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- [00:06]
Ryan Knudsen
In the transportation industry, there's a dream some people have, Robo taxis, self driving cars that people can just call up and that'll take them wherever they need to go.
- [00:16]
Chris Otts
Yeah, it's been a big aspiration and it has huge implications for the traditional auto industry.
- [00:26]
Ryan Knudsen
Our colleague Chris Otts covers the auto industry and he says that maybe someday, if this technology, technology gets good enough, people won't even need to own cars anymore.
- [00:36]
Chris Otts
If you think about it, your personal vehicle is idle the vast, vast majority of the time. If you have reliable self driving cars, that changes the entire paradigm in terms of what the auto industry is. You could have cars that are owned centrally by a fleet instead of people owning personal vehicles. So to move into a world where you have on demand transportation, that could totally upend transportation as we know it.
- [01:13]
Ryan Knudsen
One of the companies that's been trying to do that is called Cruise. It's owned by General Motors.
- [01:19]
Chris Otts
Cruise is an autonomous vehicle startup that General Motors bought and has invested heavily in over the last decade. Billions of doll General Motors only a few years ago predicted that Cruise would generate $50 billion a year in revenue by the end of the decade. And GM had hoped that Cruise was a big part of its future.
- [01:48]
Ryan Knudsen
But last week GM said that after investing $10 billion over the last decade, it's killing its robo taxi program.
- [02:00]
Mary Barra
Cruise, the autonomous vehicle company, they're pulling their cars from the streets. General Motors, which owns Cruise, says it's moving away from the robo taxi business.
- [02:11]
Chris Otts
The company says it'll the whole question for GM is what is the future? Where is the growth? Cruise was a big part of the moonshot future growth story for General Motors. And now they're admitting that those aspirations of this legacy car company owning a big robo taxi business that's ferrying everyone around are not going to come true.
- [02:43]
Ryan Knudsen
Welcome to the Journal. Our show about money, business and power. I'm Ryan knudsen. It's Tuesday, December 17th. Coming up on the show, why GM is slamming the brakes on Cruise.
- [03:11]
Mary Barra
This episode is brought to you by Indeed. We're driven by the search for better. But when it comes to hiring, the best way to search for a candidate isn't to search at all. Don't search match with Indeed. Use Indeed for scheduling, screening and messaging so you can connect with candidates faster. Listeners of this show will get a $75 sponsored job credit to get your jobs more visibility@ Indeed.com journal. Terms and conditions apply.
- [03:46]
Ryan Knudsen
In 2016, General Motors Company, known for its SUVs and pickup trucks, paid a billion Dollars to acquire something totally different. The autonomous vehicle startup Cruise. It was founded in 2013 and based in San Francisco. Why would a company like GM be interested in a self driving robo taxi car company like Cruise?
- [04:08]
Chris Otts
If you see the future of your industry looking vastly different than it looks today, if people no longer need to personally own vehicles because they can hail a robot that will tell take them anywhere that they need to go, that certainly looks like an existential threat for a car company. So in some sense Cruise was a hedge for GM against the future. If that's really where the world is going. GM probably felt that they were better to be taking part in that rather than displaced by it. Remember that General Motors had to be bailed out by the taxpayers in the Great Recession, so they went bankrupt. A century old company. There's big turning point. They were headed in a new direction under Mary Barra who became CEO in 2014. And they were getting their feedback under them and then trying to look at how do we participate in where the industry is evolving.
- [05:16]
Ryan Knudsen
Self driving cars in robo taxis seemed like one of the answers. But creating self driving technology is hard. So for gm, acquiring one of the top startups made a lot of sense.
- [05:28]
Chris Otts
It would be extremely difficult for a company like General Motors to come up with this self driving technology in house. This is a wholly different business than GM is in. So it was much simpler for GM to just spend a billion dollars and acquire this technology than it would be for them to try to build it themselves.
- [05:57]
Ryan Knudsen
In late 2021, GM launched a small fleet of Cruise Robo taxis in San Francisco. One of the people who took a ride was GM CEO Mary Barra. Plant a little camera here starting your trip. Let's Cruise.
- [06:11]
Unnamed Guest
Oh my gosh, this is incredible.
- [06:15]
Ryan Knudsen
Here we go. Cruise was one of several startups working on Robo taxis at the time. The other main player was Waymo, which is owned by Google's parent company, Alphabet. Did it look at that point that like Cruise was like doing well, like it had a chance to like compete or even win against the race against Waymo.
- [06:35]
Chris Otts
Cruise and Waymo were neck and neck essentially for a while in the race to really commercialize this technology. It wasn't at all clear that one company or the other company was ahead at that time. They were both putting more cars out on the road and slowly rolling this out to customers.
- [07:01]
Ryan Knudsen
Even though both companies had robo taxis on the road, perfecting the technology for a wider rollout was still a challenge, in part because of the way its artificial intelligence worked. Sometimes when the car found itself in an unusual situation, it didn't always do the right thing.
- [07:17]
Chris Otts
It is all of the unforeseen edge cases that make self driving such a thorny problem to solve. Can you pre program that your self driving vehicle may end up behind another vehicle that is transporting stoplights that have not been installed yet but are on the way to where they're going to be installed? And to understand that these are not traffic lights that the vehicle needs to pay attention to right? There's all kinds of situations where humans can reason through what is going on in front of them that are a challenge for artificial intelligence.
- [08:04]
Ryan Knudsen
And one of those unusual situations that AI wasn't quite ready to solve happened last fall.
- [08:12]
Unnamed Guest
A woman is hospitalized in serious condition after being hit by an autonomous car in San Francisco. Rescuers were able to lift the car off the victim and the fire department used the Jaws of Life to free her. Firefighters say it was the most serious incident they are aware of involving a self driving car.
