost the company about $2 billion per year, totaling $10 billion since 2016.
Perhaps the beginning of the end came from the highly publicized accident involving a Cruise vehicle. On Oct. 2, 2023, a Nissan Sentra hit a pedestrian in San Francisco and pushed her into the path of an oncoming Cruise driverless car. The Cruise vehicle braked hard but hit her, then proceeded to drive 20 feet at 7 mph to the curb, dragging the woman and leaving her critically injured.
In response, Cruise fired nine executives and cut about 24%, or 900 full-time employees, from its workforce. Cruise CEO Kyle Vogt and Chief Product Officer Dan Kan resigned. GM also paused production at Factory Zero in Detroit and Hamtramck on what was meant to be the next Cruise vehicle — the Origin — a six-seat bus-like vehicle with no steering wheel or brake pedals.
Still, GM said repeatedly that it supported Cruise’s mission. Investment in developing commercial autonomous vehicle technology slowed, but did not cease.
“We believe in the profound, positive impact it will have on societies, including saving countless lives,” GM said in a November 2023 statement. “We believe strongly in Cruise’s mission and the transformative technology it is developing. Our commitment to Cruise with the goal of commercialization remains steadfast.”
That is, until December.
Jennifer Dukarski, an automotive technology attorney based in Ann Arbor, said she found the news unsurprising — except for the timing. GM’s decision to cut Cruise in many ways mirrored its exit from car-sharing service Maven in 2020, but to do so on the cusp of a new presidential administration that has shown obvious favoritism for Elon Musk’s business ventures is curious, she said. Tesla, Musk’s vehicle manufacturer of fully electric vehicles, has also experimented with commercial and private autonomous vehicles and driver-assist technology.
“I’m sure those were factors, but I’m also sure that the company sees long term that perhaps robotaxis are just a blip on the introduction of this technology to the real consumers,” Dukarski said.
John Murphy, Bank of America Securities managing director and lead U.S. auto analyst, said GM appears to remain committed to advanced driver assist technology internally, which is why its exit on robotaxi initiatives was something of a head-scratcher on Wall Street.
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“It was a little bit of a shocker,” Murphy said. “High levels of advanced driver-assistance systems will be necessary to be competitive in the mid- to long-term in the industry. If you shut it down, you ultimately are going to have to become a customer of full self-driving out of Tesla or somebody else that actually develops the technology.”
Transparency issues
The San Francisco accident itself was not the only damage to Cruise’s prospects, however. Both Cruise and GM were accused of misleading or deceiving regulators on the role the company’s autonomous technology played in the accident.
Cruise and GM retained Quinn Emanuel Urquhart & Sullivan, a business law firm, to conduct a three-month investigation that included interviews with 88 Cruise employees and a review of more than 200,000 internal documents. Cruise’s bungled accident response stemmed from poor leadership and a culture combative with regulators, according to Quinn’s report from the probe following the October 2023 incident.
“Only through a dramatic overhaul of its leadership structure and personnel will Cruise be equipped to meet any future crisis that comes its way and achieve its mission of making AVs ‘better than human,’ ” the 105-page Quinn report concluded.
The business firm’s findings, published Jan. 25, 2024, also revealed that though the company mishandled the case, the incident was the first pedestrian injury involving a Cruise autonomous vehicle in more than 5 million miles of driving.
Technology issues
But the biggest cash burn to hit GM was Cruise’s pursuit of processing power that autonomous technology requires, Murphy said.
“The capital investment is coming not necessarily from a fleet but the system itself,” Murphy said. “If you look at what Tesla is doing with their 50,000 H-100s from Nvidia … that’s something that will be difficult for other companies, particularly companies like GM, to get an adequate return on investment in the short run, which is what GM investors traditionally are looking for.”
The H-100 graphics processing unit is a computer chip used to train machine learning models like OpenAI. To train artificial intelligence models, a lot of processing power in a data center is critical, according to Sam Abuelsamid, vice president of market research at Telemetry Insights. Still, it’s only useful if the system is truly independent of human programming intervention. The next generation produced by artificial intelligence software company Nvidia is the B-200, which is more adept than its earlier counterpart, but even more expensive.
“If you are looking to do any sort of AI training, the H-100 is the card to have. It’s very powerful … but it also consumes a lot of power,” Abuelsamid said.
Who is leading the pack?
The arena of vehicles that can think for themselves is wide, but successes among the major players remain few. Defining autonomy is one major hurdle — the levels that correspond to features that assist human drivers far outweigh what experts like Abuelsamid call true autonomy — a vehicle that for drivers is hands-off, eyes-off and brain-off.
Alphabet-backed Waymo appears to be leading the pack as the only company operating driverless vehicles in a fleet. Traditional automakers aren’t making full self-driving personal vehicles today — no matter what Tesla calls its system, according to Abuelsamid.
