General Motors is slowing the expansion of its Cruise automated driving division and significantly cutting spending at the unit after suspending operations in response to growing safety concerns about its self-driving cars.
The company had been planning to roll out a shuttle service in San Francisco and three other cities and begin testing Cruise vehicles on the streets of several other markets. It now plans to focus on a single city as it works to improve the operation of its fleet of driverless vehicles it has been testing.
“We expect Cruise’s pace of expansion to be more deliberate when operations resume, resulting in substantially less spending in 2024 than in 2023,” GM Chief Executive Mary T. Barra said at a conference Wednesday. of investors. “We must rebuild trust with regulators at the local, state and federal levels, as well as first responders and the communities in which Cruise will operate.”
Last month, California regulators suspended Cruise’s license to operate in the state after a Cruise self-driving vehicle in San Francisco struck a pedestrian who had been hit by another car, dragging her for 20 feet.
The company responded by removing all of its driverless vehicles from the roads, citing the need to regain public trust.
GM Chief Financial Officer Paul Jacobson said spending on Cruise would fall by “hundreds of millions of dollars” in 2024, and would likely fall further as the company overhauls the division’s operations.
Barra did not say how the drop in spending would affect Cruise’s workforce, noting that the company would provide more details after reviewing independent safety reports on the San Francisco incident.
Commenting on Cruise, GM also gave a general business update, saying it expected to report net income in 2023 of between $9.1 billion and $9.7 billion, a range slightly lower than previous forecasts, after strikes halted operations in three of your plants in the fall.
GM said the strikes had cost the company $1.1 billion in operating profits and reduced its production by about 95,000 vehicles. It also said new labor agreements with the United Automobile Workers union and Canada’s Unifor union, which include substantial wage increases, would add $500 to the cost of its North American vehicles in 2024. Barra said the increase in labor costs, however , would be “fully offset” by the cost-cutting measures the company had been carrying out over the past year.
GM also said it would buy back up to $10 billion of its shares in a bid to boost the stock price. “Our share price is disappointing for everyone,” Barra said. After GM’s announcement, its shares rose 11 percent in early trading; They ended the day up 9 percent to nearly $32, though still barely half their price two years ago.
He also said GM expected to significantly increase EV production in 2024, after encountering lower-than-expected demand and delays in ramping up its EV production this year.
“Although the growth rate is lower, demand for electric vehicles is clearly moving in the right direction,” he said. “There’s really no reason why demand for electric vehicles won’t be higher in the coming years.”
In his speech, Barra said GM remained optimistic about Cruise’s future. “What Cruise has accomplished in the eight years since we acquired the company is extraordinary,” he said. “Our priority now is to focus the team on safety, transparency and accountability.”
Founded in 2013 and purchased by GM in 2016, Cruise is one of several startups that have been working to develop autonomous vehicles with the goal of creating a driverless taxi business in cities across the United States. One of its rivals is Waymo, owned by Alphabet, Google’s parent company.
Cruise has been testing self-driving taxi services in San Francisco, Phoenix, Houston and Austin, Texas, and has tested its autonomous vehicles in six other cities, including Nashville and Seattle. In August, California regulators approved a measure to allow Cruise and Waymo to charge for their 24-hour driverless services in San Francisco, after having operated on a limited scale for more than a year.
But in San Francisco, city officials, firefighters and police said Cruise’s self-driving cars posed safety risks and caused congestion by blocking fire trucks, stopping in the middle of busy streets and delaying firefighters’ responses to save lifes.
Earlier this month, Cruise suspended a stock buyback program for employees after saying its valuation had changed. The suspension of the buyback program was previously reported by Reuters.
On November 19, Kyle Vogt, Cruise CEO and company founder, resigned. Dan Kan, chief product officer, later resigned. Cruise did not name a replacement for Vogt.
In an email sent to Cruise employees at the time, Ms. Barra said she and the rest of the Cruise board were “focused on setting Cruise up for long-term success,” adding: “The Public trust is essential for this. As we work to rebuild that trust, security, transparency and accountability will be our north stars.”
