Wall Street offers mixed reactions to GM’s Cruise shutdown
Wall Street offers mixed reactions to GM’s Cruise shutdown
Wall Street analysts' opinions on General Motors (GM) decision to close down its Cruise robotaxi division were split — one side expressed disappointment over a sudden end to what was billed as a USD 50 billion opportunity by 2030 while the other contradicted the shutdown, describing Cruise as an exciting move that should be celebrated.
Tuesday's announcement from the automaker said that to compete in the autonomous vehicle sector, it would require weighted investments and, consequently, announce Cruise's discontinuation. Some of Cruise's talent will be integrated into GM's driver assistance technology division.
‘A positive first step in the right direction,’ CFRA Research analyst Garrett Nelson said of the move. While he lauded the decision as a positive step to alleviate the nightmare for the CEOs, he also observed that GM’s previous enthusiasm about Cruise was a ‘black eye for credibility’ for the management itself.
GM shares soared 3 percent in after-hours trading on the news but then slipped 1.3 percent on Wednesday.
Increased scrutiny on Cruise following a 2023 high-profile San Francisco crash in which a robotaxi hit a pedestrian prompted the decision. Under a deferred prosecution agreement, Cruise later admitted to submitting a false report during the investigation and was fined USD 500,000.
GM CEO Mary Barra admitted there were missteps as Cruise rolled out its service, including difficulties cultivating relationships with local regulators. "We thought we could scale the business faster," Barra said at the time.
GM is shifting focus on its mainstays, gasoline powered pickup trucks and SUVs, as EV demand stumbles and competition mounts. It's recently scaled back EV ambitions, sold a stake in a battery joint venture, and taken a USD 5 billion loss in its China operations.
However, cruise’s rivals, including Alphabet’s Waymo and Tesla, are still making the costly investments in autonomous technologies. Analysts say that companies with deep pockets are more capable of shouldering losses in a nascent robotaxi market.
Barclays highlighted Alphabet’s ability to absorb Waymo’s financial strain, thanks to its USD 100 billion in annual earnings. GM, by contrast, is projected to earn USD 14–15 billion in 2024.
Barra also addressed GM’s future in China and the potential impact of policies from president-elect Donald Trump. She called for a federal framework on autonomous regulations, expressing hope for constructive dialogue with the administration.
