GM Stock Down 13.5% From Recent Highs – What’s The Latest on Cruise?

General Motors stock price (NYSE: GM) has been pulling back in recent days, with a 13.5% retracement from the end of November highs. Now as the firm announces its decision to withdraw from its Cruise robotaxi business, we take a look at why the move was in fact welcomed by many on Wall Street.

Originally, Cruise was anticipated to be a major revenue generator, with forecasts estimating a $50 billion contribution by 2030. However, the high level of investment required in an increasingly competitive sector compelled GM to reconsider its position.

GM's strategic decision was influenced by the need to address substantial financial and regulatory challenges. The company had invested approximately $10 billion into Cruise before deciding to wind down the robotaxi operations. k movement, initially rising by 3% post-announcement before settling down with a 1.3% decrease by market close.

The closure reflects broader strategic adjustments within GM. This includes integrating some of Cruise's talent into the development of driver assistance systems, further honing the company's focus on strengthening other automotive sectors. The decision has raised a few questions about GM's management credibility, particularly against the backdrop of regulatory delays and relationship issues cited by GM CEO Mary Barra as contributing factors to Cruise's underperformance.

Additionally, Cruise came under scrutiny due to a robotaxi accident in San Francisco in October 2023, with the company admitting to filing a false report and agreeing to a $500,000 penalty.

This exit is part of a larger shift for GM, which includes scaling back its electric vehicle (EV) plans, selling a stake in a battery plant, and reporting significant losses in the Chinese market, amounting to $5 billion. GM is now channeling efforts towards gasoline-powered pickup trucks and larger vehicles. Despite these setbacks, the company is projecting earnings between $14 and $15 billion for 2024, with a continued engagement in China through its Buick and Cadillac brands.

Wall Street analysts note that successful ventures in the robotaxi market typically require backing from entities with robust earnings. GM's decision to exit underscores its strategic pivot, focusing on robust sectors and mitigating losses from high-risk ventures like Cruise.