GM to cut Cruise spending by ‘hundreds of millions of dollars’

GM Chair and CEO Mary Barra reiterated plans Wednesday for Cruise to be more “deliberate” when operations ultimately resume at the troubled self-driving vehicle subsidiary. For GM, that will include slashing Cruise spending “by hundreds of millions of dollars” by 2024, a move expected to result in widespread layoffs at the San Francisco-based company that employs about 3,800 people.

Barra and CFO Paul Jacobson said Wednesday there will be more specific information in the coming weeks about what this new Cruise will look like after the results of the two independent SALVATION and EVENTS reviews already underway.

The couple’s comments are part of a more extensive GM updates which aims to boost automaker confidence after a protracted United Autoworkers strike and soften demand for EVs. GM on Wednesday also revised up its 2023 guidance to include adjusted revenue of $11.7 billion to $12.7 billion, compared with the previous outlook of $12 billion to $14 billion, a accelerated $10 billion share buyback program and 33% increase in its quarterly dividend next year to 12 cents per share.

“What Cruise has done in the last eight years since we acquired the company has been incredible,” Barra said during a conference call Wednesday morning. “Our priority now is to focus them on safety, transparency and accountability and build trust with regulators at the local state and federal level, including first responders and the communities where we operate.”

Barra added that he expects “Cruise’s expansion step will be more deliberate if operations continue and spending will be much lower in 2024 than 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 acquired the company in March 2016. Spending has accelerated in recent years following Cruise’s aggressive plans to launch in more than a dozen US cities. The company burned $732 million in the first three quarters of 2023, according to GM’s last 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 permits to operate self-driving cars on public roads after the an incident that saw a pedestrian – who first hit someone. -driven vehicle and landed in the path of a Cruise robotaxi — ran and was dragged 20 feet by the AV. A video, viewed by TechCrunch a day after the incident, shows the robotaxi braking aggressively and stopping the woman. The DMV’s suspension order said Cruise withheld about seven seconds of video footage, which showed the robotaxi attempting to pull over and then dragging the woman 20 feet.

The cruise received in August 2023 the final permit needed to operate its robotaxi service in San Francisco. Almost immediately, more incidents began to pile up, including videos of the robotaxis blocking traffic, driving on wet pavement and crashing into an emergency responder vehicle. However, the October 2nd incident prompted the DMV, and soon after the California Public Utilities Commission, to pull the permits, effectively ending Cruise’s ability to operate in the state.

Cruise soon halted all driverless operations across its entire fleet, including newly launched locations in Austin, Houston and Phoenix. Last week, co-founder and CEO Kyle Vogt suddenly resigned. His co-founder Dan Kan also resigned.

GM has since been around the executive wagons, by elevating some Cruise insiders and inserting its own leaders on top.

GM has not named Vogt’s replacement, instead choosing co-presidents. Mo Elshenawy, who was executive vice president of engineering at Cruise, is now CTO and co-president. Craig Glidden, a Cruise board member and GM’s EVP of legal and policy who was recently installed as Cruise’s chief administrative officer, is also in the role of co-president. Jon McNeill, a GM board member, has been appointed vice chairman of the Cruise board.

“We have a lot of confidence in what the two co-presidents will do,” said Barra “And GM will be confident to make sure it meets our strict requirements from a safety perspective.”

Although specific details about the Cruise’s redesign are scarce, Barra explained that the automaker was already looking for ways to be more efficient and cut costs before its recent problems. He noted that the company found “synergies” between Cruise and what Mike Abbott, a former Apple executive who led GM’s software, was working on.

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