After a pedestrian accident last month that led the company to suspend its testing – and drew with it a fresh round of government scrutiny – GM is cutting back its investment in its Cruise autonomous driving segment.
The division, which had previously operated under the motto “zero crashes, zero emissions, zero congestion,” will detail this week how much it plans on cutting its budget, according to a new report from FT.
The Financial Times reported that the division won’t drop the slogan entirely, but will spend less on the segment. GM had previously invested about $700 million per quarter and Cruise operated in several U.S. cities, with San Francisco being the most prominent.
The spending cuts have people questioning the economics of Cruise as a business. GM had bought out Softbank’s minority share in the segment for $2.1 billion last year and now owns 80% of Cruise. It has invested “billions” in total into the company, the report notes.
Barclays auto analyst Dan Levy, speculating as to whether or not financial conditions could further mire the project, told FT: “The big question is to what extent ‘Zero Zero Zero’ also hinged on zero rates.”
“This has been a big theme this year in auto; everyone has had to step back from the euphoria,” he added.
One GM investor told the FT: “The problem for Cruise as a business is GM is dependent on it for all the software [revenue] targets the company has set. We don’t see a path to profit, but we do see they will burn a lot of cash trying. GM would be better placed winding back its bet, and returning the money to shareholders.”
Recall, we just wrote days ago that about 11 days after Cruise halted all autonomous vehicle deployment across the US following several collisions and a suspension of its permit to operate robot taxis in California, Forbes revealed that Cruise CEO Kyle Vogt held an all-hands meeting at the beginning of November to halt production of its fully autonomous vans temporarily.
The fallout continues as Vogt, according to audio obtained by Forbes, told employees that suspending driverless operations nationwide was the primary reason why it must pause “production of the Origin” van.
The Origin operates fully autonomously and has no steering wheel or pedals. This halt represents a significant setback for Cruise, which has faced regulatory scrutiny following an incident where one of its vehicles dragged a woman who had been struck by another car. Furthermore, an investigative piece by The Intercept revealed Cruise’s software has “problems recognizing children.”
Matthew Colvin, chief of staff of the Transportation Trades Department said in a letter to the US Department of Transportation following the incidents: “The public are also recognising that being unwitting guinea pigs to unproven tech that’s desperately underregulated is not what anybody has signed up for.”
Vogt said Cruise has produced hundreds of Origin vehicles and “more than enough for the near-term when we are ready to ramp things back up.”
“During this pause, we’re going to use our time wisely,” he explained. And now, their money, too…