GM President and CEO Mary Barra on Wednesday reiterated plans for Cruise to be more “intentional” when work finally resumes at the troubled self-driving subsidiary. For GM, that will include cutting spending on Cruise by “hundreds of millions of dollars” in 2024, a move expected to lead to widespread layoffs at the San Francisco-based company that employs about 3,800 people.
Barra and CFO Paul Jacobson said Wednesday that there will be more concrete information in the coming weeks about what this new cruise will look like following the outcome of two independent security and incident evaluations already underway.
The couple’s comments were part of a wider GM update which was aimed at boosting confidence in the auto industry after a prolonged strike by the United Autoworkers and moderating the demand for EVs. GM said the new labor deal will cost it $9.3 billion. The company too raised its 2023 guidance to include adjusted earnings of $11.7 billion to $12.7 billion, compared with a previous outlook of $12 billion to $14 billion; accelerated $10 billion share buyback program and 33% increase in iThe quarterly dividend next year at 12 cents per share.
“What Cruise has accomplished in the last eight years since we acquired the company is remarkable,” Barra said during the conference call Wednesday morning. “Our priority now is to refocus them on safety, transparency and accountability, and to build trust with regulators at the local state and federal level, including first responders and the communities in which we will operate.”
Barra added that she expects “the pace of cruise expansion will be more appropriate when operations resume and spending will be significantly lower in 2024 than it was in 2023.” Jacobson later added that spending would be cut by hundreds of millions of dollars.
GM has invested billions of dollars in Cruise since it bought the company in March 2016. Spending has increased in recent years in conjunction with Cruise’s aggressive plans to launch in more than a dozen U.S. cities. The company burned through $732 million in the first three quarters of 2023, according to GM’s latest earnings report.
Barra’s comments come after weeks of turmoil at Cruise following the California Department of Motor Vehicles’ decision on Oct. 24 to suspend the company’s licenses to operate self-driving vehicles on public roads following an incident that saw a pedestrian — who initially had hit man – drove a car and landed in the path of a Cruise robotaxi – fell over and was dragged 20 feet by the AV. A video, seen by TechCrunch a day after the incident, showed the robotaxi braking aggressively and coming to a stop on top of the woman. The DMV suspension order said Cruz withheld about seven seconds of video, which showed the robotaxi then trying to pull over and then drag the woman 20 feet.
Cruise received in August 2023 the last license needed to operate a robotaxi service in San Francisco. Almost immediately, several incidents began to pile up, including videos of the robotaxi blocking traffic, driving on wet concrete, and a collision with an emergency vehicle. However, it was the Oct. 2 incident that prompted the DMV, and soon after the California Public Utilities Commission, to pull licenses, effectively ending Cruise’s ability to operate in the state.
Cruise soon discontinued all driverless operations in its fleet, including recently launched locations in Austin, Houston and Phoenix. Last week, co-founder and CEO Kyle Vogt abruptly resigned. Its co-founder Dan Kahn also resigned.
GM has since circled the executive wagons, bringing out some of Cruise’s experts and bringing in its own leaders at the top.
GM did not name Vogt’s replacement, instead appointing co-chairmen. Mo Elshenawy, who is executive vice president of engineering at Cruise, is now CTO and co-president. Cruise board member and GM EVP of legal and policy Craig Glidden, who was recently brought in as chief administrative officer at Cruise, is also in the role of co-chairman. GM board member Jon McNeill has been named vice chairman of Cruise’s board.
“We have a lot of confidence in what the two co-chairmen are going to do,” Barra said.
While specific details about Cruise’s restructuring were scarce, Barra hinted that the automaker was already looking for ways to be more efficient and cut costs before its recent troubles. He noted that the company had found “synergies” between Cruise and what Mike Abbott, a former Apple executive who heads GM’s software, is working on.
