Raphael Stevens

Next year is shaping up to be another pivotal year for weight loss drugs, which skyrocketed in popularity despite hefty price tags, mixed insurance coverage and some unpleasant side effects. 
Investors will be watching to see how Eli Lilly and Novo Nordisk navigate the ongoing supply issues plaguing their treatments.
Those two companies and other drugmakers hoping to join the weight loss drug market are also expected to release crucial clinical trial data.

George Frey | Bloomberg | Getty Images

Weight loss drugs exploded into the public eye this year, and 2024 will bring more change to the evolving market. 
The drugs skyrocketed in popularity in 2023 as they helped patients shed significant weight, despite hefty price tags, mixed insurance coverage and a handful of unpleasant side effects. 

Demand for the drugs is unlikely to slow down in 2024, especially as treatments gradually become more accessible. Much of Wall Street believes the weight loss drug market will only expand, with some analysts projecting that it will be worth $100 billion by the end of the decade. Goldman Sachs analysts expect 15 million U.S. adults to be on obesity medications by 2030.
But next year, investors will be watching how the dominant players in the market, Novo Nordisk and Eli Lilly, navigate supply issues plaguing their treatments. Patients have been struggling to get their hands on Novo Nordisk’s weight loss injection Wegovy, its diabetes treatment Ozempic, and Eli Lilly’s diabetes injection Mounjaro.
Analysts expect supply constraints to improve but note that the broader issue will take years to resolve. 
Outside of supply headwinds and the lack of broader insurance coverage for weight loss drugs, Novo Nordisk and Eli Lilly have a big year ahead of them. 
Novo Nordisk could win approvals for expanded use of Wegovy in the U.S. and Europe. Eli Lilly’s newly approved weight loss drug, Zepbound, could garner more than a billion dollars in sales in its first year on the market.

Both companies are also expected to release new data that could show other potential health benefits of their drugs beyond weight loss and diabetes management, which may increase insurance coverage down the line. 
Next year may mean even more to the other companies hoping to join what’s so far been a two-horse race to make weight loss treatments.
New drug data from Pfizer and Amgen, and the potential for more buyouts or collaborations between larger companies and smaller makers of obesity drugs, could alter the market’s competitive landscape in the coming months.

Supply issues could ease but won’t go away

The supply problems plaguing Wegovy, Ozempic and Mounjaro are likely “the biggest thing” investors will watch next year, Guggenheim analyst Seamus Fernandez told CNBC. 
Some analysts said supply constraints will likely persist for years, but expect them to ease in 2024 as Novo Nordisk and Eli Lilly work to expand manufacturing capacity for their drugs. 

George Frey | Reuters

Novo Nordisk during its third-quarter earnings call in November said it is “looking at significantly scaling our supply” of Wegovy in the U.S. in 2024. TD Cowen analyst Michael Nedelcovych told CNBC that the company during the call appeared to suggest that such a change wouldn’t look like a big jump in supply but rather steady improvements over time.
Supply could increase more significantly years from now: Novo Nordisk in November said it would invest $6 billion to expand its manufacturing facilities in Denmark, noting it will finish construction from the end of 2025 through 2029. The company also said it would spend around $2.3 billion to expand another production site in France. 

Top weight loss and diabetes drugs

Wegovy from Novo Nordisk is a weekly weight loss injection for adults with obesity or who are overweight. The drug mimics a hormone produced in the gut called GLP-1 to suppress a person’s appetite.
Zepbound from Eli Lilly is a weekly weight loss injection for adults with obesity or who are overweight. The treatment mimics GLP-1 and another gut hormone called GIP to reduce appetite and food intake.
Ozempic from Novo Nordisk is a weekly injection that helps lower blood sugar levels in adults with Type 2 diabetes. The medication mimics GLP-1 to suppress appetite and help the pancreas make more insulin.
Mounjaro from Eli Lilly is a weekly injection that helps lower blood sugar levels in adults with Type 2 diabetes. The drug mimics GLP-1 and GIP to curb appetite and stimulate insulin production.

