GM Shares Fall 6% After Cruise Halts Self-Driving Car Production

Shares of General Motors (GM) dropped by over 6% on Tuesday, marking the company’s most significant one-day decline in nearly a year. This downturn follows the indefinite delay in the production of an autonomous vehicle by its self-driving unit, Cruise. The vehicle, known as the Origin, which lacks a steering wheel or pedals, has faced numerous delays and scrutiny, particularly after a Cruise car struck a pedestrian.

By 11 a.m., GM’s stock had fallen to approximately $46.50, marking its steepest decline since a 5.7% drop on August 8 of the previous year. That earlier drop was due to production delays in GM’s electric vehicle lineup, caused by battery assembly issues.

In its second-quarter report, GM revealed that Cruise had indefinitely postponed the production of the Origin. GM CEO Mary Barra explained that this move aims to reduce Cruise’s costs and address “regulatory uncertainty” surrounding the vehicle, which lacks traditional driving controls such as a steering wheel, pedals, and mirrors.

Cruise CEO Kyle Vogt halted the production of the Origin in October, coinciding with a nationwide suspension of the company’s driverless operations. This decision came after an incident where a pedestrian was inadvertently dragged by one of Cruise’s robotaxis. In response, Cruise has shifted its focus to developing the next-generation Chevrolet Bolt, a previously discontinued electric car that has been integral to Cruise’s vehicle development.

The halt in Cruise production at a Detroit plant resulted in approximately $583 million in costs for GM.

Despite the setbacks, GM has raised its earnings estimates for the year. The company now expects earnings to be between $13 billion and $15 billion, up from the previous range of $12.5 billion to $14.5 billion. GM reported second-quarter earnings of $3.06 per share and revenue close to $48 billion, surpassing analyst expectations of $2.75 per share and around $45.5 billion, according to FactSet.

The development of the Origin has been plagued by delays for years. In 2018, GM petitioned the National Highway Traffic Safety Administration (NHTSA) to allow the creation of a Chevrolet Bolt without steering wheels or brake pedals. The petition was withdrawn a year later after the NHTSA took no action. Cruise filed a petition in 2022 to approve the Origin, but the agency has yet to issue a decision. While waiting for regulatory approval, Cruise has been allowed to test the vehicles.

Cruise suspended operations last year following multiple safety concerns, including a reported incident where a Cruise robotaxi dragged a female pedestrian after being pushed in front of the vehicle by a human-driven car. This incident led to investigations by the NHTSA, the Justice Department, and the Securities and Exchange Commission to assess whether Cruise had implemented sufficient pedestrian safety measures. In response, Cruise initiated an internal review and hired an external consulting firm to evaluate its technology. Testing of Cruise’s robotaxi fleet with human-driven vehicles resumed in Phoenix earlier this year and has since expanded to Dallas and Houston.

The indefinite delay of Cruise’s Origin vehicle production has significantly impacted GM’s stock and raised questions about the future of autonomous vehicle technology. The company’s decision to halt production and redirect focus to other projects highlights the challenges and uncertainties in the rapidly evolving autonomous vehicle industry. Despite these setbacks, GM’s strong financial performance and increased earnings projections indicate resilience and adaptability in navigating these obstacles.