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Sam Abuelsamid has had first-hand experience with safety concerns riding in a self-driving car operated by General Motors’ subsidiary Cruise.
Cruise had been operating its self-driving robotaxi fleets in San Francisco, Austin, Texas and Phoenix, Arizona in recent months until it halted all operations last week following an incident in San Francisco in which a car hit a pedestrian, forcing her in the path of a driverless Cruise car that then pinned her underneath and dragged her several feet, critically injuring her.
It was in late September, about a week before that incident, when Abuelsamid was in one of Cruise’s robotaxies in Austin, heading from the University of Texas campus back to his hotel room downtown.
The most direct route was straight down a thoroughfare, he said, but the car turned and started “meandering through a neighborhood” full of twists and intersections. Abuelsamid was perplexed and grew increasingly worried because the car’s algorithm chose what he said was a riskier route with more turns and intersections rather than heading straight. He got to his hotel safely but still reported the problem to Cruise.
“They made excuses about the routing algorithm and how they take a lot of factors into account as to why it goes the way it goes,” said Abuelsamid, who is principal analyst for transportation and mobility at Guidehouse Insights in Detroit. “None of it was particularly convincing or explained the things that I saw. They have all my data (from that trip) but they were not able to convincingly explain why it did what it did.”
It’s concerns and queries like that from state and federal transportation regulators, Wall Street analysts, everyday people and experts like Abuelsamid, who has a degree in mechanical engineering and worked on vehicle safety systems for 17 years before becoming a journalist and automotive analyst, that continues to put the future of Cruise in question.
The company, Abuelsamid said, has big problems. He and other analysts say if Cruise does not fix its technology to make the cars safer and do marketing and testing to show consumers and regulators they can be trusted, it will ultimately hurt GM’s stock and GM’s investment in the company.
As it stands, the most recent problems with Cruise will likely push back any possibility of GM getting a return any time soon on its multiple billions of dollars of investment in Cruise over the past several years.
“It’s absolutely a very serious problem,” Abuelsamid said. “(Cruise) is still losing a ton of money. It’s costing GM several billion a year and the likelihood of them reaching profitability before the end of the decade is slim.”
GM’s position on Cruise
Cruise posted a blog on Nov. 8 outlining various steps it is taking to improve safety, including a voluntary recall, seeking to hire a chief safety officer and hiring an independent, third-party engineering firm to perform a technical root cause analysis of the pedestrian incident in California, to list a few.
In an email Friday, Cruise spokesperson Tiffany Testo did not comment on Abuelsamid’s experience but said, “We believe that over time autonomous vehicles can significantly reduce the number and severity of car collisions, including the more than 40,000 deaths on U.S. roads each year. This is what motivates our work and safety is at the core of everything we do. As a company, we are focused on continuously improving our technology and operations.”
GM has invested in Cruise since 2016 and echoes Cruise’s belief about safety. GM bought into the company with the goal of operating driverless taxi fleets across several major U.S. cities.
In 2022, GM spent about $2 billion covering Cruise expenses, according to a Free Press report. Reuters reported that GM has lost about $8 billion on Cruise since 2017. In the third quarter of this year, GM reported investing $732 million on Cruise, compared with a year ago when GM spent $497 million. Cruise had $1.7 billion in cash as of Sept. 30, about enough to last nine months at the current cash burn rate, Reuters reported.
Cruise leaders have promised to deliver $1 billion in annual revenue by 2025. This past summer, GM CEO Mary Barra, who has touted that self-driving cars will make roads safer and less congested, reiterated a forecast that Cruise could generate $50 billion a year in annual revenue by 2030.
But then came the pedestrian accident in San Francisco — among other incidents earlier this year with Cruise vehicles, including a collision with a bus and holding up traffic as the vehicles get stuck and protesters putting traffic cones on the self-driving cars’ hoods to disable them — that prompted the California Department of Motor Vehicles to revoke Cruise’s license to operate last month. The DMV’s state regulators found that Cruise’s cars posed a danger to public safety.
Then on Tuesday, GM hit pause on production of the Cruise Origin, which is a fully autonomous six-seater bus-like vehicle built at Factory Zero in Detroit and Hamtramck.
The next day, Cruise recalled all 950 of its cars to update software. In documents posted by U.S. safety regulators, Cruise said that with the updated software, the vehicles will remain stationary should a similar incident with a pedestrian occur in the future. Currently, Cruise uses modified Chevrolet Bolts, which have driver controls and brakes, in its robotaxi fleets. The Origin is not yet deployed on roads because it awaits government approval given it has no steering controls or brakes.
In the meantime, more than two dozen unions urged U.S. auto safety regulators on Thursday to start an industry-wide investigation into driverless vehicles, including Alphabet’s Waymo and Amazon.com’s Zoox, according to a Reuters report. In a letter to U.S. Transportation Secretary Pete Buttigieg and Ann Carlson, the acting administrator at the National Highway Traffic Safety Administration (NHTSA), the unions cited California’s decision to suspend Cruise testing, noting driverless vehicles “are unsafe and untenable in their current form. This industry is in dire need of federal regulation and leadership to restore a modicum of safety and establish a realistic path for these vehicles to operate without threatening other road users,” Reuters reported.
The NHTSA did not respond to a request for comment on Friday.
GM said it stands by Cruise. GM spokesperson Aimee Ridella emailed the following statement to the Detroit Free Press on Friday: “GM has made a bold commitment to autonomous vehicle technology because we believe in the profound, positive impact it will have on societies, including saving countless lives. We believe strongly in Cruise’s mission and the transformative technology it is developing. 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. Our commitment to Cruise with the goal of commercialization remains steadfast.”