Meanwhile, Eli Lilly said during its third-quarter earnings call in November that supply of Mounjaro has improved in the U.S. even as it remains constrained around the globe.
Executives also said that Eli Lilly is on track to achieve its goal of doubling production capacity for drugs such as Mounjaro, in part through investments in new manufacturing sites in North Carolina and Indiana.
But Eli Lilly CEO David Ricks said on the call that the company is “aggressively planning” further production buildup for Mounjaro and other drugs. He added that “it’s a problem we work on every day. So we’re not at all happy with the capacity.”

Zepbound could become a blockbuster 

The FDA approves Eli Lilly’s Zepbound, a weight loss drug similar to Ozempic and Wegovy.
Courtesy: Eli Lilly

Morgan Stanley expects Zepbound to rake in $2.2 billion in sales in 2024, according to a note released after the drug’s approval in November. Meanwhile, Bank of America analysts in a November note projected $2.7 billion in Zepbound revenue in 2024. 
Some analysts expect far more sales growth for Zepbound and Mounjaro beyond 2024. Tirzepatide, the active ingredient in both drugs, has a “very strong shot of being the best-selling molecule of all time in the pharmaceutical industry,” said Guggenheim’s Fernandez. 
Wall Street is enthusiastic about Zepbound in part because it may cause more weight loss than Wegovy. Studies directly comparing the two, including an ongoing trial from Eli Lilly, would need to confirm that.
Results from that trial could come out next year after initial data from separate studies examining Zepbound as a potential treatment for other health conditions, including heart failure.
Mixed insurance coverage will likely weigh on sales of Zepbound and other weight loss drugs in 2024, but Eli Lilly has already secured some coverage for the drug. 

Wegovy could make history again 

Wegovy made history this year when it slashed the risk of serious heart problems by 20% in people with obesity and heart disease in a late-stage trial. In 2024, the drug could shake up the pharmaceutical industry again if U.S. and European regulators decide to approve it for that purpose. 
Those potential approvals, which would make Wegovy the first GLP-1 drug to have an expanded use for heart health, are a “foregone conclusion” for Novo Nordisk, Cantor Fitzgerald’s Louise Chen told CNBC.  

Still life of Wegovy an injectable prescription weight loss medicine that has helped people with obesity. It should be used with a weight loss plan and physical activity. 
Michael Siluk | UCG | Getty Images

An FDA approval could potentially increase the uptake of Wegovy, encouraging more obesity specialists, primary care providers and cardiologists to prescribe it to eligible patients, said Dr. Eduardo Grunvald, medical director for UC San Diego’s Center for Advanced Weight Management.
An approval may also put more pressure on U.S. insurers to eventually cover Wegovy and similar weight loss treatments, opening the door for broader use.
Eli Lilly is also studying the cardiovascular benefits of Zepbound in a phase three clinical trial in diabetes patients with increased cardiovascular risk, and results are expected in late 2024. The drugmaker is conducting a similar study in obese patients with heart-health risks, but results may not come until 2027. 
Meanwhile, Novo Nordisk’s other treatments could reach their own milestones next year.
Novo Nordisk expects to release data in the first half of 2024 from a late-stage trial examining Ozempic as a treatment for kidney failure in diabetes patients with chronic kidney disease. The company hinted that the trial would be a success when it halted the study a year earlier than planned in October based on an interim analysis.

Upcoming clinical trial data releases

A phase-three trial from Eli Lilly on Zepbound as a treatment for cardiovascular complications in diabetes.
A phase-three trial from Novo Nordisk on Ozempic as a treatment for kidney failure in diabetes patients with chronic kidney disease.
A phase-three trial from Novo Nordisk on a 25-milligram version of its once-a-day weight loss pill.
A phase-three trial on Zepbound as a potential treatment for heart failure in patients with obesity.
A phase-three trial on Zepbound as a potential treatment for non-alcoholic fatty liver disease, which is caused by fat buildup in the liver, in patients with obesity.
A phase-three trial on Zepbound as a potential treatment for obstructive sleep apnea, or the pause of breathing during sleep due to blocked airways, in patients with obesity.
A phase-three trial on IcoSema, a combination of once-weekly insulin and once-weekly semaglutide, in patients with diabetes.

