Raphael Stevens

Culture issues, ineptitude and poor leadership at Cruise led to ongoing regulatory issues and concerns of a coverup following an October accident involving a pedestrian, according to a company probe.
Results of the investigation were published in a 105-page report, after a third-party firm interviewed 88 Cruise employees and reviewed more than 200,000 documents, including emails, texts, Slack messages and more.
The report addresses, in part, controversy that has swirled around Cruise since an Oct. 2 accident in which a pedestrian in San Francisco was dragged 20 feet by a Cruise robotaxi.

Chevrolet Cruise autonomous vehicles sit parked in a lot in San Francisco, June 8, 2023.
Justin Sullivan | Getty Images News | Getty Images

Culture issues, ineptitude and poor leadership at General Motors’ Cruise autonomous vehicle unit were at the center of regulatory oversights and coverup concerns that have plagued the company since October, according to the findings of a third-party probe.
The report addresses, in part, controversy that has swirled around Cruise since an Oct. 2 accident in which a pedestrian in San Francisco was dragged 20 feet by a Cruise robotaxi after being struck by a separate vehicle. Results of the investigation, which reviewed whether Cruise representatives misled investigators or members of the media in discussing the incident, were published Thursday in a 105-page report.

Despite the findings, which pointed to widespread issues with company culture, the third-party probe found that the evidence to date “does not establish that Cruise leadership or personnel intended to deceive or mislead regulators” during briefings a day after the accident, according to a summary of the report released by Cruise.
Cruise remains under investigation by several entities, including the U.S. Department of Justice and the U.S. Securities and Exchange Commission.
Several Cruise leaders and employees — most of whom are no longer employed by the company — attempted to show regulators a video of the incident, according to the findings, but were only able to do so in one of several initial meetings due to connection or “video transmission issues.” Although the intent to share the information had been there, the report found, the Cruise representatives subsequently failed to properly inform some regulators or officials of everything that occurred.
“The problem is that when the video froze, literally and figuratively, the Cruise employees froze in the moment, and nobody thought to speak up and fill in the detail,” a person close to the investigation told CNBC. 
Some employees also failed to update or correct company statements that omitted such information and attempted to deflect blame on the human hit-and-run driver who initially struck the pedestrian.

The report outlines multiple instances in which then-CEO and co-founder Kyle Vogt, who resigned in late November, made the final calls to withhold information, specifically regarding media.

Cruise co-founder Kyle Vogt shows off the push-button opening of the laterally opening doors on the new Cruise Origin, a fully autonomous passenger vehicle, in San Francisco, Jan. 21, 2020.
Carlos Avila Gonzalez | Hearst Newspapers | Getty Images

“This conduct has caused both regulators and the media to accuse Cruise of misleading them,” the report said. “The reasons for Cruise’s failings in this instance are numerous: poor leadership, mistakes in judgment, lack of coordination, an ‘us versus them’ mentality with regulators, and a fundamental misapprehension of Cruise’s obligations of accountability and transparency to the government and the public.”
Quinn Emanuel Urquhart & Sullivan, the business law firm that GM and Cruise retained to conduct the three-month investigation, interviewed 88 Cruise employees and reviewed more than 200,000 documents, including emails, texts, Slack messages and more.
The investigation was led by former federal prosecutor John Potter, a San Francisco-based partner and co-lead of Quinn Emanuel’s corporate investigations group. The firm is known for representing high-profile celebrities and business owners, including Tesla CEO Elon Musk.

Cruise ‘accepts’ report

Since the incident, Cruise’s robotaxi fleet has been grounded. Local and federal governments have launched their own investigations. Cruise leadership has been gutted: Its cofounders, including Vogt, resigned and nine other leaders were ousted. And the venture laid off 24% of its workforce, as well as a round of contractors.
Cruise said it “accepts” the conclusions found in the report. The San Francisco-based company, of which GM owns about 80%, said it will “act on all” recommendations and is “fully cooperating” with investigations by state and federal agencies following the Oct. 2 accident.
The company said Thursday that investigations or inquiries into the incident include those by the California DMV, California Public Utilities Commission, National Highway Traffic Safety Administration, U.S. Department of Justice and U.S. Securities and Exchange Commission.
“It was a fundamentally flawed approach for Cruise or any other business to take the position that a video of an accident causing serious injury provides all necessary information to regulators and otherwise relieves them of the need to affirmatively and fully inform these regulators of all relevant facts,” the Quinn Emanuel findings said.

