General Motors shares rose early Wednesday as the automaker scrapped its Cruise robotaxi program to concentrate on developing self-driving technology for personal vehicles. The company announced late Tuesday that it will no longer fund the robotaxi development work at its self-driving unit, Cruise, due to the "considerable time and resources" required to scale the business, amid an "increasingly competitive" robotaxi market.
Shares of GM inclined 1.7% in premarket activity. The auto manufacturer will now realign its autonomous driving strategy and prioritize the development of advanced driver assistance systems for personal vehicles. It will also build on the progress of its hands-off, eyes-on driving feature, Super Cruise. "GM made this decision to refocus our strategy because we believe in the importance of driver assistance and autonomous driving technology in our vehicles," Chief Executive Mary Barra said during a conference call, as stated in a FactSet transcript.
"This approach would allow us to leverage the strengths of GM and Cruise while simplifying and accelerating the path forward." The automaker aims to merge its majority-owned Cruise unit and technical teams into a single effort to advance its autonomous and assisted driving objectives. GM currently owns 90% of Cruise and has agreements with other shareholders that would lift its stake to over 97%. The company will work with Cruise's leadership team to restructure and refocus the division's operations.
This restructuring is expected to yield annual cost savings of over $1 billion and reduce the company's current yearly expenditure of roughly $2 billion by more than half, Chief Financial Officer Paul Jacobson mentioned on the call. The proposed restructuring is expected to complete in the first half of next year, as per GM. "We're always looking to drive capital efficiency, and that's when we look at the amount of money to deploy a robotaxi business and then to maintain that business and grow it," Barra stated in response to a question by an analyst on the call.
"A robotaxi business is not General Motors' core business." Last week, GM projected a more than $5 billion profit hit amid competitive market conditions in China that will require restructuring operations in the country. The automaker also agreed earlier this month to sell its stake in the nearly completed Ultium Cells battery cell plant in Michigan while maintaining its ownership interest in Ultium Cells LLC..