Novo Nordisk will also release phase three clinical trial data on a 25-milligram version of its once-a-day weight loss pill, which uses semaglutide, the same active ingredient as in Ozempic and Wegovy. 
That trial is crucial because Novo Nordisk is waiting to see that data before filing for approval of the oral weight loss drug, said Cowen’s Nedelcovych. He added that in the long term, the availability of weight-loss pills could boost capacity for their injectable counterparts. 
Also in 2024, a study following patients from a previous late-stage trial could potentially generate data supporting Wegovy as a treatment for preventing the development of diabetes, Nedelcovych said.

A make-or-break year for Pfizer

New data next year will be crucial to determining whether Pfizer gets a piece of the weight loss drug space. The stakes are high: CEO Albert Bourla has said the company hopes to capture $10 billion of that market. 
Pfizer axed a twice-daily version of the only obesity product in its pipeline earlier this month after patients taking the pill lost significant weight but had trouble tolerating the drug in a mid-stage study. 
Now, the company is pinning its hopes on a once-a-day version of the pill, known as danuglipron, which it believes may cause fewer adverse side effects. Pfizer said it expects to release more data on that version of the drug in the first half of 2024, which will help the company decide whether to start a late-stage study on the pill. 

CFOTO | Future Publishing | Getty Images

However, some analysts have raised questions about whether the once-a-day version will be easier to tolerate.
“Despite ongoing work, tolerability still appears to be an issue with the product, and it is not clear to us why this will improve” in a phase three trial or with a once-daily version, JPMorgan analyst Chris Schott said in a December note.
Barclays analyst Carter Gould said in a December note that it is “increasingly apparent” that the company will have to look externally for an obesity treatment, whether that’s through an acquisition or partnership, to capture a slice of the weight loss drug market like it had hoped.
Meanwhile, upcoming data will reveal how serious Amgen’s weight loss drug portfolio is. In the first half of 2024, Amgen is slated to publish early stage trial data on an oral weight loss medication.
In the second half of the year, Amgen plans to release mid-stage trial data on an injectable drug that helped cause up to 14.5% weight loss after 12 weeks in an early study.

Watch for buyouts and partnerships

Pfizer isn’t the only company that could benefit from looking externally for obesity drugs. 
Larger drugmakers used acquisitions of smaller businesses, or partnerships with them, to carve out space in the weight loss drug market this year. More companies could deploy the strategy next year, analysts said.
“There are a bunch of other large-cap pharmas on the list who could do this,” said Cantor Fitzgerald’s Chen. 
Swiss company Roche said earlier this month it would buy the privately held U.S. obesity drugmaker Carmot Therapeutics for $2.7 billion. AstraZeneca signed a licensing agreement with Chinese biotech company Eccogene to develop an obesity pill. 
Novo Nordisk and Eli Lilly have also snapped up smaller obesity drug companies this year to maintain their dominance in the market. 

Recent weight loss drug buyouts and partnerships

Roche in December said it will buy privately held obesity drugmaker Carmot Therapeutics for $2.7 billion.
AstraZeneca in November said it signed a licensing agreement with Chinese biotech company Eccogene to develop an obesity pill.
Novo Nordisk in August said it will acquire the privately held obesity drugmaker Inversago Pharma for $1.08 billion. 
Novo Nordisk in August said it will acquire Embark Biotech, which develops obesity and diabetes drugs, for up to $500 million. 
Eli Lilly in July said it will acquire privately held obesity drugmaker Versanis for $1.93 billion.

In a statement to CNBC, Novo Nordisk said it has increased its focus on “sourcing and elevating external innovation” to complement its in-house products and broaden its drug pipeline, especially for diabetes, obesity, cardiovascular disease and rare blood disorders.
The company also said it is interested in the “full range of business development activities,” from acquisitions to partnerships on early or late-stage products, when it comes to companies with new biological drugs, new potential treatment targets and new mechanisms of action, or how a drug works.
Chen said acquisitions or partnerships may be the only way for small- to mid-cap weight loss drugmakers to catch up with Eli Lilly and Novo Nordisk.
Some smaller companies have indicated that they are open to the idea: Altimmune said Dec. 5 that it is looking for partners to launch and develop its experimental obesity drug pemvidutide. 
Shares of Altimmune have jumped more than 140% since Nov. 30, when the company released mid-stage trial data showing that its injectable drug caused 15.6% weight loss on average after 48 weeks.
Other smaller weight loss drugmakers include Structure Therapeutics, whose once-daily pill helped overweight or obese patients lose up to 10 pounds of weight on average after a month in an early-stage trial. The company is expected to report mid-stage trial data on its drug in diabetes patients this month and more results on the pill in patients with obesity early next year, Guggenheim’s Fernandez noted. 
Still, some bigger drugmakers may wait to see larger and later-stage data from smaller companies before moving to acquire them. That data may not come out until 2025 or later for many firms, said Fernandez. More

