5 ms·

GM paid less for Cruise Automation than was reported

47 points by argonaut 10y ago

Animats 10y ago
Still, $581 million is a lot for a technology inferior to what GM already had through their Cadillac/CMU deal.[1] [1] https://www.washingtonpost.com/local/trafficandcommuting/driverless-vehicles-even-in-dc-streets-an-autonomous-car-takes-a-capitol-test-run/2014/08/25/6d26baa8-06a4-11e4-8a6a-19355c7e870a_story.html https://www.washingtonpost.com/local/trafficandcommuting/dri...
- jayjay71 10y ago
  I am still amazed that GM managed to lose that IP to Delphi. It was amazing tech (I worked on it).
  - Animats 10y ago
    Me too. Delphi (which used to be part of GM) is now using Audis. San Francisco to New York via LA and Washington, 99% on automatic.[1] That's way ahead of Cruise. How did GM screw that up? Delphi used to be part of GM, and is still a major supplier. The latest from Cruise is them hitting a parked car at 20MPH on 7th St. in SF.[2] [1] http://delphi.com/delphi-drive http://delphi.com/delphi-drive [2] https://www.dmv.ca.gov/portal/wcm/connect/bc21ef62-6e7c-4049-a552-0a7c50d92e86/Cruise_Automation_01.08.16.pdf?MOD=AJPERES https://www.dmv.ca.gov/portal/wcm/connect/bc21ef62-6e7c-4049...
    - jayjay71 10y ago
      Don't forget GM also funded the winning team of the DARPA Urban Challenge in 2007, and then let the majority of talent go to Google. Stanford's entry Stanley came in 2nd and is at the Smithsonian National Air and Space Museum. CMU's entry Boss came in 1st and was left in a garage/workspace and (partially) stripped for parts.
      - jayjay71 10y ago
        I actually made a mistake. Stanley was the winning entry in the 2005 DARPA Grand Challenge. Junior was the 2nd place winner in the 2007 Urban Challenge.
dpiers 10y ago
The number listed does not include the golden handcuffs/employee retention bonuses. Given that this was an acquihire, an additional $400MM in bonuses paid out over the next few years is plausible. Especially given that unvested employee grants are included in the non-disclosed employee retention side of the arrangement.
- argonaut 10y ago
  I don't think it's plausible. Sure, it is common for the majority of payouts in acquihires that are in the $1M-$50M range to be through handcuffs. When a company is acquired for $600M, that is not an acquihire, and I would be very surprised if retention payments for such a small number of employees totaled $400M. I would be happy to be corrected, if someone has heard of situations where small acquired companies had such large golden handcuffs.
theoracle101 10y ago
From an accounting standpoint yes, but in reality they paid about $1B. Half was directly for the company, the other half was golden handcuffs. They are choosing to allocate the second to operating expenses and not acquisitions. To the employees of Cruise, still feels like a sweet billion. For once investors got less and employees got more, which is a refreshing change
- argonaut 10y ago
  Do you have inside knowledge we're unaware of? Otherwise it's hard to say "in reality...." $1B is plausible, but much more questionable given this article.
  - mikeyouse 10y ago
    Dan Primack wrote a clarifying article yesterday: https://www.google.com/amp/amp.timeinc.net/fortune/2016/07/21/more-on-what-gm-paid-to-buy-cruise-automation/%3fsource=dam# https://www.google.com/amp/amp.timeinc.net/fortune/2016/07/2... The key part: because GM GM is being very narrow in how it describes the deal value. The $581 million (or $600 million, whichever you prefer) is the cash and stock that actually went out the Detroit doors during GM’s second fiscal quarter. Not included were a variety of other things, including cash still being held in escrow, expected earn-out payments, employee retention packages and other expected employee compensation (particularly for those with unvested shares at the time of acquisition).
    - argonaut 10y ago
      Yes, but I find a $400M retention package to be highly implausible. We're talking the kind of compensation that Google/Facebook would spend to retain 40 top executives.
    - gumby 10y ago
      That seems unlikely, as GAAP would require reserving that amount on the balance sheet and typing it to the acquisition. What Primack describes would be like buying a house and claiming its price is what you paid as the down payment.
sulam 10y ago
I think it's hilarious that the main thrust of this article is that "omg, there might be a unicorn we hadn't heard of!!!" As if a company undergoes some significant change when its paper valuation passes $1B. Honestly, $600M or $1000M, for a tiny company is a great exit, and having or not having a silly mythical creature label doesn't affect that.
- avs733 10y ago
  don't question the narratives. The narratives must be respected. The narratives protect us. The narratives know what is best for us. The narratives love us.
malz 10y ago
The media unquestioningly reported the $1 billion number. This article at least admits "it's unclear where that $1 billion figure came from", but where's the shame about being manipulated into reporting completely made-up numbers?
rmason 10y ago
Related side note: George Hotz from Comma.ai was interviewed by Jason Calacanis for this week in startups and he trashed the Cruise Automation deal. He said they were too secretive and hinted they did not have very good technology. http://thisweekinstartups.com/george-hotz-commaai/ http://thisweekinstartups.com/george-hotz-commaai/
- theoracle101 10y ago
  How can he claim they have poor tech & be secretive at the same time? Within SDC circle, Hotz's company so far has shown some pretty poor demos. Really poor. I guess the salesmanship will him raise more $$ but its founded in anything but reality

