In a new note out from Deutsche Bank, analyst Edison Yu argues that the pivot from Cruise opens the door for more buybacks and a renewed focus on end to end AI in its vehicles.
Yu highlighted GM's announcement to integrate Cruise with its core operations, projecting annual cost savings exceeding $1 billion, on top of its prior guidance for steady EBIT in 2025.
While it remains unclear if the 2025 outlook has shifted, Yu believes the move will be welcomed by investors as GM can reallocate resources to its aggressive share buyback plan, aiming to reduce share count below 1 billion by early 2025, and prioritize investments in Level 3+ and Level 4 autonomy, which have quicker monetization potential.
Yu also noted GM's pivot in Cruise’s technology strategy, with the company now leveraging end-to-end AI models rather than its earlier rules-based approach, signaling a significant evolution in its autonomous vehicle efforts.
Yu commented on GM's decision to acquire the remaining 10% of Cruise and integrate its development under GM's operations.
The move shifts focus from costly robotaxi commercialization to advanced driver-assistance systems (ADAS), like Level 3 autonomy for consumer vehicles. GM cited the high cost of scaling robotaxis, potentially in the tens of billions, as a key reason for the pivot, deeming it a poor risk/reward investment.
GM aims to complete the restructuring by early 2025, leading to annual savings of over $1 billion, reducing Cruise's current $2 billion spend.
Yu noted that while GM's 2025 guidance for flat EBIT hinges on reducing EV losses by $2–$4 billion, the additional savings provide a significant cushion for potential shortfalls. From a valuation perspective, Cruise’s optionality was already discounted by most investors. The lower cash burn enables GM to enhance its aggressive share buyback strategy, with plans to complete its $6 billion authorization by early 2025, reducing its share count below 1 billion.
The note can be found in the usual place for premium subscribers.
