GM Bets Big Bucks on Cruise Automation and a Driverless Future

According to reports in Fortune and other media outlets, GM has forked over more than $1 billion in cash and stock to acquire Bay Area startup Cruise Automation, a producer of “after-market” kits that can turn existing cars into autonomous vehicles.

If the figure is correct, that makes company co-founder Kyle Vogt a “two-time unicorn founder,” as venture capitalist Micah Rosenbloom of Founder Collective tweeted this morning. (Twitch, the live-streaming video platform popular with gamers, is Vogt’s other billion-dollar baby.) Reached by phone, a GM spokesman said “we are not confirming that figure,” referring to the value of the acquisition.

According to a press release issued by GM, Cruise will operate as an independent unit within GM’s recently formed autonomous vehicle development team led by Doug Parks, vice president of autonomous technology and vehicle execution, and will remain in San Francisco. Founded in 2013, Cruise’s investors include Spark Capital, Maven Ventures, Founder Collective, and Y Combinator.

The Cruise purchase comes just two months after GM bought ride-hailing startup Sidecar for a reported $35 million in a deal that included the startup’s intellectual property and about 20 employees. A few days after that, GM announced a strategic alliance with San Francisco-based ridesharing company Lyft to create a network of on-demand autonomous vehicles after a $500 million investment through GM Ventures. GM president Dan Ammann joined Lyft’s board as part of the deal.

Amidst this flurry of activity in January, GM also announced a new “mobility” arm called Maven, meant to build on OnStar’s 20-year legacy and staffed by former Google, Zipcar, and Sidecar employees. To start, Maven will offer car-sharing to all residents of Ann Arbor, MI, by parking 21 GM cars around the city and making them available at a starting rate of $6 per hour. It will also launch car-sharing services for a select group of Chicago residents in partnership with Magellan Development Group, expand its existing residential program with Stonehenge Partners in New York City (previously called Let’s Drive NYC), and test various car-sharing models, including peer-to-peer systems, on college campuses and in Germany and China.

So, why Cruise Automation, and why now? GM seems to be playing catch-up in terms of driverless and mobility innovations as auto executives try to plot a course for the autonomous future. In a January conference call with reporters, Ammann said the auto industry will change more in the next five years than it has in the past 50, and not just because of autonomy.

Automakers are scrambling to cope with the distaste that millennials—who now outnumber even the baby boomers—have shown for car ownership in favor of ride-sharing, public transit, and other non-traditional modes of personal transportation. The question the car companies are now contending with is how they can make money in this brave new world. Experts have long predicted that autonomous driving will likely come to market first in fleet vehicles. In GM’s case, that probably means a network of shared, autonomous vehicles that could be summoned using ride-hailing technology.

According to a statement by Mark Reuss, GM’s executive vice president of global product development, purchasing, and supply chain, “Cruise provides our company with a unique technology advantage that is unmatched in our industry. We intend to invest significantly to further grow the talent base and capabilities already established by the Cruise team.”

Vogt’s statement in the release seems to indicate Cruise is up for the challenge: “Getting there faster and achieving scale faster is what matters to us and partnering with GM delivers that,” he said.

Sarah Schmid Stevenson is the editor of Xconomy Detroit/Ann Arbor. You can reach her at 313-570-9823 or sschmid@xconomy.com. Follow @XconomyDET_AA

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