General Motors is slowing the expansion of its Cruise automated driving division and significantly cutting the unit’s spending after halting operations in response to growing safety concerns about its self-driving cars.
The company had planned to launch a ride-hailing service in San Francisco and three other cities and begin testing Cruise vehicles on the streets of several other markets. The company now plans to focus on just one city as it works to improve the operations of its fleet of self-driving vehicles that it has been testing.
“We expect that the pace of Cruise’s expansion will be more deliberate as it resumes operations, resulting in significantly lower spending in 2024 than in 2023,” GM Chief Executive Mary T. Barra said at an investor conference on Wednesday . “We must restore trust with local, state and federal regulators, as well as first responders and the communities in which Cruise will operate.”
Last month, California regulators revoked Cruise’s operating license in the state following an incident in San Francisco in which a Cruise self-driving vehicle struck a pedestrian who had been hit by another car, 20 feet away dragged along.
The company responded by taking all of its self-driving vehicles off the road, citing the need to regain the public’s trust.
Paul Jacobson, GM’s chief financial officer, said spending at Cruise would fall by “hundreds of millions of dollars” in 2024 and would likely fall further as the company reviews the division’s operations.
Ms. Barra did not say how the spending drop would affect Cruise’s workforce, noting that the company would provide more details after reviewing independent safety reports on the San Francisco incident.
While commenting on Cruise, GM also provided a general business update, saying it expects net income of $9.1 billion to $9.7 billion for 2023 – a slightly lower range than previous forecasts – after strikes hampered operations in three of his plants in the fall.
GM said the strikes cost the company $1.1 billion in operating profits and reduced its production by about 95,000 vehicles. It also said new labor contracts with the United Automobile Workers union and Canadian union Unifor – both of which include significant wage increases – would increase the cost of their North American vehicles by $500 in 2024. Ms Barra said the increase in labor costs was “fully offset” by cost-cutting measures the company has undertaken over the last year or so.
GM also said it would buy back up to $10 billion in shares to boost its stock price. “Our share price is disappointing for everyone,” Ms. Barra said. Following GM’s announcement, the company’s shares rose 11 percent to more than $32 in early trading, although they were still barely half what they were two years ago.
She also said GM expects to significantly increase electric vehicle production in 2024 after lower-than-expected demand this year and delays in increasing electric vehicle production. “Although the growth rate is lower, the demand for electric vehicles is clearly going in the right direction,” she said. “There’s really no reason why demand for electric vehicles won’t be higher in the coming years.”
In her remarks, Ms. Barra said GM remains optimistic about Cruise’s future. “What Cruise has accomplished in the eight years since taking over the company is remarkable,” she said. “Our priority now is to align the team around security, transparency and accountability.”
Cruise was founded in 2013 and purchased by GM in 2016. Cruise is one of several startups working to develop self-driving cars with the goal of building a driverless taxi company in cities across the United States. One of its competitors is Waymo, which is owned by Alphabet, Google’s parent company.
Cruise tested self-driving taxi services in San Francisco; Phoenix; Houston; and Austin, Texas; and it has tested its autonomous vehicles in six other cities, including Nashville and Seattle. In August, California regulators approved a move to charge Cruise and Waymo in San Francisco 24-hour fees for their driverless services after more than a year of limited operations.
But in San Francisco, city officials, firefighters and police said Cruise’s driverless cars posed a safety risk and caused traffic jams by blocking fire trucks, stopping in the middle of busy streets and delaying firefighters’ missions to save lives.
Earlier this month, Cruise suspended an employee stock repurchase program after it said the company’s valuation had changed. The suspension of the buyback program was previously reported by Portal.
On November 19, Kyle Vogt, CEO of Cruise and founder of the company, resigned. Dan Kan, the chief product officer, later resigned. Cruise has not named a replacement for Mr. Vogt.
In an email to Cruise employees at the time, Ms. Barra said that she and the rest of the Cruise board were “focused on setting Cruise up for long-term success,” adding, “Public trust is critical to this.” “As we work to rebuild that trust, security, transparency and accountability will be our north stars.”