Microsoft to Report $800M Loss from Cruise Robotaxi Shutdown

Impact of GM's Cruise Shutdown on Investors

The ramifications of General Motors’ (GM) decision to halt its Cruise robotaxi program are now being felt by the company’s minority stakeholders. This action is triggering financial adjustments for those who previously invested in the self-driving car venture.

Microsoft's Impairment Charge

Microsoft, having made a significant investment in Cruise back in 2021, is set to recognize an $800 million impairment charge. This is a direct consequence of GM’s recent actions regarding its robotaxi division, as detailed in a regulatory filing.

The charge will be reflected within Microsoft’s other income and expense category. It wasn't factored into the company’s second quarter guidance, which was issued on October 30, 2024. The filing indicates an anticipated reduction of approximately $0.09 in second quarter diluted earnings per share.

GM's Increased Ownership

GM currently holds approximately 90% ownership of Cruise. The automaker is actively pursuing agreements to repurchase shares from other minority shareholders. This move aims to increase GM’s ownership stake to over 97%.

Previously, GM sought substantial capital to facilitate the public deployment of robotaxis. To this end, the company brought on a diverse group of external investors, including Microsoft, Walmart, Softbank, T. Rowe Price, and Honda.

Past Funding Rounds and Valuation

In January 2021, Cruise secured $2 billion in funding. This round included investments from Microsoft, alongside GM and its partner, Honda. The infusion of capital elevated Cruise’s valuation to $30 billion.

A long-term strategic partnership was also established between the two companies. This collaboration outlined plans for Cruise to leverage Azure, Microsoft’s cloud and edge computing platform, to power its autonomous vehicle ride-hailing service.

GM's Strategic Shift

General Motors announced on Tuesday a change in direction. The company will cease further funding for the robotaxi’s development. Instead, Cruise will be integrated back into GM and its resources will be focused on enhancing driver assistance features and, ultimately, developing fully autonomous personal vehicles.

GM initially acquired the self-driving startup Cruise in March 2016 for $1 billion. Since the acquisition, the automaker has invested over $10 billion in an effort to commercialize autonomous vehicle technology through a robotaxi business model.

Honda's Response

Honda, as a minority investor, announced on Wednesday its decision to discontinue funding for a joint venture with General Motors and Cruise. This venture was intended to launch a robotaxi service in Japan.