A separate investigation by engineering consulting firm Exponent Inc. found the Cruise autonomous vehicle involved in the Oct. 2 incident “incorrectly classified the collision with the pedestrian as a side-impact collision, which led the AV to perform a subsequent pullover maneuver (to the outermost lane) instead of an emergency stop,” according to the report.
Exponent’s results, which also found a semantic mapping error, were consistent with Cruise’s analysis of the incident, according to the company.
Cruise said it updated the software to address the underlying issues and filed a voluntary recall with the NHTSA in November.

Future of Cruise?

Cruise vehicles remain grounded in the U.S. A source familiar with the operations told CNBC the company is “committed” to relaunching operations but is currently focused on rebuilding trust with regulators and addressing other issues outlined in the report.
Prior to the accident, Cruise was planning aggressive expansion of robotaxis outside its home market, where the majority of its vehicles operated.
Cruise, which GM acquired in 2016, was considered to be among the leaders in autonomous vehicles alongside Alphabet-backed Waymo, outlasting many other companies that have abandoned the segment.
After purchasing Cruise, GM brought on investors such as Honda Motor, SoftBank Vision Fund and, more recently, Walmart and Microsoft. However, in 2022, GM acquired SoftBank’s equity ownership stake for $2.1 billion.
GM CEO and Chair Mary Barra, who leads Cruise’s board, said in December that the Detroit automaker is “very focused on righting the ship” at Cruise. The Quinn Emanuel report does not directly reference Barra. GM is mentioned several times.
GM said in a statement the Quinn Emanuel report “confirms Cruise’s actions following the incident on October 2 were not consistent with the company’s values and fell far short of the justifiable expectations of regulators and the public.”
“We know that in order to successfully move forward, Cruise must do so in full partnership with regulators and the communities it serves. We remain committed to Cruise’s vision and know this transformative technology will ultimately save lives,” the company said Thursday. More

Arkhouse has the financing in place to take Macy’s private at a bid of $5.8 billion, managing partner Gavriel Kahane told CNBC Thursday.
But the activist investor has run into roadblocks without the department store retailer’s cooperation on due diligence.
“At this stage, based on public information, there isn’t a bank in the world that would give you committed financing, and that’s just par for the course,” Kahane said on CNBC’s “Money Movers.”

Arkhouse has the financing in place to take Macy’s private at a bid of $5.8 billion, managing partner Gavriel Kahane told CNBC Thursday, but the activist investor has run into roadblocks without the department store retailer’s cooperation on due diligence.
“At this stage, based on public information, there isn’t a bank in the world that would give you committed financing, and that’s just par for the course,” Kahane said on CNBC’s “Money Movers.” He added that management’s response in the coming days and weeks would determine how Arkhouse moved forward.

Arkhouse has previously said it would take “all necessary steps” to acquire Macy’s, including going directly to shareholders.
Kahane’s Arkhouse and Brigade Capital submitted an unsolicited bid to Macy’s management in December to take the company private at $21 a share, a premium of more than 32%. Investment bank Jefferies has provided a highly confident letter, Arkhouse has previously said, meaning the bank believes the two firms will be able to raise the capital necessary to close the deal.
Arkhouse also said it could raise its bid above the original $21-per-share offer, but only if the Macy’s management was willing to sign a mutual non-disclosure agreement and permit diligence to begin.
Macy’s board rejected that offer on Sunday, saying in part that it believes it is “highly unlikely” Arkhouse and Brigade’s proposed financing “could be successfully executed.” It also refused to enter into a non-disclosure agreement or permit diligence to move forward, with CEO and chair Jeff Gennette saying in a letter to Arkhouse and Brigade that “such an exercise would unnecessarily distract our management team.” More

Levi Strauss will lay off 10% to 15% of its global corporate workforce.
The company said the job cuts will take place in the first half of the year.

Jeans are displayed at a Levi Strauss store in New York, March 19, 2019.
Shannon Stapleton | Reuters

Levi Strauss will lay off at least 10% of its global corporate workforce as part of a restructuring, the apparel retailer said Thursday as it said it expected weaker sales this year.
The job cuts will take place in the first half of the year, and could affect up to 15% of corporate employees, Levi’s said. The company had more than 19,000 employees as of November, but it is unclear how much of that workforce is in corporate offices.