Wall Street watches
GM has to stay the course with Cruise because too much money has been invested to do otherwise, Wall Street analysts told the Free Press on Thursday and Friday. But the ongoing troubles at Cruise pushed GM’s share price down more than 3% to $26.65 on Thursday, its lowest closing price since August 2020.
“I don’t think the market has this issue at the top of its concerns on GM, but it does diminish the upside story to owning the stock until trust can be restored and the service resumes,” Morningstar Auto Analyst David Whiston told the Detroit Free Press. “A $1 billion in revenue in a few years is not a big number for a firm like GM. It’s more important to just scale up safely and show the path to viability regardless of if that happens in 2025, 2026, or later.”
Whiston said if GM ended its autonomous vehicle plans, someone else will do it, noting other players out there now with plenty of money to sink into it. Besides Waymo and Zoox, there is Tesla. Whiston said the billions of dollars GM has already spent on Cruise “are a sunk cost” that can only be recovered if Cruise succeeds.
“But, yes, investors and management want a return on that money,” Whiston said. “If I thought AVs were not worth the time, I’d wish GM would end Cruise, but I think AVs potential is massive and will be done by someone else if GM stops trying.”
A ‘potential Cinderella story’
Cruise is one of the most valuable assets in all of GM so there is a lot of hope riding on it, said Dan Ives, managing director at Wedbush Securities.
But, “it’s kept investors up at night” because it’s yet to deliver value and the last few months, have been “an absolute nightmare,” Ives told the Detroit Free Press. He said it is possible for Cruise to hit $1 billion in revenue in two years, but it’s a stretch. As for profits coming from Cruise, Ives said it will likely be many years before that happens.
“But they have to keep plugging along because it is (GM’s) torch bearer strategy,” Ives said. “Cruise, down the road, if successful could be its own spinoff of a company. This is the potential Cinderella story. From a disruptive technology perspective, they’re past the point of no return. If (GM and Cruise) scale back, that would be a disaster and put them at a further disadvantage against Tesla and others.”
Cruise layoffs coming
Meanwhile, Cruise leaders are doing damage control to calm investors, appease regulators and win the public’s trust, according to audio of a Monday staff meeting obtained by Forbes.
Forbes reported this week that during the hour-long meeting, Cruise executives went through various damage control measures, ranging from internal “listening sessions” to possible websites that would detail collisions involving Cruise cars or allow people to post comments about their interactions with the vehicles. Cruise CEO Kyle Vogt, who was a co-founder of the company, told employees that there will be layoffs, Forbes reported.
“We are still working through what that means for the company and who’s going to be affected by that and we don’t have all the answers yet,” Vogt said, according to the Forbes report. “But what I can do is commit to providing more details within the next three weeks. So, importantly that’s not when layoffs would occur for full time employees, that’s when we’re going to give you an update on what that timeline might be.”
Cruise’s Testo said it “has made the difficult decision to reduce a portion of the contingent workforce that supported driverless ridehail operations. These contingent workers were responsible for work such as cleaning, charging and maintaining the fleet, and we’re grateful for their contributions.”
Cruise is also conducting a search to hire a chief safety officer who will report directly to CEO Vogt. In the meantime, Louise Zhang, vice president of safety and systems, will act as interim chief safety officer and oversee Cruise’s safety review and investigations, Testo said.
The Cruise Board has also retained law firm Quinn Emanuel to examine and better understand Cruise’s response to the pedestrian accident, including Cruise’s interactions with law enforcement, regulators and the media, she said.
“This outside review will help us learn from this incident, strengthen our protocols, and improve our response to these types of incidents in the future,” Testo said.
GM and Honda have said the plan announced last month to start a joint venture between them and Cruise to deliver a driverless ride service in Japan in 2026 continues.
Best case: GM still looking at billions in losses
Despite the troubles, there is enormous societal potential for autonomous driving technology, said Abuelsamid who took his first ride in a self-driving car in 2008. He said the technology can improve safety, help transport people who can’t drive, help reduce the number of vehicles on the road and improve energy efficiency.
“So let’s do it right. I want to see it work and I know it can work,” Abuelsamid said. “But only if it’s done in a thoughtful and regulated manner.”
He believes Cruise rushed to market feeling pressure to expand in part due to Barra’s enthusiasm and possible departure one day.
“Up to this point, Mary Barra has been a staunch supporter of Cruise and Kyle … There is a question of if her successor will have the same enthusiasm for Cruise?” Abuelsamid said. “But the desire to grow Cruise as rapidly as possible, whether that’s driven from her or Kyle Vogt or someone else, that was a mistake.”
He noted GM is in a similar position as Ford Motor was last year at this time when the Dearborn automaker announced in its third quarter earnings report last year that it was exiting its investment in the driverless-tech company Argo AI because it failed to attract new investors. At the time, Argo announced it was winding down operations in Pittsburgh.
GM is looking at big losses “in the many billions of dollars” with Cruise, Abuelsamid warned.
“GM has spent somewhere between $5 billion and $10 billion on this effort with Cruise,” Abuelsamid said. “If they keep going with Cruise and, best case Cruise gets its act together and can start operating robotaxies again in the next year and do some expansion in Cruise over the next few years, GM is still looking at $10 billion to $20 billion in losses over the next decade.”
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Contact Jamie L. LaReau: jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.
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