Wall Street mostly upbeat about GM’s decision to pull the plug on Cruise

On By Littum

By Nora Eckert and David Shepardson

DETROIT (Reuters) – General Motors needed to exit its Cruise robotaxi business, most Wall Street analysts agreed on Wednesday, but the automaker’s decision to do so was still a disappointing end to an operation that GM had touted as a potential $50 billion revenue generator by 2030.

The largest U.S. automaker pulled the plug on Cruise on Tuesday after evaluating the continued investments needed in a competitive field, executives said, adding that they intend to fold some of Cruise’s talent into GM to continue development of driver assistance systems .

“We view the news as a step in the right direction for GM, as we believe investors were losing patience with their heavy spending (~$10 billion) related to robotaxi development with little to show for their investment ,” Garrett Nelson, analyst at CFRA Research wrote.

GM shares rose 3% after hours on Tuesday immediately following the announcement, but gave back those gains during Wednesday’s regular session, closing up 1.3%.

Nelson said the announcement was “a black eye for the credibility of GM management, which as recently as last year told investors the Cruise business could generate $50 billion in annual revenue by 2030.”

Speaking to reporters Wednesday night, GM CEO Mary Barra explained why the automaker had been bullish on Cruise.

“At that point, we really felt like we wanted to roll our vehicles faster than we were,” Barra said, adding “there was definitely a regulatory component where we weren’t building the right relationships with our regulators.”

Cruise came under scrutiny after an October 2023 crash in San Francisco in which one of its robot axes hit and seriously injured a pedestrian after she was hit by another vehicle. Last month, Cruise admitted to filing a false report to influence a federal investigation and agreed to pay a $500,000 fine as part of a deferred prosecution agreement with the U.S. Department of Justice.

For the year to date, GM has far outperformed its competitors. Its stock is up 45% in 2024, while Ford’s is down 14% and Stellantis is down 37%.

“I hope you can see that we are being proactive in making decisions,” Barra said, also facing other questions about cost-cutting measures the automaker is taking as it navigates turbulence in demand for electric cars, changing technology and a new presidential administration.

GM recently scaled back plans for electric vehicles, sold a stake in one of its joint venture battery factories and posted a $5 billion loss on its China business as it restructured. GM is now doubling down on its core business: making gasoline-powered pickup trucks and other large vehicles.