The cuts come amid a wave of early-year layoffs within the retail industry and across a range of public companies. Macy’s and Wayfair both announced job cuts this month, as both older and newer retailers try to kickstart sales and boost profits.
The company made the announcement as it reported fourth-quarter earnings and forecast a weaker than expected fiscal year ahead. Here’s what Levi’s reported compared with what Wall Street expected, according to analyst estimates compiled by LSEG, formerly known as Refinitiv:

Earnings per share: 44 cents adjusted vs. 43 cents expected
Revenue: $1.64 billion vs. $1.66 billion expected

The company said it expected revenues to rise 1% to 3% for the full fiscal year, lower than the 4.7% Wall Street anticipated. Levi’s expects earnings of $1.15 to $1.25 per share for the year, lower than analyst expectations of $1.33 per share.
Net income for the three-month period that ended Nov. 26 was $126.8 million, or 32 cents per share, compared with $150.6 million, or 38 cents per share, a year earlier
The company’s shares fell about 2% in extended trading Thursday.

Inventories during the quarter declined 9% from the prior year. Wholesales revenue saw a slight 2% decline.
In the company’s specific segments, Beyond Yoga revenue rose 14%. The denim retailer has looked to gain athleisure market share, and appointed former Athleta CEO Nancy Green as the new chief executive for the brand earlier this month.
The company’s other brands segment saw net revenue fall 11%.
This is breaking news. Please check back for updates. More

Turnover in CEO positions spiked in 2023 and jumped in the retail industry in particular.
Retail CEO departures were the second-highest they have been since Challenger, Gray & Christmas started tracking them in 2002.
Companies are rarely naming women as their new CEOs in the retail industry.

Michelle Gass, chief executive officer of Kohls Corp., at the National Retail Federation Inc. annual honors in New York, Jan. 12, 2020.
Bess Adler | Bloomberg | Getty Images

Turnover in C-suites spiked across industries last year — and in retail in particular.
Next week, new CEOs will take over at both Levi Strauss and Macy’s, from their current offices elsewhere in the companies. But turnover in corner offices goes well beyond those big names.

Last year, U.S. companies announced 55% more CEO changes than in 2022, according to outplacement firm Challenger, Gray & Christmas. The 1,914 departures in 2023 set a record since the firm started tracking the data in 2002. The firm tracks public U.S. businesses, along with private, government and nonprofit companies that have CEO positions.
“There was a lot of reticence among CEOs to leave their organizations in the middle of the Covid crisis,” said Andy Challenger, senior vice president at Challenger, Gray & Christmas. “Covid rocked retail in a really significant way. Boards didn’t want to make changes, CEOs themselves didn’t want to leave. And now as that storm has passed, I think there’s been this pent-up demand for people to leave.”
Challenger said the pandemic accelerated changes in consumer preferences, which has forced companies’ boards of directors to look for new strategies and leaders to adapt.
The retail industry in 2023 saw 52 CEO departures, its second-highest number since Challenger, Gray & Christmas started tracking them, and more than double the 21 CEO turnovers in 2022, according to the firm’s data. It was below 2019’s record 63 CEO departures in the industry.
“Retail, probably, has seen the biggest shakeup in its leadership for a long time,” Challenger said.

In Korn Ferry’s separate analysis of retail CEO turnover in 2023, the executive recruitment firm found 57% of new chief executives named in the industry last year were already working for the company they will lead. Of the 43% of external hires, 45% came from outside of retail, often in adjacent industries such as consumer packaged goods and hospitality.