The Detroit Three’s driving systems — GM’s SuperCruise, Ford’s BlueCruise and Stellantis’ Active Driving Assist — allow hands-off but not brain-off and eyes-off driving, which true autonomy requires. The Detroit automakers’ systems also only work on certain roads, mostly highways.
Still, lacking extensive computing power doesn’t appear to be GM’s issue. Otherwise, why fold the remaining business into its SuperCruise strategy?
While the dragging incident was unfortunate, Dukarski said, “That’s not a reason to roll up an entire program.”
“The reason to end the program is you have a problem you can’t find a solution for,” she said, “Your AI is not able to make a decision you’re confident in, for example. But it doesn’t appear that the technical problems are causing GM to make a change because they’re using this technology and want to apply it towards consumer-owned vehicles. The technology doesn’t seem to be the weakest link here.”
Learning from history
Focusing on core business is typically GM’s response to losing a big bet. That’s what Kyle Vogt, CEO at The Bot Company and former Cruise co-founder, said on social media last summer. He tweeted his disappointment in the company’s pullout of the driverless Origin less than a year after announcing production plans at Factory Zero in Hamtramck, saying that it would have been “amazing for cities.”
“GM repeatedly finds themselves with a 5-10 year head start, but then fumbles the ball, shuts things down and loses the lead,” he posted on Elon Musk’s social media site X. “Anyone remember the EV1?”
The EV1 was GM’s ahead-of-its-time EV program begun in 1996. GM discontinued the two-seater all-electric car three years later.
But GM turning toward its bread-and-butter business makes perfect sense, experts say. Last year, for example, the company faced some $300 million in losses in China before making a small profit there in the fourth quarter thanks to massive restructuring. Also, research and development paid off as the company announced pretax profits in the billions and record-setting profit-sharing for qualifying UAW workers.
And GM is hardly the first to back away from future mobility development. Ford Motor Co. and Volkswagen forayed into the autonomous vehicle space — and chose to abandon it — long before GM. Ford outsourced most of the technology required to its self-driving development partner Argo AI, a task it was ill-equipped to handle. Even after heavy investment, Ford terminated the project.
But the clock is ticking. On its fourth-quarter 2024 earnings call Feb. 5, Ford CEO Jim Farley said it’s time not just for the U.S. market but global players in vehicle manufacturing and development to turn back to full self-driving investment.
“That’s why we made some of the announcements we did today, because we need a strong strategy team to decide, do we partner? Do we continue to ride our own team into this Level 4 personal autonomy?” he said. “And I think you’re going to find, just like our move on Argo, we’ll be thoughtful and practical. We won’t get in love with the size of the market. We’ll make a practical decision, and I think we’ll be well-positioned.”
Those announcements include executive changes to the company’s current driver-assist strategy. Marin Gjaja, who joined Ford in 2022, became chief strategy officer last week after holding key leadership roles, including most recently COO for Ford Model e — Ford’s division that develops electric vehicles, digital platforms and software such as BlueCruise.
As for who remains in the field, time will tell how much further the technology advances without backing from large traditional automakers who have other business lines to think about.
“The deeper they got in, the more they realized they were going to have to spend,” Abuelsamid said. “VW and Ford were not willing to put in more money and were unable to raise more capital.”
Yet it’s not easy to call GM’s gamble on Cruise a “mistake,” according to Sam Fiorani, vice president of global vehicle forecasting at Auto Forecast Solutions. In fact, GM is probably better equipped today than ever before in terms of what it learned and how much it will save by not moving further down this particular path. With today’s higher interest rates, justifying the cash burn needed to explore autonomy is far more difficult than it was even five years ago, Fiorani said.
“This is a technology that is much tougher to tackle than the optimistic investors want to believe. Getting any salable product onto the street this decade is unlikely and making money on autonomy won’t happen until well into the 2030s,” Fiorani said. “GM can step aside before losing billions more to allow startups to make the mistakes and cross the barriers. If they survive, these companies will be badly bruised and possibly ripe for the picking by GM at a later point. The road to autonomy will be paved with many people and startups that pushed the technology forward but couldn’t make the whole trip.”
Traditional automakers have the upper hand over asset-light technology companies when it comes to vehicle manufacturing, management, sales and logistics, Fiorani added. Regardless of investor interest, any Silicon Valley startup without experience in the asset-heavy, capital-intensive and deeply intricate business relationships needed to operate in the auto industry would be at a disadvantage.
But the initial interest and investment from legacy corporations stemmed not necessarily from the goal of making the future so much as fear of being left behind. If such a time existed where a fully autonomous, safe and reliable robotaxi fleet could attain high levels of consumer adoption, personal ownership would be rendered obsolete. Or at least, that’s what may have driven many to the sector in the first place, Abuelsamid said.
“If they could be made to work, be made viable and meet most people’s transportation needs, then there’s really no reason for a consumer to buy a GM vehicle — or any other vehicle,” he said.
Jackie Charniga covers General Motors for the Free Press. Reach her at jcharniga@freepress.com.
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