GM Revises Cruise Unit Spending After Pedestrian Incident

GM revises investment in self-driving unit Cruise following a pedestrian incident, signaling a cautious approach in autonomous tech development.

How will GM's reduced spending on Cruise affect self-driving tech?

General Motors, the powerhouse behind Chevrolet and Buick, is set to revise its approach to self-driving technology, specifically its investment in the Cruise unit. This decision follows a recent incident involving a pedestrian and a Cruise vehicle, prompting GM to suspend testing. On Wednesday, GM will detail its reduced financial commitment to this cutting-edge technology, which has been a critical component of its future-oriented strategy.

Self-driving cars will change the way we travel.
Better statistics than human drivers despite accidents (Photo: General Motors/Cruise)

A Shift in Strategy: Less Spending, More Caution

GM's longstanding slogan, "Zero crashes, zero emissions, zero congestion," reflects its dedication to an autonomous and electric vehicle future. However, in light of the recent developments, GM plans to curtail investment in Cruise, influenced by a predicted slowdown in testing, as informed by sources close to the company. GM's quarterly investment in Cruise amounts to approximately $700 million, focusing on driverless taxi services in cities like San Francisco.

Despite not commenting immediately, GM has previously affirmed its commitment to Cruise, emphasizing a cautious expansion approach post-investigation to rebuild trust and enhance safety.

Impact Of Cruise Suspension On GM's Long-Term Goals

The suspension of Cruise's operations, especially following the prohibition by California regulators, has broader implications for GM's long-term revenue projections, which included substantial contributions from autonomous technology and software. The incident, where a pedestrian was injured after being struck by a Cruise vehicle, led the California Department of Motor Vehicles to question Cruise's safety and accuse it of misrepresenting incident details. Cruise has engaged law firm Quinn Emanuel for an independent investigation.

Industry Perspective: Realism And Return On Investment

The incident and subsequent decisions raise questions about the feasibility of GM's ambitious "Zero Zero Zero" vision. Industry analysts, like Barclays' Dan Levy, suggest a growing investor impatience with non-lucrative projects in the auto sector. This sentiment is echoed in concerns raised by transportation labor organizations about the safety and regulation of autonomous vehicles.

Financial Realities And Investor Sentiments

GM's significant investments in Cruise, including a $2.1 billion buyout of Softbank's stake, reflect its stake in the autonomous driving sector. However, investor confidence has waned post-incident, with concerns about Cruise's profitability and cash burn rate. Some investors advocate for a reduction in Cruise funding, suggesting a focus on shareholder returns.

Cruise's financials reveal a $1.9 billion loss in the first nine months of the year, with significant cash burn rates and limited reserves. While Cruise has a borrowing arrangement with GM's financial arm, questions linger about its sustainability and path to profitability amidst changing investment landscapes.

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