In a significant strategic shift, General Motors (GM) announced a reduction of approximately USD 1 billion in spending on its autonomous vehicle subsidiary, Cruise, in 2024. The decision comes in the aftermath of probes initiated by the U.S. Justice Department and the Securities and Exchange Commission following a harrowing accident involving a Cruise robotaxi in San Francisco. Despite the setbacks, GM affirms its commitment to the self-driving project but acknowledges the need for a comprehensive overhaul to address safety concerns and regain regulatory trust.

Regulatory scrutiny unleashed: probes and fallout

Last week’s revelation of investigations by federal authorities added to Cruise’s mounting troubles after an October 2 incident where a robotaxi struck a pedestrian in San Francisco, resulting in the revocation of its permit to operate driverless vehicles by the California Department of Motor Vehicles. GM CEO Mary Barra, responding to the crisis, outlined plans to recalibrate Cruise’s trajectory.

Financial fallout and strategic refocus

Cruise, grappling with financial hemorrhaging, burned USD 1.9 billion in cash during 2023, accompanied by a staggering USD 2.7 billion pretax loss. This financial turmoil, compounded by USD 500 million in fourth-quarter restructuring costs, triggered a reassessment of Cruise’s operational strategy. Barra emphasised that the revised spending strategy aims to retain critical software and engineering talent, a pivot from earlier plans for expansive robotaxi operations in multiple cities.

Learning from mistakes: a safety-centric approach

Addressing concerns about Cruise’s safety protocols, Barra assured that the company is cooperating with government investigations and intends to set a higher safety standard for its autonomous vehicles compared to human drivers. A technical review by engineering firm Exponent highlighted mapping errors and misidentification of collision impacts, leading to corrective measures, including a vehicle recall and software updates.

Navigating regulatory challenges: settlement offer and reckoning

In an attempt to reconcile with regulatory authorities, Cruise proposed a USD 75,000 settlement and committed to enhanced disclosures, seeking resolution with the California Public Utilities Commission. Cruise acknowledged the swiftness and extent of repercussions following the October 2 accident, defending the proposed settlement as reasonable given the circumstances.

Leadership shake-up: CEO resignations and workforce reductions

In response to the crisis, Cruise initiated a leadership shake-up by terminating nine executives, including the resignation of CEO Kyle Vogt and co-founder Dan Kan. The workforce underwent a significant reduction, reflecting the severity of the challenges faced by the autonomous vehicle unit.

GM’s uphill battle: defending the investment amidst losses

The intensification of investigations and revelations about Cruise’s mishandling of the October 2 accident adds substantial pressure on GM and CEO Mary Barra. Despite over USD 8 billion in losses, Barra has staunchly defended GM’s investment in Cruise, projecting a potential annual revenue of USD 50 billion by 2030. The ongoing regulatory challenges prompt a reevaluation of these ambitious projections.

A pivotal moment for GM and Cruise

As GM navigates the storm surrounding Cruise, the billion-dollar spending cut reflects a strategic imperative to address safety concerns, rebuild regulatory relationships, and realign Cruise’s trajectory for a sustainable autonomous future. The company faces a pivotal moment, where decisive actions will shape the future of its autonomous ambitions in an industry marked by rapid innovation and stringent safety expectations.