Cruise announces layoffs after GM said it was slashing driverless spending

Cruise, the self-driving unit of General Motors, will lay off nearly a quarter of its employees, or 900 workers, after grounding its fleet in response to an incident in which a hit-and-run victim became pinned under a Cruise vehicle and then was dragged 20 feet to the side of the road.

After the incident, the California Department of Motor Vehicles suspended Cruise’s permit to operate driverless cars in the state. The company then grounded its entire fleet nationwide. (It had vehicles in Arizona, Texas, and Florida as well.) In response to the pause in operations, GM said it would reduce spending on Cruise and appoint its own executives to oversee the company.

In response, several top executives have left the company, including co-founder and CEO Kyle Vogt and chief product officer Dan Kan. Nine more executive were dismissed yesterday, including chief legal and policy officer Jeff Bleich and senior vice president of government affairs David Estrada.

Following the resignation of Vogt, Mo Elshenawy, the company’s VP for engineering, was promoted to president and chief technology officer. In a memo to employees today, Elshenawy struck a sober tone.

“We knew this day was coming, but that does not make it any less difficult—especially for those whose jobs are affected,” he wrote.

Today, we are making staff reductions that will affect 24% of full-time Cruisers, through no fault of their own. We are simplifying and focusing our efforts to return with an exceptional service in one city to start with and focusing on the Bolt platform for this first step before we scale. As a result, we are reducing our employee counts in operations and other areas. These impacts are largely outside of engineering, although some Tech positions are impacted also. As you might have learned, yesterday, we took action to part ways with several SLT members.  

Affected employees were primarily in the company’s commercial operations division, as well as related corporate functions, a spokesperson said. She added that the company’s top priority was to “do right” by these departing workers.

Those who were laid off will remain on payroll through February 12th and are eligible for an additional eight weeks of pay. Long-term employees are being offered an additional two weeks’ pay per every year at Cruise over three years. Everyone will receive an end-of-the-year bonus, as well as extended medical and dental coverage, immigration support, and other benefits. The full memo was posted on Cruise’s website.

Cruise has said it will eventually relaunch its driverless ridehail operations in just one city. The company will also “prioritize” the Chevy Bolt platform it uses for its fleet, indicating that production of its Origin shuttle without steering wheel and pedals will remain indefinitely paused.

It’s been a tumultuous seven years since GM first announced its plan to acquire Cruise with the goal of rapidly commercializing the technology. The company has scored some significant victories in recent months, including a vote in California to allow it to operate its driverless robotaxi service 24/7 — only to see most of that progress evaporate after a series of errors have exposed major problems with Cruise’s management. 

The October 2nd crash has thrown the company into crisis mode. In the aftermath, the company hired two outside law firms to review Cruise’s safety protocols as well as determine whether Cruise purposefully withheld video footage from the California DMV of its driverless vehicle dragging the hit-and-run victim to the side of the road. The company issued a voluntary recall of all 950 Cruise vehicles earlier this month to update the software to prevent similar incidents in the future.

GM is also putting its own people in place to keep a closer eye on Cruise. Craig Glidden, the automaker’s executive vice president of legal and policy and a Cruise board member, will serve as a president and continue as chief administrative officer. Jon McNeill, who joined the Cruise board last month, has been appointed vice chairman of the board, serving alongside GM CEO Mary Barra.

GM has lost $8.2 billion on Cruise since 2017 but expects to lose much less going forward. In a recent call with investors, the automaker didn’t share specific cash reductions, but chief financial officer Paul Jacobson said it would likely amount to “hundreds of millions” of dollars.

But GM isn’t ready to pull back completely from self-driving technology like some of its competitors. In an interview in Washington, DC, yesterday, Barra said that fully driverless cars will scale faster than a lot of people think.

“Some of the challenges we just faced, I think, it was more not working with the regulators to help them understand the technology and then being transparent as issues happen,” she said. “But the technology had already been evaluated by a third party to say it’s already safer than a human driver.”

Update December 14th 12:55PM ET: GM slashing spending on Cruise was the result of the pause in driverless operations. The layoffs were the result of the pause, not the reduction in spending. This story has been updated to better reflect that fact.