Wall Street is mostly upbeat about GM’s decision to end Cruise By Reuters

By Nora Eckert and David Shepardson

DETROIT (Reuters) – General Motors ( NISE: ) had to exit its Cruise robot business, most Wall Street analysts agreed on Wednesday, but the automaker’s decision to do so remains a disappointing end to an operation that GM touted as a potential 50 dollar revenue generator until 2030.

The largest U.S. automaker on Tuesday pulled Cruise after assessing the ongoing investment needed in a competitive space, executives said, adding that they intend to shift some of Cruise’s talent to GM to continue developing driver assistance systems.

“We see this news as a step in the right direction for GM, as we think investors have been losing patience with the big spend (~$10 billion) on robotaxi development with very little to show for their investment,” Garrett Nelson, analyst in CFRA Research wrote.

Shares of GM jumped 3% in after-hours trading on Tuesday immediately after the announcement, but gave back those gains during Wednesday’s regular session to close up 1.3%.

Nelson said the announcement was “a black eye for the credibility of GM management who, just last year, told investors that 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 was bullish on Cruise.

“We really felt at the time that we were going to move our vehicles faster than we were,” Barra said, adding “there was definitely a regulatory component where we didn’t build the right relationships with our regulators.”

Cruise was under scrutiny after an October 2023 crash in which one of his robot taxis hit and seriously injured a pedestrian in San Francisco. Last month, Cruz 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 US Department of Justice.

For the year to date, GM has far outpaced its competitors. Its shares are up 45% for 2024, while Ford’s (NISE: ) is down 14% and Stellantis (NISE: ) is down 37%.

“I hope you see us being proactive in our decision-making,” Barra said as she faced other questions about the cost-cutting moves the automaker is making as it navigates turbulence in demand for electric vehicles, changing technology and a new presidential administration.

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

Cruise’s competitors — including Alphabet (NASDAQ: ) Waymo, Baidu (NASDAQ: ) and Tesla (NASDAQ: ) — are well-funded and may have better technology, analysts say. Waymo, which is expanding its autonomous transportation services, continues to lose billions of dollars a year.

Barclays (LON: ) noted that Alphabet, which has more than $100 billion in annual revenue, could absorb the costs associated with Waymo’s development. However, GM is expected to post $14 billion to $15 billion in revenue in 2024.

“It’s clear from Waymo that the AV robotaxi business is best owned by entities with deep pockets,” Barclays said.

CHINA, TRUMP AND ELON

Separately, Barra said GM has a future in China and can be profitable with its Buick and Cadilla portfolios there.

She also discussed Tesla CEO Elon Musk and President-elect Donald Trump, saying she hopes the pair will help establish a federal framework for autonomous regulations.

“I think the federal framework will allow everyone to be more efficient.” “I think there is an opportunity there,” said Barra.

Barra will once again have to deal with Trump, who has publicly criticized her in the past over GM layoffs and U.S. factory closures. Barra said she hopes the president-elect will be open to discussing how some of his proposed policies, such as eliminating EV tax credits or raising tariffs on Mexico and Canada, would affect the automaker.

“My experience is that he listens carefully,” she said.

Separately, Microsoft (NASDAQ: ) said Wednesday it expects to record an impairment charge of about $800 million in the second quarter of fiscal 2025 related to GM’s Cruise decision.