GM paid a lot less for Cruise Automation than everyone thought

Cruise AutomationGeneral MotorsCruise Automation CEO Kyle Vogt (center) with GM’s Dan Ammann (far right).

General Motors reported second-quarter earnings on Thursday, and they were a big beat on analysts expectations. The automaker turned in yet another profitable quarter and took in a record amount of revenue, over $40 billion, for the period.

On a conference call with reporters after earnings were released, CFO Chuck Stevens also confirmed how much GM paid for Cruise Automotive, a self-driving-car startup that the giant automaker acquired in March: $581 million.

In the second quarter, $291 million of that was paid in cash, with the balance in GM stock.

That’s a lot, but it’s far lower than the $1-billion price tag that was widely reported at the time the acquisition was announced.

GM steadfastly declined to publicly comment on the size of the deal until it was completed and the second quarter was in the books.

So it’s unclear where that $1-billion figure came from, but it wasn’t from GM.

When the Cruise acquisition was announced, we were sceptical that GM would have paid $1 billion — either in cash, stock, of some combination of both — for an obscure West Coast startup that had previously been known mainly for developing an aftermarket autonomous driving technology that worked only on Audi cars.

Cruise’s pre-acquisition valuation, based on its level of venture funding, was around $100 million. We figured that something in the $500-million ballpark from GM was at the far end of a possible price range, so we were stunned when the $1-billion number immediately began circulating.

The issue was that, if the $1 billion was correct, GM would have overnight created a Silicon Valley unicorn that nobody previously knew existed.

That said, Cruise had been funded to the tune of about $19 million by various investors, who look to have made out pretty well on the deal, even it we ultimately learned that the price GM actually paid had been greatly exaggerated.

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