Weekly Brief: GM Cruise Upping Headcount Won’t Get It Ahead of Rivals

General Motors’ Cruise is getting serious with just nine months to go before its self-imposed deadline to launch a robo-taxi service in America.

The self-driving outfit announced last week that it will double its headcount in 2019 in the build up to that launch, growing to 2,000 by the end of the year. Most of the new hires will be engineers, the company said. It will triple its office space in San Francisco to accommodate the growth. That will include a new office building where the file-sharing company Dropbox is currently located. Not only will Cruise swipe office space from Dropbox, it’s also swiping Arden Hoffman, who oversaw the human resources side of Dropbox’s growth during the past four years. She will now head up Cruise’s HR function.

Does Cruise’s ambitious growth goals suggest that its robo-taxi service will be equally ambitious when it launches later this year? Of course not! Waymo has logged hundreds of thousands of miles more than Cruise piloting self-driving cars with fewer crashes, all of which delivered us a tiny whimper of a robo-taxi launch in Chandler, Arizona, last year. Also, let us not forget that Waymo is the disruptor here, GM the dinosaur. Traditional carmakers are famously loath to take big risks, especially when it comes to the largest carmaker in America.

So no, Cruise’s ambitious growth target on the engineering front doesn’t mean that a nationwide robo-taxi service is coming soon. It doesn’t even mean that Cruise will actually be able to grow as much as it wants to. The self-driving industry is already running low on talent these days, with companies fighting over the scraps and attempting to lure engineers from one outfit to another with obscene packages. Waymo continues to grow – Aurora just snagged $530M of start-up funding and plans to use a healthy chunk of that to recruit more engineers. Uber is attempting to bring its self-driving program back from the dead and needs more engineers to act as manual drivers. Now, add Cruise’s request for 1,000 new engineers, and you start to realize that the race for self-driving cars is as much about who gets the talent as it is about who can deploy the technology fastest.

Speaking of Uber, news leaked last week that the ride-hailing company is about to publicly file for its initial public offering, just in time to try and spoil Lyft’s IPO fun. Self-driving tech may play into how this shakes out with investors. Lyft is expected to reveal its IPO price early this week.

Industry experts expect the price to land somewhere between $20Bn and $25Bn. Once it reveals the price, Lyft will go on a two-week roadshow across America to drum up support and financial commitments from investors. That brings us back to Uber, Lyft’s rival, which plans to file its IPO papers during Lyft’s roadshow to cast a pall over the proceedings. Uber is valued at somewhere between $90Bn and $125Bn and is a far more multifaceted company than Lyft. Whereas Lyft is just in the US and focuses exclusively on ride-hailing, Uber is international and has secondary businesses in freight and food delivery. It also has a significant investment in self-driving tech, which could prove a red flag for investors.

Uber’s former CEO Travis Kalanick was convinced that self-driving tech was so essential to the future of Uber’s business that it was, in essence, the entire business in and of itself. The company planned to have 75,000 robo-taxis on the road by 2019, according to court documents released last week in connection with last year’s Waymo Uber cyber espionage lawsuit. The documents further reveal that the company was spending wildly to hit these targets, with monthly bills regularly approaching $20M. That all led to a pedestrian death in Tempe, Arizona, in 2018 and a shuttered self-driving program for six months. The program is only now getting back up on its feet with light testing in Pittsburgh. How much of a setback does that deal to Uber’s long-term value?

As a result of last year’s lawsuit, Waymo now owns 0.34% of Uber, which will represent nearly half a billion dollars when Uber goes public. That, in turn, will give Waymo yet more cash to expand its lead over Uber and others in the robo-taxi race. Should that scare investors away from Uber? Away from Lyft? All food for thought for potential investors in the coming four weeks.


One comment

  1. Chris Brown 18th March 2019 @ 5:06 pm

    In California testing, GM’s Cruise ranks second to Waymo’s in number of autonomous miles traveled and while Waymo’s rate of disengagements far outpaces the others, Cruise is second. Third and fourth place aren’t even close. “GM the dinosaur” is doing very well against these upstarts, including Aurora. This isn’t a two-man race.

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