Professional pickleball players have formed a collective to voice their concerns about the future of the sport.
The collective sent a letter to all Major League Pickleball stakeholders to address their concerns.
MLP and the Professional Pickleball Association Tour are trying to finalize a merger.

Major League Pickleball finals at Pickle & Chill on October 16, 2022 in Columbus, Ohio.
Emilee Chinn | Getty Images

Dozens of professional pickleball players have formed a collective to voice their concerns about recent pay cuts and the future of the sport.
In a letter obtained by CNBC, the collective shared their dissatisfaction with how they have been treated by Major League Pickleball and the Pro Pickleball Association Tour.

It comes after MLP on Nov. 28 asked players to take a 40% percent pay cut in return for a reduction of work obligations to help the league become financially viable over the long term. The MLP and the PPA Tour are currently negotiating a proposed merger.
“We understand the economic reality of pay-cuts, however, lies, threats, deceitfulness, false deadlines, and the refusal to honor written addendums and agreements have no place in the league that we know and love. If we are going to collaborate on contract modifications, we deserve honest answers to honest questions, and we have not received them,” the letter says.
CNBC spoke with multiple players who say they feel like they’ve been unfairly treated or received threats for not agreeing to the proposed pay cuts. Many were not so much against the proposed cuts but the lack of transparency and the way the leagues have handled it. They all spoke on the condition on anonymity out of fear of retribution.
Fueled by a boom in the sport’s popularity, Major League Pickleball has attracted A-list ownership groups featuring superstars such as LeBron James, Tom Brady, Kevin Durant and Patrick Mahomes, to name just a few. Julio DePietro, who bought a stake in the Florida Smash MLP team in 2022, and most recently served as MLP CEO, told CNBC in July that MLP team valuations had soared to $10 million after being acquired for as low as $100,000 since the league began play in 2021.
But recently the league undergone major leadership changes. MLP founder Steve Kuhn and Commissioner Brooks Wiley have departed in recent months. DePietro, who was hired as CEO in July, quietly left that role, too.

Steve Kuhn, MLP Founder, Major League Pickleball at NYSE, May 25, 2022.
Source: NYSE

Despite the proposed merger still being in the works, the players say PPA Tour CEO Connor Pardoe did a lot of the negotiating with MLP players over their contracts, which they found unusual. Many say they had chosen MLP over the PPA Tour to get away from Pardoe, and now they are being forced to negotiate with him.
One player said they were threatened that if they don’t take the pay cut by the following day, the cuts would increase to 60% from 40%. The player requested additional information and for a written proposal which the league failed to provide him.
MLP pay ranges from $30,000 to $2 million a year, according to an owner who spoke to CNBC on the condition of anonymity.
Other players said they were threatened by MLP and PPA Tour leadership that if they didn’t take the cuts they may be scheduled to work in their developmental program coaching clinics or camps – even on their kids’ birthdays.
“We decided to form the collective in response to the immoral, unethical and arguably illegal negotiation tactics that are being used,” another player said.
The collective represents the interests of the vast majority of MLP’s approximately 100 players, according to former MLP Challenger champion and MVP Jillian Braverman, one of the group’s leaders. The group started as a WhatsApp chat and has evolved into a forum where players can collectively share their experiences. Braverman said they have received funding from an angel investor and have hired both an employment attorney and an antitrust attorney.
In a joint statement, MLP and the PPA Tour told CNBC: “The players have shown overwhelming collaboration during this process and have largely understood that we are all collectively making adjustments to build an operation that can ensure the long-term health and success of professional pickleball for all key stakeholders.”
One owner told CNBC he hopes the collective is a wakeup call to the other owners about the proposed merger and how dire things have become.
“It isn’t all rainbows and butterflies, players are not happy. It’s not going well and they feel rightfully aggrieved,” said the owner, who declined to be named, as he was discussing confidential matters.
Ritchie Tuazon, who owns MLP’s California BLQK Bears, said he sees the value of the collective, especially as some players don’t even have agent representation.
“Moving in the direction of a unified player voice is only a positive thing for pickleball,” he said.
The collective’s letter to MLP stakeholders, which includes all owners, also included survey results reflecting the opinions of roughly 65 players.
When asked whether they feel they have been treated fairly during the pay cut negotiation process, 89% of the respondents said no. The vast majority (92%) said that MLP leadership has failed to successfully answer the majority of their questions.

