- GM revealed a substantial, equity-centric compensation package for Dan Ammann, former president and now CEO of Cruise, GM’s self-driving division.
- Cruise’s valuation has increased from roughly $US1 billion in 2016 to $US14.6 billion in 2019, following investments from SoftBank and Honda.
- Ammann’s package set off a round of premature speculation about a Cruise IPO.
It wasn’t really news, but it was some hard numbers.
This week, General Motors filed its annual 10-K report with the Securities and Exchange Commission and detailed a new compensation package for Dan Ammann, the automaker’s former president who last year took over as CEO of Cruise, GM’s self-driving car division.
“On February 4, 2019, the Compensation Committee of the Board of Directors (Cruise Board) of GM Cruise Holdings granted [restricted stock units] for 16,914 GM Cruise Common Shares and stock options for 101,485 GM Cruise Common Shares to Dan Ammann under the GM Cruise Holdings 2018 Employee Incentive Plan,” the filing read.
It didn’t take long for speculation about a potential IPO or Cruise spinoff/sales to intensify. This is understandable as Cruise has been attracting a lot of outside investment, especially from Japan’s SoftBank Vision Fund and Honda. The obscure San Francisco startup, which GM acquired in 2016 for an all-in price of around $US1 billion, is now valued at $US14.6 billion.
Ammann’s package certainly implies some sort of future, lucrative liquidity event, but the road from here to there could be long. An IPO, for example, isn’t likely to be announced anytime soon – and that’s because Ammann himself thinks Cruise could be worth a lot more than it is now.
“To have SoftBank come in and make that bet tells you something about what they see in terms of the opportunity, because they are not investing in an $US11-billion valuation to see it go to $US13 billion,” Ammann told Business Insider in an interview last year, prior to the announcement of the Honda stake.
Equity for talent
Additionally, Ammann’s vesting schedule stretches to 2028, and Cruise is currently losing money: $US700 million in 2018, with another $US1 billion queued up in 2019 (GM made almost $US12 billion on a non-GAAP basis in 2018, so the company can afford losses on Cruise as the division pushes for a commercial rollout this year).
Somewhat lost in the chatter about an IPO or a sale was GM’s logic in setting up Cruise as a separate holding and designing a very Silicon Valley-style compensation structure. GM’s stock is valuable, but it probably won’t increase by a factor of almost 40 in the next decade (GM is now trading at about $US40, but Ammann’s payout would be based on a strike price of around $US1,500 per share for Cruise equity).
The grant is also all-or-nothing; if Ammann doesn’t meet targets, he gets nothing. He’s also off the GM short-term incentive plan, now that he’s no longer president of the holding company. He is drawing a salary, so he’s not going to be a $US1-a-year CEO.
Cruise’s finances have been on Ammann’s mind ever since the division entered its current expansion – which makes sense, given his background as an investment background and former GM CFO.
“For the Cruise team, this creates some equity currency that we can use to attract talent, and that’s a big deal and a big part of why we did it,” he said of the SoftBank investment last year.
In this respect, Ammann’s package is a good example of what new talent at Cruise can expect: a significant potential reward for taking on serious risk.
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