GM expects to spend $2B on Cruise in 2022

GM's CFO said on the company's first-quarter earnings call that Cruise expenses will be $2 billion this year.

Cruise and GM gave a detailed accounting of what the $2 billion would be used for. If Cruise responds to requests for more information, the article will be updated. Cruise plans to begin mass production of its Origin AV in 2023, so we can expect a good portion of the funding to go toward that end as the company ramps up plans for commercialization in San Francisco.

Cruise has not made a profit for GM. In the first quarter of this year, Cruise incurred losses of $325 million, a figure that is exclusive of the $1.1 billion in compensation expenses per Cruise employees. The cruise lost $229 million in the first quarter.

The hefty expense will eventually have a payoff according to GM. The company expects Cruise to bring in $50 billion in revenue by the end of the decade. Cruise will make progress toward commercialization this year, thanks to the expenses this year.

The company opened its operations to the public in San Francisco. Currently, it covers 70% of the city, but it hopes to be able to cover all of San Francisco in the near future. Cruise has applied for the final permit from the California Public Utilities Commission that will allow it to begin charging for services in the state.

We believe that this is going to be disruptive in the long term for personal car ownership and the short term for ride-Hailing type businesses based on early customer feedback, and right now we are focused on making sure that.

GM bought out SoftBank Vision Fund 1's equity stake in Cruise for over $2 billion last month. GM invested an additional $1.35 billion in Cruise, bringing its total stake up to 80%, which it said would provide more value for its stakeholders.

The adjusted effective tax rate was lowered by three percentage points because of the increased ownership percentage in Cruise. The automaker increased its full-year guidance by 0.25.

GM sees Cruise as a tremendous money maker in the long term, and this transaction is in line with their capital allocation priorities to invest in businesses that drive outsized growth opportunities.

This article has been updated to reflect Cruise's losses in Q1 2022.