From development to pass-through: GM’s cruise robotaxi business is the latest development initiative to fail.

DETROIT – For years, General Motors CEO and Chair Mary Barra promises a new future for the company, poised to evolve from a metal-bending vehicle manufacturer to a technology-driven, forward-thinking company.

Part of the project was for GM’s innovation division to identify trillions. Yes, trillions — New dollar market opportunities such as electric commercial vehicles, auto insurance, military defense, autonomous vehicles and even, eventually, the potential for “flying cars,” also known as civil air mobility.

“We are developing world-class technology solutions and services that will change the way people move, as well as new fleet solutions and entirely new business models,” Barra said at a time. Virtual CES Keynote In January 2022.

While GM has declined to say how much revenue such businesses have generated, Barra said Ending its cruise robotics operations On Tuesday, it made clear that the automaker’s development priorities have changed. Broader, industry-wide redundancies To conserve capital. Companies including GM are now focusing on more “core” operations and adjacent business opportunities, including software, EVs and “personal autonomous vehicles.”

“You really have to understand the cost of operating a fleet of robotaxis, which is quite significant, and again, not our core business,” Barra said during a Tuesday call with Wall Street analysts.

There was to be a driverless ride-hailing service. shining star With GM’s growth opportunities, a few years ago executives cited this as an $8 trillion market opportunity that the automaker would lead. This included former executives. $50 billion in revenue By the end of that decade, and Cruise is being valued. At over $30 billion.

Instead, after spending more than $10 billion on Cruise since acquiring it in 2016, GM is spinning off the robotaxi business and transferring Cruise operations and an unspecified number of its roughly 2,300 employees to the automaker. I am adding

As part of the winddown, GM is expected to disclose additional costs in the next year for employee severance packages and repurchasing equity investments from outside investors, among other costs.

GM cited an increasingly competitive robotaxis market, capital allocation priorities, and the time and resources needed to grow the business as reasons for its decision.

The automaker was the main competitor. Alphabet-Backed Waymo, now the last company with any notable public operations. Others, especially Teslahave ambitions for Robotaxis businessbut have so far failed to commercialize these operations.

To GM’s credit, Wall Street, which had previously pushed such development ventures, applauded Cruise’s decision to end its robotaxis ambitions. Shares of the company were initially higher, before ending the week at the level when the announcement was made.

GM, like other companies, has increasingly moved away from trying to impress Wall Street with growth initiatives, including generating $280 billion in new business By 2030, to refocus on its core business to generate profits amid economic and recessionary concerns.

Analysts largely viewed GM’s decision as a positive, saving the automaker more than $1 billion a year in capital, which they expect could be used for Redemption of excess sharesThis includes a target to reduce its outstanding shares below 1 billion.

“It has been apparent for some time that most investors have removed Cruze from their GM valuations, so today’s news came as a surprise,” Wells Fargo analyst Colin Langen wrote in an investor note on Tuesday. Which are not.”

GM will combine majority-owned Cruise LLC with GM technical teams. Barra reiterated last week that the automaker is not giving up on vehicle autonomy. It will focus on personal autonomous vehicles rather than robotics.

But it’s hard to ignore that the Cruze is GM’s latest mobility venture or development venture that falls short of expectations.

GM plans to diversify its business through fashionable industries such as ride-sharing and other “mobility” ventures – a Modern term Previously used by the industry for growth initiatives — or startups — have fallen largely flat since the automaker began investing in such growth areas in 2016.

Earlier this year, the automaker bundled its Bright Drop EV commercial van into a Chevrolet that sold cheaply. It has also failed to announce any meaningful plans for fuel sales to tie-up with ships, trains and aircraft, and it Many closed earlier “Mobility” business.

Not all of GM’s non-core businesses launched in recent years have failed. GM Energy and Bright Drop continue to operate under the Commercial EV unit. Automaker’s “Envolve” Fleet Business.

GM’s finance arm, meanwhile, is a work in progress. Insurance business It was launched in late 2020 as part of development initiatives with its OnStar telematics and data unit. GM said Friday that the operations are now in 12 states, and are “well positioned for long-term success.”

GM also maintains a military defense unit and a fuel cell business that has recently announced new contracts or partnerships. This includes multi-million dollar contracts for GM Defense.

Aside from the capital savings, GM’s silver lining to canceling the Cruise Robotaxis business was that it saw more promise in continuing its development. Super Cruise Hands-free advanced driver assistance system. This includes more semi-automated and ultimately autonomous capabilities.

GM was the first automaker to offer such a hands-free system in 2016. However, it was a notoriously slow ramp until recently, until the automaker began rolling it out to its lineup. It launched in 2021 and has expanded to more than 20 models, including high-volume vehicles such as its full-size pickup trucks and SUVs.

“The strategic shift demonstrates GM’s belief in the potential of AV technology for personal vehicles. Going forward, GM will focus on improving SuperCruise’s capabilities, including artificial intelligence (AI). will be further enabled by technological developments,” John Murphy of Buffa Securities said in an investor note Wednesday.

On the other side of the coin, Murphy also points out that the move could mean other companies like Waymo and Tesla “There is better tech and/or that the market may not appeal to later entrants.”

GM was not expected to be a “later entrant”. Robotex. Actually, it was First to offer such rides to the public, and many believed it was one of the leaders until last year, when the company grounded its driverless operations in October 2023. A pedestrian accident In San Francisco

National Highway Traffic Safety Administration Cruise was fined $1.5 million. After the company failed to provide details of the accident, in which a pedestrian was dragged 20 feet by a cruise robotaxis after being struck by a separate vehicle.

A third-party investigation into the incident ordered by GM and Cruise found that cultural issues, incompetence and poor leadership fueled regulatory oversight. The cause of the accident. The investigation also investigated allegations of a cover-up by Cruz’s leadership but found no evidence to support those claims.

The report outlines several instances in which then-CEO and co-founder Kyle Vogt, who resigned from the company in November 2023, issued a final order to withhold information, specifically from the media. The call was made.

Vogt wasn’t thrilled about GM’s decision to wind down its Robotaxis operation. He Posted on X. After the announcement, “If it wasn’t clear before, it’s clear now: GM is a bunch of dummies.”

Vogt Earlier this year Pointed out GM’s history of taking advantage of technology firsts, as it did with the Cruze and SuperCruise, and squandered it. GM had a similar path with EV tech, such as the EV1 — a battery electric vehicle that was developed in the 1990s — and the Chevrolet Volt plug-in hybrid electric vehicle in the 2010s, both of which the company abandoned. was given

GM follows several other companies in abandoning Robotex, including its closest crosstown rival Ford Motorwhich shut it down. Argo AI autonomous vehicle unit With Volkswagen in 2022.

The robotaxi leader in the U.S. is Waymo, which is expanding operations for its publicly available fleet in Los Angeles, Phoenix, and San Francisco, and will soon debut in Miami, Atlanta, and Austin, Texas.

“In many ways this announcement highlights the economic challenges of scaling robotaxi networks and rideshare platforms could pay off as the commercialization effort of AVs (a bullish sign), but we think more at this time.” The obvious impact is on the ecosystem of partnerships that Waymo has already scaled, and Tesla has ambitions to do the same, Bernstein analyst Daniel Roska said in an investor note last week do