Women lose corner offices in retail

Next week, Michelle Gass will officially take over as the 13th CEO of Levi Strauss in its 171-year history, and its first female chief executive. She’s just one of a handful of women named as CEO at a major retailer in 2023.
Thirteen women vacated their retail CEO positions last year, and only five women took over top jobs at companies in the sector, said John Long, retail sector lead for Korn Ferry North America.
He called the trend “surprising.”
Gass moves into the C-suite from her current position as president of the denim brand. Prior to joining Levi’s in 2022, Gass served as Kohl’s CEO and was succeeded by a man, Thomas Kingsbury.
That trajectory was common for other women taking over top retail jobs. Four of the five incoming female retail CEOs were internal appointments, according to Korn Ferry.
Despite recent progress, there are far fewer women than men in CEO positions across industries. But the percentage of female CEOs is higher across all sectors than it is in the retail industry specifically.
“When we looked at replacement CEOs [in all industries], the highest percentage of new CEOs coming in that we’ve ever tracked were women,” said Challenger. “It’s a positive number, but it’s only 28%, not even close to equity.”
Just 11% of incoming retail CEOs are women, according to Korn Ferry. Retail and consumer-facing companies are often scrutinized more for gender disparity at the highest levels, since demographic analysis shows the majority of consumers making retail purchases are women.
“A lot of the reasons for why certain CEOs get chosen for their roles has unfortunately less to do with the customer, ultimately, but has more to do with the mandate that the company is pursuing,” said Long. “So if they’re pursuing a growth mandate, or a turnaround mandate, they’re more often to look for folks that have that in their background somewhere.”
The tenure length of exiting retail CEOs is also stark when split by gender. The average tenure of all departing retail CEOs last year was 6.6 years, according to Korn Ferry’s analysis. It was 7.7 years for men and just 3.7 years for women.
Even when removing two male chief executives whose very long tenures skewed the data, the average male retail CEO tenure falls just slightly, to 6 years, still significantly longer than the average female retail CEO tenure.
A few factors may explain why women have shorter tenures as retail CEOs.
One reason some experts cite to explain shorter tenures for female CEOs is the “glass cliff” phenomenon. The theory suggests women and minorities are often elevated to higher positions when the circumstances are difficult, thereby setting them up for a higher likelihood of faster failure.
“There are systemic barriers that women face. It’s improving, but it’s nowhere close to parity … getting to 10% of female CEOs has been a real struggle,” said Lorraine Hariton, CEO of global nonprofit Catalyst, which works with companies to build better workplaces for women.
“Retail is an industry that is in flex, we know there’s a lot of struggle,” said Hariton. “When organizations are struggling, they reach out to a broader pool of candidates, but if you are coming into a struggling situation already, your likelihood of success is much lower, especially if you weren’t groomed for the job.”
That’s one part of the “glass cliff” phenomenon, according to Hariton. The other part is that “unfortunately, unconscious biases still exist.”
“How are you perceived? Are you given the benefit of the doubt?” she said.
The fact that patience for women CEOs is lower could explain the shorter average tenures.
Hariton notes women are “overpopulated” in other roles, such as general counsel, chief financial officer, human resources jobs and marketing. But seemingly, fewer companies are grooming women for CEO roles in their succession planning.
“I just look forward to a day when we don’t have to talk about this,” Hariton said. More

Shares of Humana plunged after the health insurer issued a full-year earnings guidance that was about half of Wall Street’s expectations.
The company cited soaring medical costs that dogged insurance companies last year and will likely pressure them again in 2024.
Those higher costs reflect an increasing number of older adults returning to hospitals to undergo procedures they had delayed during the pandemic, such as joint and hip replacements. 

A Humana Inc. office building in Louisville, Kentucky, Feb. 3, 2019.
Bloomberg | Bloomberg | Getty Images

Shares of Humana plummeted Thursday after the health insurer issued dismal full-year earnings guidance, citing soaring medical costs that are dogging the broader insurance industry.
Those expenses have spiked as an increasing number of older adults return to hospitals to undergo procedures they had delayed during the pandemic, such as joint and hip replacements. 

Humana, which primarily provides government-backed insurance through the Medicare Advantage program, said it expects adjusted earnings of about $16 per share for 2024. That’s a little more than half of the $29.10 per share that analysts expected, according to LSEG, formerly known as Refinitiv. 
The guidance adds to Wall Street’s concerns about health insurance company profits falling as medical costs jump. UnitedHealth on Friday also reported its own jump in medical costs, though it was less extreme than Humana’s.
Humana shares closed 10% lower Thursday.
Its forecast dragged down other health insurance stocks. Shares of both UnitedHealth and CVS Health closed around 4% and 3% lower, respectively. Cigna’s stock closed almost 2% lower, and Centene shares ended more than 2% lower.
Elevance Health closed more than 1% higher on Thursday. Unlike Humana, the insurer forecast 2024 earnings above estimates Wednesday, after higher premiums in its commercial business helped control medical costs in the fourth quarter.

