DETROIT — General Motors Co.'s move Tuesday to halt funding for its Cruise LLC robotaxi program makes way for Silicon Valley rivals to take a firmer hold of the potentially multi-billion-dollar business. But experts say bowing out is the right choice for the embattled Cruise.

The decision to instead focus on providing autonomous technology in personal vehicles followed a year of GM trying to refocus and relaunch Cruise after an October 2023 pedestrian crash opened up the operation to scrutiny from public officials and consumers. After investing $10 billion on Cruise since 2017 and projecting in 2021 the business could collect revenue of $50 billion annually by the decade's end, executives recognized that spending the resources needed to scale the business would have been difficult in the increasingly competitive market, especially after the accident.

"This is the right decision to rip the band-aid off on Cruise as this initiative was stuck in neutral and rolling backward," said Daniel Ives, an analyst at investment firm Wedbush Securities Inc., in a statement. "It's a tough moment for GM, but they needed to cut the cord on Cruise and strategically focus on its core business."

The Cruise decision is the latest in a series of moves that demonstrate GM's focus on lowering its costs and generating better returns on its invested capital. Tuesday's Cruise news came after GM said last week that it's selling its stake in the Lansing Ultium Cells LLC joint-venture battery plant to partner LG Energy Solution and restructuring its suffering China business. In mid-November, GM laid off 1,000 salaried workers.

"In this dynamic environment, agility and capital efficiency are key success factors," GM CFO Paul Jacobson told analysts and investors following the Cruise announcement. "Our focus is on implementing this technology in a pragmatic and capital-efficient manner."

GM's autonomous future, Cruise's accident

With the robotaxi operation in the rearview mirror, GM said it's proritizing the development of its Super Cruise advanced driver assistance system with the goal of having fully autonomous personal vehicles.

The Super Cruise "hands-off, eyes-on driving feature" is offered on more than 20 GM models currently. Super Cruise is free for the first three years and then customers can sign up for a plan at $25 per month, according to OnStar's website.

"We know people everywhere love to drive their own vehicles, but not in every situation, so it makes sense to develop autonomous technology for them," GM CEO Mary Barra said on the Cruise call.

GM's plan is to combine the Cruise and GM technical teams into one to continue working on AV technology. To integrate Cruise into GM, which owns about 90% of the Cruise business, the automaker said it has agreements with other shareholders to raise its ownership stake to more than 97% and will pursue acquiring the rest of the remaining shares.

With the repurchase of the shares and Cruise's board approval, GM will work with Cruise leaders to restructure Cruise. GM expects the restructuring will lower its spending by more than $1 billion annually after the proposed plan is completed, which is expected in the first half of 2025.

In the year since the October 2023 crash in which one of the Cruise robotaxis dragged and seriously injured a pedestrian in San Francisco, Cruise has relaunched service with safety drivers in Houston, Phoenix and Dallas, hired Marc Whitten as CEO and updated its safety standards. In February, the robotaxi unit hired Steve Kenner as its chief safety officer, a role the company established after the pedestrian crash.

In the second quarter, GM executives announced the company would pause production of the Cruise Origin robotaxi at the Factory Zero Detroit-Hamtramck Assembly Center, which led to a $600 million charge. Cruise would instead focus on using Chevrolet Bolt EV AVs.

"Had the accident in San Francisco never happened, I don't think we'd be hearing this announcement today," said David Whiston, an analyst at financial services firm Morningstar Inc. "That accident forced them to put everything on pause."

The incident led regulators to scrutinize Cruise's safety standards, leading the company to suspend its services. Kyle Vogt, former Cruise CEO and founder, left the company in November 2023.

In response to GM's robotaxi decision, Vogt on Tuesday posted on X: "In case it was unclear before, it is clear now: GM are a bunch of dummies."

But since the accident, Cruise had been trying to make progress on reentering the robotaxi business. In August, Cruise and Uber Technologies LLC announced a multiyear deal for customers to book autonomous Cruise robotaxis through the Uber platform starting in 2025.

When asked about the Uber deal on Tuesday, Barra said: "Those are issues that have to be worked out from a Cruise perspective."

And the self-driving services that Cruise has launched over the last year have been paused, according to a person familiar with the matter.

The competitive robotaxi business

Tuesday's announcement officially ends Cruise’s battle with Waymo — a subsidiary of Google’s parent company, Alphabet — for supremacy atop the nascent robotaxi industry. For a time, Waymo and Cruise were close competitors.

Waymo was valued at about $30 billion during a fundraising round in 2020, and Cruise reached a similar valuation the following year, according to CNBC. But problems at Cruise over the next several years tested GM's commitment to a venture far outside its core business, culminating in the decision to abandon robotaxi plans altogether.

Even with GM’s exit, there is still significant competition on the horizon for Waymo as tech companies see long-term promise for driverless ride-hailing.

Zoox, an Amazon.com Inc. subsidiary, has robotaxis operating in San Francisco and Las Vegas. Tesla Inc. CEO Elon Musk has also said that the EV giant plans to join the robotaxi business, unveiling its Cybercab at an event in October.

But GM isn't the first to recognize the difficulties of the robotaxi business. Crosstown rival Ford Motor Co. and Volkswagen AG in October 2022 made the decision to absorb their AV partner, Argo AI.

"Mary and her team are in a tough spot because if they stay with it, then you've got $2 billion-plus in annual losses year after year. And then they have to keep fielding questions of, 'When are you scaling? What's the cadence of this? Why are you going to turn a profit?'" Whiston said.

"It's probably not an unsafe move, provided robotaxis don't destroy the need to have personal vehicle ownership. But I think, as a society, we're quite a ways off from that happening."

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