General Motors‘ bet its Cruise robo taxi unit would deliver US$50bn in revenue by 2030 is facing its toughest test, according to Reuters.
The report said GM chief executive Mary Barra had stuck with Cruise in the face of scepticism from investors, arguing that Cruise technology would save lives and become a significant source of new profit for the automaker in the future.
But the unit’s operations are shut down as regulators investigate the safety of Cruise’s self-driving vehicles.
Cruise has nine months of cash left, and one major investor, Honda Motor has said it did not plan to put up more money. Layoffs have started as Cruise reviews its operations and management, Reuters reported.
The news agency, citing GM financial disclosures, noted Cruise had lost over $8bn since 2017, including $728m in the third quarter of this year. Cruise had $1.7bn in cash as of 30 September, enough to last nine months at the current cash burn rate.
“I think it’s a bit of a black hole,” Pzena Investment Management analyst Lawrence Paustian told Reuters. “It wasn’t too long ago people were really hyped about autonomous and they saw Cruise as this valuable asset. Now everyone’s looking at it as a liability.”
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The news agency said Barra had told investors last month they could “rest assured we do have funding plans that will support Cruise’s expansion” but did not provide details. Barra has stood by Cruise and her forecast that the robo-taxi business could generate $50 billion in revenue by 2030.
GM said in a statement cited by Reuters its “commitment to Cruise with the goal of commercialisation remains steadfast”.
Safety “has to be our top priority and we fully support the actions that Cruise leadership is taking to ensure that it is putting safety first and building trust and credibility with government partners, regulators, and the broader community,” GM reportedly said.
Reuters said Cruise was conducting a search for a chief safety officer and had hired law firm Quinn Emanuel to conduct an outside review.
A senior executive at Honda Motor told Reuters the automaker had no plan to invest more in Cruise. But Honda chief operating officer Shinji Aoyama has said there was no change to Honda’s plan to begin a driverless ride service in Japan in 2026 through a joint venture with Cruise and GM.
In October 2018, Honda invested $750m in Cruise, valuing the operation at $14.6bn.
GM had not released a more recent valuation for Cruise, Reuters noted.