Cruise, the autonomous vehicle arm of General Motors, has temporarily suspended its employee share buyback program following a recent accident that led to the halt of its self-driving operations. The move prompts a reassessment of the equity initiative, impacting commercialization and revenue timelines.
CEO highlights material changes
Cruise CEO Kyle Vogt noted significant changes in recent events, necessitating a re-evaluation of the employee equity program. The suspension, prompted by regulatory actions and safety concerns, has led to a shift in the company’s valuation landscape.
Regulatory hurdles and safety concerns
California regulators ordered Cruise to remove its driverless cars from state roads, citing public risk and alleging the misrepresentation of technology safety. A previously undisclosed accident involving a pedestrian in San Francisco heightened scrutiny. Cruise maintains it fully cooperated with regulators, launching an internal review of its response and automated driving system.
Contractor layoffs and cost-cutting measures
In a cost-cutting move, Cruise laid off hundreds of contractors responsible for operating and maintaining its robotaxi fleets. The decision aligns with the company’s broader efforts to manage expenses amid financial losses, including over $8 billion since 2017.
Equity program cancellation raises talent retention concerns
Cruise introduced an equity program in 2022, enabling employees to sell vested equity to GM and other investors quarterly. The suspension raises concerns about talent retention, potentially accelerating departures. The move, seen as a cost-cutting strategy, aligns with broader financial considerations, including the costly labor deal with the United Auto Workers.
Revised bonus payout and employee rest day
To address the evolving situation, Cruise announced a bonus payout shift to January 2024 instead of March. The company also declared a “Cruise rest day” on Friday, Nov. 17, encouraging employees to recharge amidst operational challenges.
Financial landscape and cash reserves
Cruise’s financial disclosures indicate losses exceeding $8 billion, with $728 million lost in the third quarter of 2022. Despite the financial strain, Cruise maintains a cash reserve of $1.7 billion as of Sept. 30, sufficient for nine months at the current cash burn rate.
Cruise’s decision to suspend the employee equity program reflects the challenging landscape of autonomous vehicle operations, regulatory hurdles, and financial considerations, raising questions about talent retention and the company’s strategic direction.