Detroit OEM GM will invest $850mn into its troubled autonomous driving subsidiary Cruise as part of a new funding model which will give the company several months' runway for path back to operations following its suspension last year.
GM CFO Paul Jacobson told analysts at a Deutsche Bank auto industry conference that the latest funding would differ from the company's previous model of funding Cruise, in that it will not take the form of a single lump sum.
"I would consider to be like a step financing," Jacobson says. "So if you understand the way we had funded it before, we wanted them to have a pretty sizeable cash balance, etc. Given a lot of the repositioning that we have done and now relaunching, going forward it is kind of pay as you go."
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Deutsche Bank analyst Emmanuel Rosner characterises the changed funding model as somewhat cautious, noting that there is "a bit of a bridge until a sort of more permanent type of solution" is found for the embattled AD business.
"I think in Q1, Cruise earned maybe $700mn or so. So the amount [GM] is describing seems like it is about a quarter's worth of runway," Rosner says
Jacobson, however, says that Cruise still has sufficient cash on its balance sheet for the short term and that the renewed funding is "essentially getting them through the end of this year into Q1".
Jacobson says that this gradual funding model is preferred to allow for Cruise to continue to refine its operating procedures, after the company restarted supervised autonomous driving trials in limited cities last month.
Indeed, after the November collision which led to the revocation of Cruise's license, the company admitted fault for its lack of transparency but continued to stand by the soundness of its core robotaxi technology. The company's return to operations with supervising drivers may indicate, though, an additional acknowledgement that its AD technology may also need honing before before rushing to scale.
"This buys us time to continue to pursue our strategic review going through of how we are going to think about Cruise's future as they continue to make good progress getting back to autonomous and full autonomous driving," Jacobson says.
Ciaran has written about finance, politics and culture. He is passionate about e-mobility and what it means for our way of life.
Ciaran has a Masters in Ancient Philosophy from Oxford University.