The poll results regarding the PPA Tour were even more damaging, with 57% saying they have felt victimized, harassed or bullied by the rival league. More than 75% said Connor Pardoe and the PPA Tour leadership team are not of high moral character and integrity.
“We believe that MLP has departed from the ethos that we know and love and is instead embodying the exact ethos that we fled from when we signed multi-year deals with Major League Pickleball in August,” the letter says.
Braverman said Major League Pickleball has yet to respond to Sunday’s letter. The group sent a follow-up note Thursday, telling MLP leaders that the collective has retained counsel.
MLP did send a letter to players Thursday, but without explicitly addressing the players collective. Titled “Where We Stand,” the league letter said “over 85% of all 2023 Premiere Level Players” have accepted reductions as well as new agreements with the “NewCo,” which would be the merged MLP and PPA Tour.
The MLP also said they are “at capacity,” and not doing any more reductions. It added that if players who have accepted a reduction want to change back to their original deals “we would be open to that.”
Pickleball Union, a pickleball news website, and the collective challenged these claims. After reaching out to players and agents, they determined the number of people to have accepted the cuts to be closer to 25% to 30% at best.
In MLP’s Thursday letter, the league also touts that MLP owners have pledged an additional $10 million annually to fund operations and will be receiving another $50 million on Jan. 1. Overall, after amended player agreements, there will be a 300% increase in total player salaries in 2024 vs. 2023, it adds.
The league ended the letter with a warning, though.
“If the merger is not completed by Jan. 31, 2024, these new agreements will be null and void, and deals will revert to the contracts you signed with MLP or PPA, which will leave the future viability and sustainability of MLP uncertain,” the letter says. More

State of Freight

Shipping giants Hapag-Lloyd and Maersk have paused travel through the Red Sea, citing security risks.
Iranian-backed Houthi militants from Yemen have attacked container ships amid Israel’s war with Hamas.

The Hamburg flag flies in front of Hapag-Lloyd containers on the Hapag-Lloyd containership “Berlin Express” at Burchardkai in the Port of Hamburg.
Marcus Brandt | Picture Alliance | Getty Images

Two shipping giants, Hapag-Lloyd and Maersk, are pausing their travel through the Red Sea and the Bab el-Mandeb Strait in the Middle East following a series of attacks on their vessels by Iranian-backed Houthi militants from Yemen.
Maersk, the world’s second largest container shipping company, moves 14.8% of the world’s trade. It said it would divert ships away from the Red Sea. The Houthi group backs Hamas, the Palestinian militant group, and has said it is targeting vessels headed for Israel.

In an email to CNBC, a Maersk spokesman said the Danish company is deeply concerned about the highly escalated security situation in the southern Red Sea and Gulf of Aden. The recent attacks on commercial vessels in the area are alarming and pose a significant threat to the safety and security of seafarers, the spokesman added, saying that employees’ safety is the company’s top priority. 
“Following the near-miss incident involving Maersk Gibraltar yesterday and yet another attack on a container vessel today, we have instructed all Maersk vessels in the area bound to pass through the Bab al-Mandab Strait to pause their journey until further notice,” the representative said.
Maersk said it would release more details about potential next steps in the coming days.
Hapag-Lloyd, which controls about 7% of the global container ship fleet, told CNBC in an email, that it will “pause all container ship traffic through the Red Sea until Monday. Then we will decide for the period thereafter.”
The Bab el-Mandeb Strait is between the Horn of Africa and the Middle East. It connects the Red Sea to the Gulf of Aden and the Arabian Sea, which feed into the Indian Ocean. This waterway is used by container ships and exports of petroleum and natural gas from the Persian Gulf.

