Cruise cuts by GM stir doubts in drive to autonomous vehicles

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A Cruise robotaxi failed to brake quickly enough behind a city bus in San Francisco in March 2023. | Source: Cruise

Shortly after Kyle Vogt resigned as CEO of robotaxi company Cruise on November 19, General Motors released a statement that said it “made a bold commitment to autonomous vehicle technology” and that its “commitment to Cruise with the goal of commercialization remains steadfast.”

That commitment is, understandably, starting to waver after serious safety incidents.

General Motors, which acquired the company for $1 billion in 2016, said this week that it plans to cut spending on Cruise by “hundreds of millions of dollars in 2024.” San Francisco-based Cruise employs nearly 4,000 people. The slash in spending will result in additional layoffs and other cutbacks that will likely halt Cruise’s progress.

GM Chair and CEO Mary Barra and CFO Paul Jacobson shared the grim details during a financial update yesterday. The conference call also discussed a new labor deal with the United Auto Workers (UAW) union that will cost GM $9.3 billion, a 2023 financial update, 2024 outlook, and an accelerated $10 billion share-buyback program.

Barra said more specifics about the new plans for Cruise will be released after the completion of two independent safety reviews that have already started. However, she said the pace of Cruise’s expansion will “be more deliberate when operations resume.” GM also said Cruise will eventually relaunch a robotaxi service, but in just one city; it didn’t specify which city.

“What Cruise accomplished over the past eight years since we acquired the company is remarkable,” stated Barra. “Our priority now is to refocus them on safety, transparency, and accountability and build trust with regulators at the local, state, and federal levels, including first responders and the communities in which we will operate.”

Cruise falters in AV race

According to its financial statements, GM has lost an absurd $8.2 billion on Cruise since 2017. And it doesn’t have much to show for it. The unit was running a robotaxi service in San Francisco, with newly launched locations in the works in Austin, Houston and Phoenix, as well as in Japan. But it paused its robotaxi operations around the U.S. following a string of safety incidents.

The burn rate for autonomous vehicle companies has always been incredibly high, but GM said it expects to lose much less going forward with these cuts.

“We are projecting to have a little bit of a narrower scope as we focus in on safety and scaling up in a much narrower view,” Jacobson said.

It will be interesting to see how a lower budget affects Cruise’s ability to keep pace with Waymo, which is now the clear-cut leader in the space. Cruise’s culture in 2023 was all about scaling as quickly as possible. How will GM’s reversal affect employee morale and retention and the ability to attract talent?

A day before GM’s financial update, Waymo announced via X, formerly Twitter, that it has conducted more than 700,000 robotaxi rides thus far in 2023 with no human driver behind the wheel. Coincidence? I think not.

Latest accident the final straw

GM said the changes at Cruise are a direct result of an incident on Oct. 2, 2023. A Cruise robotaxi dragged a woman after she was hit by a different car driven by a human. After being hit by the first car, the woman was thrown into the path of the Cruise vehicle, which couldn’t brake in time to avoid her.

The California Department of Motor Vehicles (DMV) suspended Cruise’s autonomous vehicle permits after this incident. It claimed had Cruise withheld damning footage of the incident that showed its robotaxi dragging the woman about 20 feet at 7 MPH while it attempted to pull over.

Cruise denied this, but the California DMV said Cruise’s vehicles pose a risk to the public and that it “misrepresented” the safety of its robotaxis.

In reality, this fallout is not 100% a result of that one incident. After Cruise received its final autonomous vehicle permit in August 2023, several incidents popped up, including its robotaxis blocking traffic, impeding emergency response vehicles several times, and even driving into and getting stuck in wet cement.

On top of that, there were reports, which Cruise acknowledged, that its autonomous vehicles struggled to recognize children under certain conditions and that it misrepresented the frequency with which human teleoperators had to step in to help the cars.

Vogt and co-founder and Chief Product Officer Dan Kan resigned amidst all the turmoil.

What is the road to redemption?

A lack of transparency is ultimately what put Cruise in its current predicament. Vogt had often stated that Cruise’s vehicles were safer than human drivers. And that very well could be true. But not being more upfront about the shortcomings of the technology has left the public and, perhaps more importantly, government officials feeling uneasy.

For example, Los Angeles Mayor Karen Bass recently asked regulators to be more stringent with their evaluations of autonomous vehicles on city streets.

“To date, local jurisdictions like Los Angeles have had little to no input in AV deployment and are already seeing significant harm and disruption,” Bass wrote in a letter to the California Public Utilities Commission (CPUC), which oversees permitting for robotaxis.

This came after Waymo conducted a months-long test of its robotaxis by offering passengers free rides in Santa Monica, Culver City, West Hollywood, Mid-City, Koreatown and downtown LA.

Rebuilding trust will be the most difficult part of GM’s revival plan for Cruise. But that is already under way with Cruise’s leadership changes and GM’s more “deliberate” rollout.

Reuters last week reported that Cruise has nine months of cash left. And Honda Motor, one of Cruise’s major financial backers, said it doesn’t plan to give it more money.

Earlier this year, Barra doubled down on her forecast that Cruise could generate up to $50 billion in revenue every year by 2030. That was likely always been a pipe dream, but more so now than ever before.