General Motors warned Thursday that it may have to slash the value of its Cruise robo-taxi operation now that ambitious revenue and service expansion timelines have become inoperative.
GM also announced it is abandoning an effort to stand up its BrightDrop electric commercial van operation as a separate entity (with Silicon Valley startup IPO dreams.) The tech entrepreneur hired to run the business is leaving.
Chinese automaker Geely on Thursday sold some of its stake in Sweden’s Volvo Cars at a below-market price. The move came three weeks after Volvo Cars CEO Jim Rowan tried, and spectacularly failed, to persuade investors that margins on Volvo EVs would rise.
Rivals – including the Polestar EV brand which is part-owned by Volvo and uses its technology – were saying the opposite. Volvo Cars shares have lost 12% of their value in two days.
These events are more signs of the collapse of automakers’ efforts to convince investors that the EV revolution will transform them into high-growth technology companies.
Two years ago, GM CEO Mary Barra and other top executives told investors the automaker was transforming itself into a “platform innovator” with a goal generating $80 billion a year revenue from new, non-traditional businesses by 2030.
Investors have concluded instead that automakers are incinerating value with forays into robo-taxis, Silicon Valley-inspired concepts such as BrightDrop and “all-in” electrification strategies that eclipse profit-making combustion vehicles.
GM shares are now hovering at three-year lows and are roughly 15% below the $33 a share 2010 post-bankruptcy IPO price. This is not just a GM issue. Ford, Volkswagen, Mercedes – it’s been a rough year for all of them.
As always, what happens next is the most important thing.
Cruise CEO Kyle Vogt told employees the company had to stop buying virtual shares granted in lieu of an IPO. The regulatory and political backlash following accidents involving Cruise robo-taxis, and the suspension of Cruise operations, has “materially changed the situation that existed at the time of the last valuation.”
Cruise has less than nine months of cash left. GM has said it has plans to continue funding the business. GM has yet to map out in detail what Cruise’s future will be, its new valuation and what impact that revaluation will have on GM’s finances.
As for BrightDrop, GM said it will retain the brand, but the vans and the software services will now be sold through its mainstream commercial vehicle operations. This allows for cost-cutting. For example, outgoing BrightDrop CEO Travis Katz had a vision of a stand-alone company with its own dealer network. The expenses related to that concept are no longer required.
