GM Plans Substantial Budget Cuts for Cruise Following a Series of Setbacks

GM's Mary Barra announced substantial expenditure reductions for Cruise in response to challenges. Operations will resume with a more deliberate approach, anticipating budget cuts totaling hundreds of millions over the next year, leading to widespread layoffs in San Francisco.

Experiencing Setbacks

GM is implementing its substantial cost reductions for Cruise, its Autonomous Vehicle Subsidiary, following a series of setbacks. TechCrunch reported that GM Chair and CEO Mary Barra announced significant reductions in expenditure for Cruise in response to a series of challenging setbacks.

Barra mentioned that operations would resume in some capacity, but any future plans for Cruise would be approached with more deliberation. As a result, the budget cuts are anticipated to total hundreds of millions of dollars over the next year, leading to widespread layoffs at the San Francisco-based company.

The company currently employs nearly 4,000 people. In an all-hands meeting earlier this month, Cruise CEO Kyle Vogt hinted at forthcoming information about layoffs, only to resign shortly thereafter alongside co-founder Dan Kan.

The prospect of a comprehensive company-wide overhaul looms large, as CFO Paul Jacobson announced during today's conference call that specific restructuring details would be unveiled in the coming weeks.

This revelation follows the ongoing investigations of two independent safety and incident review boards, instigated in the aftermath of a collision involving a Cruise robotaxi and a pedestrian.

Additionally, The New York Times reported that concerns were raised about the company's driverless algorithm struggling to recognize children.

GM's substantial investment in Cruise since its acquisition in 2016, totaling billions of dollars, has faced challenges in recent years, leading to a shift in plans from an aggressive launch in over a dozen U.S. cities. The latest earnings report reveals that Cruise spent $732 million in the first three quarters of 2023.

However, the purpose of today's call extended beyond discussing challenges for Cruise. Both Barra and Jacobson highlighted the recently negotiated labor deal with the United Autoworkers, which is projected to cost GM $9.3 billion in the long term.

Remaining Optimistic

Despite this, Engadget reported that the company remains optimistic about future growth, citing an adjusted earnings figure of $12.7 billion in 2023 and the initiation of an accelerated $10 billion share buyback program.

As part of a broader restructuring effort, GM has introduced new leadership for Cruise. Mo Elshenawy, formerly the VP of engineering, has been elevated to the position of co-president. The other co-president role is now assumed by GM's former EVP of legal and policy.

GM's CEO expressed confidence in the capabilities of the two co-presidents, emphasizing the company's commitment to ensuring strict safety standards. GM will actively engage to ensure that these standards are met during Cruise's operational endeavors.