Weekly Brief: Cruise Delivers Early Christmas Present to AV Rivals?

Commentary By Andrew Tolve

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20th December 2021

Building a robo-taxi business takes years, firing a CEO a matter of seconds.

Dan Ammann lost his job at the helm of Cruise last week in a move that few outside the business saw coming. Ammann is a respected leader whose vision has excited investors and brought Cruise to the brink of a viable robo-taxi business in San Francisco. The start-up is one regulatory approval away from full deployment and plans to launch in early 2022. Now, Ammann is out and Karl Vogt, Cruise’s founder and standing chief technology officer, will step in as interim CEO. What happened?

Ammann isn’t speaking, and General Motors, Cruise’s majority owner, isn’t saying much either. GM CEO Mary Barra has a habit of heaping effusive praise when a fellow colleague moves on to new endeavors. Last week she said nothing. GM released a statement, then pulled it from the wire so that Barra could hurriedly speak to surprised Cruise employees on speaker phone, according to anonymous reports. GM then released another statement whose mechanical tone reeked of a relationship gone sour. This is all that it said about Ammann: “General Motors Co. announced today that Dan Ammann, Chief Executive Officer of Cruise, is leaving the company. Kyle Vogt, Cruise President and Chief Technical Officer, will serve as interim CEO.”

That’s mighty terse for a man who has worked at the senior levels of GM for more than a decade. He joined in the turbulent years of the Great Recession, oversaw the automaker’s IPO in 2010 and was seriously considered for the top job alongside Barra in 2014. He subsequently spearheaded GM’s acquisition of Cruise and served as the company’s CEO starting in late 2018. His only blemish was promising to launch a fully-fledged robo-taxi service in 2019, which was born of an industry-wide over-optimism that every CEO was guilty of at the time. Cruise is currently the only company with fully autonomous test vehicles driving in California without safety operators.

Instead of saying this, GM talked about how this abrupt leadership change will allow it to accelerate its strategy for Cruise to build out GM’s autonomous vehicle platform, “as GM aggressively pursues addressable AV markets beyond rideshare and delivery”. That’s a telling statement. Ammann is a former investment banker for Morgan Stanley and made no secret that he wanted to take Cruise public. His IPO expertise was part of the reason he was placed at Cruise and his compensation was heavily incentivized around taking Cruise public, with a promised $25.6M in restricted stock.

Furthermore, he argued that an IPO would allow Cruise to attract even more talent and give it capital to rapidly expand its robo-taxi operations. GM, on the other hand, as Cruise’s majority owner, wanted to keep Cruise in-house for as long as possible and use it to anchor its development and deployment of autonomous driving services across its business, including ADAS features in customer vehicles. Ammann was amenable to working on these platforms and features but he thought the focus of Cruise’s business should be on robo-taxis, given its potential for strong profit margins and the urgency to claim market share.

I agree with him. From where I stand, it appears that GM wanted what it believes to be best for GM overall while Ammann wanted what was best for Cruise individually. As the majority owner, ultimately GM and Barra called the shots. GM’s stock plummeted almost 5% after Ammann’s sudden departure.

What does this mean for Cruise moving forward? GM will argue nothing, given that it is happy to finance the start-up and has brought other high profile investors to the table, including Walmart, SoftBank, Honda and Microsoft. There’s no shortage of investment capital, even without an IPO. Still, Ammann’s departure could mean that robo-taxi deployments will happen more slowly, as internal resources are spread across more GM-related projects. For competitors like Waymo, it must feel like Christmas came a week early.