General Motors (GM) Cruise to Lay off 24% of Its Workforce

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Reportedly, General Motors Company’s GM Cruise will reduce its workforce by 24%, mainly in commercial operations and related corporate functions. Before announcing the layoff, Cruise had 3,800 employees. The affected employees will receive their pay checks till Feb 12, 2023. They will also receive an additional eight weeks of salary plus tenure-based severance.

Cruise recently dismissed nine key leaders due to an accident that took place on Oct 2, 2023. The accident involved a Cruise self-driving car that dragged a pedestrian 20 feet after being struck by a vehicle.Per a memo seen by Reuters, new leadership is crucial for the company to regain trust and operate with the highest standards. After the accident, California suspended the driverless testing permit of Cruise robotaxi unit.

Last month, GM announced to cut costs at Cruise, which lost over $700 million in the third quarter and $8 billion since 2016.

Per CNBC, Cruise aims to work on a fully driverless L4 service. It plans to relaunch ride-hailing in one city before expanding.

In August, robotaxi received approval for round-the-clock service in San Francisco. Since then, it has been called into question for safety concerns. After the accident, the California Department of Motor Vehicles asked Cruise to remove its driverless cars from the roads and called them a risk to the public. Also, the National Highway Traffic Safety Administration started an investigation into pedestrian risks at Cruise.

Per a California agency, Cruise could face $1.5 million in fines and additional sanctions over its failure to disclose accident details.

In October, Cruise announced a reorganization, more oversight from General Motors, an independent safety expert and an expanded probe into Cruise’s tech and safety systems by Exponent.

Zacks Rank & Key Picks

GM currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the auto space are Volvo VLVLY, Renault SARNLSYand BYD Company LimitedBYDDY, each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for VLVLY’s 2023 sales and earnings indicates year-over-year growth of 4.2% and 70.6%, respectively. The EPS estimates for 2023 and 2024 have increased 8 cents and 7 cents, respectively, in the past seven days.

The Zacks Consensus Estimate for RNLSY’s 2023 sales and earnings indicates year-over-year growth of 4.5% and 128.1%, respectively. The EPS estimate for 2024 has increased 2 cents in the past 60 days.

The Zacks Consensus Estimate for BYDDY’s 2023 sales indicates year-over-year growth of 160.2%. The EPS estimates for 2023 and 2024 have increased 59 cents and 55 cents, respectively, in the past 60 days.

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