GM General Motors Company

New financing of over $1 billion increases value of Cruise venture to $19 billion

By Mike Colias 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 8, 2019).

General Motors Co.'s Cruise division has landed another $1.2 billion in outside financing, bringing the value of the driverless-car developer to $19 billion.

San Francisco-based Cruise said Tuesday it received an equity investment from a group of institutional investors, including mutual-fund company T. Rowe Price Associates Inc. The funding round also included current Cruise investors, including Japan's SoftBank Group Corp., Honda Motor Co. and GM, Cruise's majority owner.

GM last year set up Cruise as a separate legal entity to allow outside investors to bet on the emerging technology separate from the auto maker's core manufacturing operations. SoftBank and Honda last year each committed more than $2 billion to Cruise, which is considered among the leaders in pursuing self-driving technology.

In January, GM assigned its former president, Dan Ammann, to run Cruise as its chief executive. The San Francisco-based company has grown from a 40-employee startup acquired by GM for around $1 billion in early 2016 to more than 1,000 workers.

Cruise has said it plans to nearly double the number of employees this year as it pursues its goal of deploying a commercial robot-taxi service by the end of the year, likely in San Francisco.

"Having deep resources to draw on as we pursue our mission is a critical competitive advantage," Mr. Ammann said in a statement.

Cruise's post-investment valuation of $19 billion represents more than one-third of GM's market value of about $54 billion as of the close of trading Monday.

Traditional auto makers are confronted with having to fund bets on moonshot technologies like driverless cars while also funneling money into the capital-intensive business of developing and building traditional vehicles. They are increasingly leaning on partnerships and outside financing to fund those future investments.

Cruise continues to attract investment even as autonomous-vehicle developers have grown more cautious on their timelines to roll out the technology. Executives from auto makers and suppliers to big technology companies have begun to talk more frankly in recent months about the challenges inherent in building a car that can safely handle all driving conditions in autonomous mode.

"We overestimated the arrival of autonomous vehicles," Ford Motor Co. Chief Executive Jim Hackett said during an appearance at the Detroit Economic Club last month. The company is seeking investment for its own autonomous-development division, which is anchored by its majority stake in Pittsburgh-based Argo AI.

Uber Technologies Inc. in April said it would receive $1 billion for its self-driving-car unit from a group of investors that included SoftBank and Toyota Motor Corp., valuing the division at $7.25 billion.

GM's leadership has discussed spinning off Cruise but is unlikely to do so until the company is well along in its commercialization efforts and has proven the technology's effectiveness, according to people familiar with the planning.

Cruise is testing about 180 autonomous vehicles, mostly on the streets of San Francisco. The company has built prototypes that don't have steering wheels or brake pedals, an indication that it eventually intends to deploy the technology without a safety driver at the wheel.

Still, GM Chief Executive Mary Barra was noncommittal last week when asked by analysts whether GM would meet its target of deploying a robo-taxi service this year. She said GM likes its position relative to other players trying to commercialize autonomous cars, but wouldn't confirm a 2019 launch.

"We expect to maintain the leadership position we are in now," she said. "Safety will be the priority."

Write to Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

May 08, 2019 02:47 ET (06:47 GMT)

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