47 points by argonaut 10y ago

Still, $581 million is a lot for a technology inferior to what GM already had through their Cadillac/CMU deal.[1] [1] https://www.washingtonpost.com/local/trafficandcommuting/driverless-vehicles-even-in-dc-streets-an-autonomous-car-takes-a-capitol-test-run/2014/08/25/6d26baa8-06a4-11e4-8a6a-19355c7e870a_story.html https://www.washingtonpost.com/local/trafficandcommuting/dri...

jayjay71 10y ago
I am still amazed that GM managed to lose that IP to Delphi. It was amazing tech (I worked on it).
- Animats 10y ago
  Me too. Delphi (which used to be part of GM) is now using Audis. San Francisco to New York via LA and Washington, 99% on automatic.[1] That's way ahead of Cruise. How did GM screw that up? Delphi used to be part of GM, and is still a major supplier. The latest from Cruise is them hitting a parked car at 20MPH on 7th St. in SF.[2] [1] http://delphi.com/delphi-drive http://delphi.com/delphi-drive [2] https://www.dmv.ca.gov/portal/wcm/connect/bc21ef62-6e7c-4049-a552-0a7c50d92e86/Cruise_Automation_01.08.16.pdf?MOD=AJPERES https://www.dmv.ca.gov/portal/wcm/connect/bc21ef62-6e7c-4049...
  - jayjay71 10y ago
    Don't forget GM also funded the winning team of the DARPA Urban Challenge in 2007, and then let the majority of talent go to Google. Stanford's entry Stanley came in 2nd and is at the Smithsonian National Air and Space Museum. CMU's entry Boss came in 1st and was left in a garage/workspace and (partially) stripped for parts.
    - jayjay71 10y ago
      I actually made a mistake. Stanley was the winning entry in the 2005 DARPA Grand Challenge. Junior was the 2nd place winner in the 2007 Urban Challenge.

dpiers 10y ago

The number listed does not include the golden handcuffs/employee retention bonuses. Given that this was an acquihire, an additional $400MM in bonuses paid out over the next few years is plausible. Especially given that unvested employee grants are included in the non-disclosed employee retention side of the arrangement.

argonaut 10y ago
I don't think it's plausible. Sure, it is common for the majority of payouts in acquihires that are in the $1M-$50M range to be through handcuffs. When a company is acquired for $600M, that is not an acquihire, and I would be very surprised if retention payments for such a small number of employees totaled $400M. I would be happy to be corrected, if someone has heard of situations where small acquired companies had such large golden handcuffs.

theoracle101 10y ago

From an accounting standpoint yes, but in reality they paid about $1B. Half was directly for the company, the other half was golden handcuffs. They are choosing to allocate the second to operating expenses and not acquisitions. To the employees of Cruise, still feels like a sweet billion. For once investors got less and employees got more, which is a refreshing change

argonaut 10y ago
Do you have inside knowledge we're unaware of? Otherwise it's hard to say "in reality...." $1B is plausible, but much more questionable given this article.
- mikeyouse 10y ago
  Dan Primack wrote a clarifying article yesterday: https://www.google.com/amp/amp.timeinc.net/fortune/2016/07/21/more-on-what-gm-paid-to-buy-cruise-automation/%3fsource=dam# https://www.google.com/amp/amp.timeinc.net/fortune/2016/07/2... The key part: because GM GM is being very narrow in how it describes the deal value. The $581 million (or $600 million, whichever you prefer) is the cash and stock that actually went out the Detroit doors during GM’s second fiscal quarter. Not included were a variety of other things, including cash still being held in escrow, expected earn-out payments, employee retention packages and other expected employee compensation (particularly for those with unvested shares at the time of acquisition).
  - argonaut 10y ago
    Yes, but I find a $400M retention package to be highly implausible. We're talking the kind of compensation that Google/Facebook would spend to retain 40 top executives.
  - gumby 10y ago
    That seems unlikely, as GAAP would require reserving that amount on the balance sheet and typing it to the acquisition. What Primack describes would be like buying a house and claiming its price is what you paid as the down payment.

sulam 10y ago

I think it's hilarious that the main thrust of this article is that "omg, there might be a unicorn we hadn't heard of!!!" As if a company undergoes some significant change when its paper valuation passes $1B. Honestly, $600M or $1000M, for a tiny company is a great exit, and having or not having a silly mythical creature label doesn't affect that.

avs733 10y ago
don't question the narratives. The narratives must be respected. The narratives protect us. The narratives know what is best for us. The narratives love us.

malz 10y ago

The media unquestioningly reported the $1 billion number. This article at least admits "it's unclear where that $1 billion figure came from", but where's the shame about being manipulated into reporting completely made-up numbers?

rmason 10y ago

Related side note: George Hotz from Comma.ai was interviewed by Jason Calacanis for this week in startups and he trashed the Cruise Automation deal. He said they were too secretive and hinted they did not have very good technology. http://thisweekinstartups.com/george-hotz-commaai/ http://thisweekinstartups.com/george-hotz-commaai/

theoracle101 10y ago
How can he claim they have poor tech & be secretive at the same time? Within SDC circle, Hotz's company so far has shown some pretty poor demos. Really poor. I guess the salesmanship will him raise more $$ but its founded in anything but reality