GM Shares Dip 6% After Halting Cruise Self-Driving Cars

Topline
Shares of General Motors fell over 6% on Tuesday, pacing the company’s worst day in nearly a year after production of an autonomous vehicle from its self-driving unit Cruise was delayed indefinitely, after the car—which doesn’t have a steering wheel or pedals—faced years of delays, and Cruise endured scrutiny after a pedestrian was struck by another company car.
A delay will lower costs and address “regulatory uncertainty” around the vehicle, the company said. Getty Images
Key Facts
GM shares dropped to about $46.50 as of around 11 a.m., the stock’s furthest fall since a 5.7% decline on Aug. 8 last year, when the company said production of its electric vehicle lineup would be slowed because of battery assembly issues. In its second-quarter report, GM said its self-driving brand Cruise indefinitely delayed production of its Origin vehicle, a decision that GM CEO Mary Barra said would lower Cruise’s costs and address “regulatory uncertainty” around the car, which does not include a steering wheel, pedals or mirrors. Cruise CEO Kyle Vogt temporarily paused production of the Origin in October as the company paused driverless operations nationwide, after Forbes reported a pedestrian was inadvertently dragged by one of the company’s robotaxis. Cruise will instead focus on developing the next-generation Chevrolet Bolt, a previously discontinued electric car that Cruise has used to develop its vehicles, according to GM. Halting Cruise production at a Detroit plant resulted in about $583 million in costs for GM, the company said.
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Tangent
GM raised its earnings estimates for the year from between $12.5 billion to $14.5 billion to between $13 billion and 15 billion. The company reported second-quarter earnings of $3.06 per share and revenue of nearly $48 billion, ahead of analyst projections of $2.75 per share and roughly $45.5 billion, according to FactSet.
Surprising Fact
Development of the Origin has faced delays for years. GM petitioned the NHTSA to develop a Chevrolet Bolt without steering wheels or brake pedals in 2018, though it withdrew the petition a year later after the agency took no action. Cruise petitioned the NHTSA to approve Origin in 2022. The agency has not issued a decision, while Cruise has said it was allowed to test the vehicles while waiting for regulatory approval.
Key Background
Cruise suspended operations last year after a series of safety concerns, with Forbes reporting a female pedestrian was dragged by a Cruise robotaxi after a human-driven car pushed her in front of the car. Regulators have launched investigations into Cruise’s vehicles because of the incident, including the National Highway Traffic Safety Administration, the Justice Department and the Securities and Exchange Commission, including whether Cruise has done enough to safeguard pedestrians. Cruise launched an internal review of the incident and hired an outside consulting firm to review its technology, the company said in November. Testing of Cruise’s robotaxi fleet with human-driven vehicles was resumed in Phoenix earlier this year, and testing has since expanded to Dallas and Houston.
Further Reading