GM boss Mary Barra’s high-tech bet unraveling after Kyle Vogt departs as CEO of embattled Cruise robotaxi unit

General Motors chief executive Mary Barra’s dreams of fostering promising young tech startup Cruise into a future cash cow for GM are turning to smoke following the departure of its founder and CEO, Kyle Vogt.

His stunning fall from grace serves as a warning to Tesla CEO Elon Musk and Silicon Valley writ large of just how quickly trust and goodwill among the public can evaporate when it comes to artificial intelligence.

Only four months ago, Cruise and its rival Waymo received the go-ahead to offer their services in San Francisco around the clock, in a victory for the fledgling industry.

“I plan to spend time with my family and explore some new features,” Vogt posted on Sunday in a thread, scrupulously avoiding to a fault any mention of the Oct. 2 incident that sparked the move. 

That evening, his company became involved in a hit-and-run accident after a pedestrian struck by a human-operated car was propelled into the oncoming path of a Cruise robotaxi that accidentally pinned her underneath.

Even though the driver, who fled the scene and remains at large, shoulders much of the blame, Vogt’s company had already in the doghouse after another of his vehicles collided with a fire truck in August. 

Cruise, whose fleet had subsequently been cut in half, then multiplied its problems by omitting key facts around the Oct. 2 accident, according to California officials. This prompted the state’s department of motor vehicles to revoke its licenses and suspend its fleet.

In the aftermath, Cruise grounded its entire fleet of robotaxis to earn the public’s trust again. That now leaves Google’s Waymo as potentially the last man standing in the U.S., after Ford pulled the plug on Cruise rival Argo AI late last year

By comparison, Musk has shrewdly avoided any temptation to move beyond beta-testing his autonomous cars by insisting customers at all times supervise his Full Self-Driving feature. Instead, he hopes they can train his neural net using 500 million miles of real-world data scraped from his fleet. 

If successful, it could process visual data directly onboard with almost no need for coded commands or expensive sensor suites, leapfrogging the industry in the process. Failure however could be catastrophic with over 400,000 cars currently equipped to run FSD beta.

Billions of dollars in losses so far and Cruise is ‘just getting started’

For Barra, the crisis at Cruise appears to have the makings of a disaster. 

Detroit’s auto industry already labors under the Wall Street stigma of being an old economy has-been, whose first instinct when dealing with disruptive technology is to shut it down, as GM famously did in the late 90s with the EV1 electric vehicle. 

Cruise was Barra’s biggest bet yet on Silicon Valley, with GM snapping up a whopping 80% of the innovative startup. This investment offered her century-old carmaker the chance to finally be viewed as a disruptive tech company with valuation multiples more akin to buzzy software companies than those of a lowly metal-bender beset by a meddlesome unionized workforce.

Vogt’s company was so important to GM’s equity story that he was a constant presence in investor calls and even growth stock guru Cathie Wood bought shares in GM to gain exposure to Cruise.

Barra is now faced with the conundrum about what to do about Cruise. The company’s losses soared to $1.9 billion in the first nine months of 2023, well worse than the $1.36 billion in the previous year’s period. The big question for investors is how long it will continue to burn cash and how much more capital GM needs to infuse it with just to keep Cruise afloat. 

The suspension of its operations already pushed out its timeline for hitting revenue targets, and GM recently opted to appoint one of its own, Craig Gilden, to act as a kind of baby sitter and exercise greater oversight.

Neither GM nor Cruise could be reached immediately by Fortune for comment.

For Vogt, however, the problem is no longer his to solve but he put on a brave face while making his goodbye from a self-driving startup he first founded in—where else?—a garage.

“Cruise is still just getting started, and I believe it has a great future ahead,” he wrote. “I’m thrilled to see what Cruise has in store next.”

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