Roughly a year ago the sky seemed to be the limit for General Motors' (GM 0.91%) driverless vehicle ambitions, spearheaded by its operations at Cruise. It was a goldmine of potential and a way for the company to generate a new stream of revenue.
Fast-forward to today, and it looks more than ever like Ford Motor Company's (F 0.52%) $2.7 billion impairment charge to end its Argo AI driverless ambitions was brilliant.
Cruise crisis
In the early days of October, one of Cruise's robotaxis hit and briefly dragged a pedestrian, who was struck beforehand by a separate human-driven vehicle, causing injuries.
It was the beginning of a domino effect that would cause the company to pause its driverless vehicle operations in the U.S. and cause regulators to suspend the company's driverless testing and deployment permits.
While the media headlines were brutal, what might have been even worse was a person who claimed to be a Cruise employee warning regulators that the company's approach wasn't "consistent with a safety-first culture."
Cruise had launched driverless robotaxis in San Francisco, Phoenix, and Austin, Texas, with plans to increase the fleet of vehicles from a handful to hundreds by the end of 2024 -- all of which was halted almost overnight.
More dominos followed. Then-CEO Kyle Vogt resigned and a list of executives were reshuffled or replaced to address "fundamental cultural issues."
Through the first nine months of 2023 Cruise lost $1.9 billion before interest and taxes, but plans to restart operations in only one city in the future when the dust settles and the safety culture is repaired.
How did Ford get it so right?
Rewind to the end of 2022, when unmistakable buzz was surrounding Cruise's valuation and Ford opted to make a sharp turn away from its driverless ambitions. The move to end its investment in Argo AI, a self-driving vehicle technology start-up with Ford and Volkswagen as the main backers, cost Ford a substantial $2.7 billion in a noncash, pre-tax impairment charge.
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Key Data Points
As pointed out here, it should have been a warning sign for Ford's crosstown rival. In fact, looking back on Ford's reasoning for the sharp turn away from driverless vehicles, management seems spot on: "We're optimistic about a future for L4 ADAS, but profitable, fully autonomous vehicles at scale are a long way off and we won't necessarily have to create that technology ourselves," said President and CEO Jim Farley in a press release.
Will GM get it right?
The strategies for driverless vehicles marks a rare divergence between the two Detroit icons, which share far more in common than not. Make no mistake, GM is standing by Cruise and preaching that there is a bright future -- but at what cost? It's a fair concern for investors that Cruise is turning into a black hole for profits at a time when billions are being poured into the transition to electric vehicles.
If GM does get it right in the future, with a safety-first culture and the ability to generate billions in revenue from driverless robotaxis, investors will be pleased with the outcome. But for now, with all the headaches, headlines, and cash burning, it's a wonder how Ford got this so right.
