Microsoft Expects $800 Million Impairment Charge Due To GM's Cruise Exit, Analyst Says It's A 'Step In The Right Direction' For Automaker

Microsoft Corp. (NASDAQ:MSFT) has said that it will be recording an impairment charge of approximately $800 million in the second quarter of fiscal year 2025, according to an SEC filing. This follows General Motors (NYSE:GM) exit from funding Cruise‘s robotaxi development.

What Happened: General Motors, on Tuesday said that it will no longer fund Cruise‘s robotaxi development but will instead combine the majority-owned unit into its technical teams.

Microsoft announced in January 2021 that it held a minority investment in Cruise, an autonomous vehicle company that is a majority-owned subsidiary of General Motors.

According to Microsoft the impairment charge “Will be recorded in other income and expense and was not included in our second quarter guidance provided on Oct. 30, 2024. It is estimated to have a negative impact of approximately $0.09 to second quarter diluted earnings per share.”

General Motors said that the robotaxi development work needs considerable time and resources to scale while adding that the robotaxi market is getting increasingly competitive. The company will now focus on developing its driver assistance technology called Super Cruise which requires active driver supervision, the company said.

See Also: GM’s Cruise Exit Draws Sharp Reaction From Co-Founder Kyle Vogt: Tesla CEO Elon Musk Says Autonomous Driving Is A ‘Very Hard Problem’

Why It Matters: Bank of America analyst John Murphy believes General Motors' recent decision to prioritize personal autonomous vehicles (AVs) over robotaxi fleets signals a strategic shift, according to a Reuters report. Murphy argues that GM's confidence in the potential of personal AVs stems from the significant capital investment and operational challenges associated with scaling robotaxi fleets.

Garrett Nelson, an analyst at CFRA Research, echoed this sentiment, stating that investors were growing impatient with GM's substantial $10 billion investment in robotaxi development, which had yielded limited tangible results. “We consider the news a step in the right direction for GM, as we think investors were losing patience with its hefty spending (~$10B) related to robotaxi development with very little to show for its investment,” reported Reuters.

Elon Musk, Tesla CEO said, "Achieving a general solution to autonomy is a very hard problem, especially doing so without making the car super expensive, suggesting that achieving a cost-effective general solution is a significant challenge. Tesla is focused on enabling autonomous driving through its full self-driving software.

Former Cruise CEO Kyle Vogt, who left the company following an accident involving one of its robotaxis, took to X to criticize GM’s decision, labeling it as a misguided move.

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