Expectations for Humana’s 2024 earnings guidance were already low after the company warned last week that medical costs were running higher than expected in the fourth quarter. It signaled that higher expenses could cut into its profits in the year ahead. 
Humana confirmed that pessimism Thursday. It reported a medical benefit ratio — the percentage of payout on claims compared with premiums — of 90.7% for the fourth quarter. Analysts had estimated that the ratio would be 89.7% for the period, according to LSEG.
The insurer cited an increase in outpatient services, such as orthopedic surgeries, and in inpatient care in November and December among patients enrolled in Medicare Advantage. 
Medicare Advantage plans are privately run versions of the federal government’s Medicare program, mostly for people ages 65 and older. Those plans are one of Humana’s biggest forms of coverage outside insurance it provides for military families and retirees.
Humana posted fourth-quarter revenue of $26.46 billion, which beat analysts’ estimate of $25.42 billion, according to LSEG data. 
But the company posted a loss of $591 million, or $4.42 per share, in the fourth quarter. That compares with a loss of $71 million, or 12 cents per share, during the same period a year ago. 
Excluding certain items, Humana reported a loss of 11 cents per share. Analysts had expected the company to post earnings of 15 cents per share, according to LSEG. More

Paramount CEO Bob Bakish announced layoffs at the media company.
He did not disclose how many jobs the company would cut.
The job reductions come amid layoffs at a range of media companies, and a CNBC report that David Ellison’s Skydance Media is interested in taking Paramount private.

Paramount executive Bob Bakish attends the 2022 MTV Europe Music Awards (EMAs) at the PSD Bank Dome in Duesseldorf, Germany, November 13, 2022. 
Thilo Schmuelgen | Reuters

Paramount CEO Bob Bakish announced layoffs at the media company Thursday, citing a need to “operate as a leaner company and spend less.”
“Our priority is to drive earnings growth. And we’ll get there by growing our revenue while closely managing costs — a balance that will require every team, division and brand to be aligned,” Bakish said in a memo to employees.

“Where possible, we’ll look to expand our shared services model as we streamline operations. As it has over the past few years, this does mean we will continue to reduce our workforce globally,” he added.
Paramount did not immediately disclose how many jobs the company would cut. It also plans to reduce international content spending, Bakish said in the memo.
The company reports quarterly earnings at the end of February and plans to elaborate on its 2024 strategy then.
The cuts come as a range of companies in the media industry and beyond announce layoffs while they push to trim costs. The Los Angeles Times, Business Insider and Sports Illustrated, among others, have cut jobs in recent days in a tumultuous stretch for media.
The layoffs also come as David Ellison’s Skydance Media explores a deal to take Paramount private, CNBC reported Wednesday.

Bakish acknowledged challenges facing the company including a soft market, economic volatility, and strikes by Hollywood writers and actors that stymied studio production for much of the summer. He appeared to hint at the acquisition rumors swirling around Paramount.
“Amid all this change, it’s no surprise that Paramount remains a topic of speculation. We’re a storied public company in a closely followed industry,” he said. “But I have always believed the best thing we can do is concentrate on what we can control — execution. Leaning into what’s working, while continually adjusting to current realities.”
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Pending home sales are down 8% year over year, according to Redfin. It’s the biggest decline in four months.
Part of the decrease can be explained by severe winter weather that has sidelined potential homebuyers.

A “For Sale” sign stands outside a home following a snow fall in Geneseo, Illinois, U.S., on Monday, Jan. 20, 2020. The National Association Of Realtors is scheduled to release Existing Homes Sales figures on January 22. Photographer:
Bloomberg | Bloomberg | Getty Images

Severe winter weather is hindering home sales across the country, according to a Thursday report from real estate company Redfin.
The median U.S. home-sale price has been steadily increasing, rising around 5% in the first four weeks of January, alongside asking prices, Redfin reported. While low inventory – down 4% year over year – and increased purchasing power have contributed to the high price tags, Redfin said winter weather has also factored into sluggish sales.

Pending home sales are down more than 8% year over year, which Redfin reported as the biggest decline in four months. With potential homebuyers in areas facing severe winter weather staying home, that number has continued to climb.
The winter season has been plagued by an arctic freeze, dangerous snow and ice storms across the country and even heavy rain across drought-stricken California. The Midwest experienced near-record lows holding steady at subzero temperatures.
“Real estate is usually slow in the Midwest in the winter, but this year it’s even slower than usual because the weather has been so extreme,” Redfin agent Christine Kooiker from Michigan said in a release. “Casual house hunters are staying home to avoid the roads — but inventory is low enough that serious buyers are finding a way to see desirable homes. I also believe we’ll get busier as we approach spring.”
Real estate agents from warmer climates reported more active buyers and sellers, even with the mortgage rates stable in the high 6% range, Redfin added.
For the first month of 2024, the median home sale price was around $360,000, according to Redfin. Metros with the biggest year-over-year price increases included Anaheim, California, which saw a 13.6% jump; New Brunswick, New Jersey, at 13.5%; and Miami, Florida, at 13.3%.
Home sales in December slumped to close out the worst year since 1995, according to the National Association of Realtors. More