- [08:31]
Ryan Knudsen
In October 2023, a pedestrian was hit by a car which was driven by an actual human driver and was thrown into the path of a cruise vehicle.
- [08:41]
Chris Otts
And at this point the cruise vehicle did what it was programmed to do, which is slowly pull over and wait. However, it didn't recognize that the woman was pinned underneath the vehicle and it ended up dragging this pedestrian about 20ft. Unfortunately, the woman did survive, but this incident really ended up being a turning point for Cruz.
- [09:19]
Ryan Knudsen
At the time, a representative for Cruise said, quote, our heartfelt concern and focus is the well being of the person who was injured. The company pointed out that the initial cause of the accident was the human in the other car, not Cruise, but said it would conduct a safety review. What happened after that accident for Cruz and gm, that's next.
- [09:53]
Unnamed Guest
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- [10:28]
Ryan Knudsen
After the accident, the State of California revoked Cruz's permit to operate, which meant the company had to shut down its Robo taxi service in San Francisco, pumping.
- [10:37]
Mary Barra
The brakes on autonomous vehicles operated by Cruise. Effective today, California's DMV has suspended the company's Deployment and testing of self driving cars, a serious roadblock.
- [10:51]
Chris Otts
So crews had to go on pause, go dark for several months, and then had to come crawling back, get permission to operate once again. And they did do that. But by this time it was becoming clear that Cruise was a cash drain on GM at a time when they're also rethinking a number of approaches in the company and trying to be what they call more capital efficient, which is.
- [11:23]
Ryan Knudsen
A way to tell investors we're not going to spend so much money.
- [11:27]
Chris Otts
Yeah. So every dollar they put into Cruise and other long term investments is a dollar that they don't have to share with investors.
- [11:38]
Ryan Knudsen
Over the last three years, GM has spent nearly $20 billion buying back its own shares as a way to boost its stock price. And the company has also been cutting costs.
- [11:50]
Chris Otts
GM is clearly pivoted towards more of a short term oriented focus on returning cash to investors. And clearly they've decided that they would rather save about $1 billion a year, which is what they say they're going to save by folding Cruise into the larger company.
- [12:13]
Ryan Knudsen
A GM spokesman said there was no connection between the recent surge in share buybacks and its decision to stop funding cruises. Robo taxi business.
- [12:21]
Chris Otts
One thing GM has emphasized is that a robo taxi fleet is a pretty expensive proposition. You have to own the cars and they have to sit on your balance.
- [12:33]
Ryan Knudsen
Sheet and you have to do the maintenance.
- [12:35]
Chris Otts
Right? You have to do the. I mean, GMs in the business of making cars and then selling them. And so one of the things that they've been saying is, well, you know, owning a fleet of vehicles and renting them out as taxis has is not our core business.
- [12:51]
Ryan Knudsen
While GM is pulling back on Cruise's robo taxi program, Waymo at Alphabet is still forging ahead. Chris says that's because Alphabet has several advantages in the robo taxi race. The first is money. While GM's market cap is just over $55 billion, Google's is almost $2.5 trillion.
- [13:14]
Chris Otts
For a tech company with a very generous valuation like Alphabet has, there's a lot more room to do experimentation and aspirational projects like self driving. And then the other aspect of this too is the artificial intelligence that powers the brains of these self driving cars, the cloud infrastructure that is needed to develop this AI, all of those are obviously where Google's core competencies are more aligned with this enterprise than General Motors. General Motors never got to the part where they really have the inherent advantage which is building the car.
- [14:00]
Ryan Knudsen
In other words, it seems like if You're a robo taxi company. It might be better to be owned by a tech giant than a car company.
- [14:08]
Chris Otts
Exactly. So GM is not a tech company. GM is not in the cloud business. That was another thing that they recognized in making this decision, that they don't have any special advantage when it comes to compute power and cloud infrastructure. So that sets them a little farther behind the competitors who are in this space.
- [14:34]
Ryan Knudsen
Jem says that while it's stepping back from the robo taxi business, it's still working on self driving technology for personal cars, an area the company says is a more promising business opportunity.
- [14:45]
Chris Otts
They say that everything they spent on cruise was not for naught. Like, they're still going to salvage this technology and it's going to make their personal vehicle autonomy efforts better and faster. But it's clear that it's a far, far cry from the ambitions that they had.
- [15:06]
Ryan Knudsen
If the idea that fleets of robo taxis are an existential threat to a car company, where does that leave GM if they're no longer saying that they're going to be in that business?
- [15:17]
Chris Otts
Most of the industry is stepping back from this. GM's ultimate competitor, Ford Crosstown Rival, they got out of the autonomous driving game in 2022. They were part of a startup called Argo AI and decided that that was beyond their desires and capabilities. Other automakers are also not pursuing the robo taxi business. Some auto executives, Mary Barra included, are saying things now like, people are always going to want to have their own vehicles. They're always going to want to own, you know, even if the vehicle can drive itself. Personal vehicle ownership is not going away anytime soon.
- [16:07]
Ryan Knudsen
Does this story say more about GM or about how hard it is to create a fleet of autonomous robo taxis?
- [16:16]
Chris Otts
Well, it's a harder problem than many people may have assumed several years ago, and it's definitely too soon to say that it will not happen. But, you know, certainly GM didn't see a path to commercialization in a way that made sense for them to keep investing in the idea. But again, like fundamentally, GM has for a decade been exploring different ways that it can evolve beyond being, you know, a pickup and SUV company for the United States. And this was one of the ways that they were hoping to evolve into the future. And now it's off the table.
- [17:16]
Ryan Knudsen
That's all for today. Tuesday, December 17th. The Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode by Ryan Felton, Megan Bobrowski and Mike Kalias. Thanks for listening. See you tomorrow.