Approximately 12% of the world’s trade, which includes 30% of all global containers, move through the Suez Canal. That then feeds through the Red Sea and Bab el-Mandeb. The significance of the Suez Canal was thrust into the spotlight in March 2021, when container ship the Ever Given was stuck for six days.

A boat of the Lower Saxony water police sails along in front of the container ship “Morten Maersk” of the Danish shipping company Maersk Line, which is moored at a quay wall at the container terminal JadeWeserPort.
Picture Alliance | Getty Images

Israel based ocean carrier ZIM has re-routed vessels to avoid the Arabian and Red Seas to safeguard their vessels and crew amid the threats by the Houthis. The vessels are traveling around the Cape of Good Hope in South Africa. This alternative route to the Indian Ocean adds 10 to 14 days of travel time to a vessel’s journey. The long way around Africa also incurs higher fuel costs because of the longer travel distance. 
Since Houthi militants threatened Saturday to attack any vessels that have ownership ties to Israel, or does business in the country, there have been as many as seven incidents. Overall, 13 vessels have been attacked since the Israel-Hamas war began in early October.
In response to Friday’s attacks, in which three vessels were attacked, the World Shipping Council said it is deeply alarmed and concerned about the escalating crisis, and that it’s calling for decisive action to protect seafarers.
“The right of freedom of navigation stands as a fundamental right under international law, and must be safeguarded,” the council said. “The time for resolute international engagement is now.”
The U.S. government has been in discussions with countries of the 39-member Combined Maritime Forces to form a maritime task force to “ensure safe passage” of ships in the Red Sea.
U.S. Central Command, which oversees America’s military interests in the Middle East, has told CNBC discussions are ongoing. More

Cruise, which is laying off 24% of its workforce, has quickly gone from one of General Motors’ greatest business opportunities to a growing liability.
The self-driving vehicle subsidiary has confronted a wave of problems since an Oct. 2 accident in which a pedestrian in San Francisco was dragged 20 feet by a Cruise vehicle after the person was struck by another vehicle.
GM appears to believe it can eventually move forward with Cruise. GM CEO Mary Barra said the automaker is “very focused on righting the ship” at Cruise.

Sydney Boyo

DETROIT — General Motors’ plans to diversify its business through trendy industries such as ridesharing and other “mobility” ventures or startups have largely fallen flat since the automaker started investing in such growth areas in 2016.
Cruise, its majority-owned autonomous vehicle subsidiary, is increasingly looking like it might be next.

The unit has quickly gone from one of GM’s greatest business opportunities to a growing liability. Cruise, of which GM owns more than 80%, has confronted a wave of problems and investigations sparked by an Oct. 2 accident in which a pedestrian in San Francisco was dragged 20 feet by a Cruise self-driving vehicle after the person was struck by another vehicle.
Since the incident, Cruise’s robotaxi fleet has been grounded, pending the results of independent safety probes. Its leadership has been gutted, including its cofounders resigning and nine other leaders being ousted. GM is massively cutting spending and growth plans for the business, including pausing production of a new robotaxi. Local and federal governments have launched their own investigations. And the venture is laying off 24% of its workforce.

GM, like other companies, has quickly shifted from attempting to impress Wall Street with growth initiatives, including generating $80 billion in new businesses by 2030, to refocusing efforts on core business to generate profits amid economic and recessionary concerns.
Despite all that, GM appears to believe it can eventually move forward with Cruise. GM CEO Mary Barra said Dec. 4 during an Automotive Press Association meeting in Detroit that the automaker is “very focused on righting the ship” at Cruise.
“We are confident in the team and committed to supporting Cruise as they set the company up for long-term success with a focus on trust, accountability and transparency,” GM said Thursday in a statement related to announced layoffs at Cruise.

Past projects

But there’s growing concern across the industry, not just with GM and Cruise, about the viability of autonomous vehicles, or AVs, as a business instead of as a niche science project.
“AV technology, while they’ve made a lot of progress with it, is unlikely to be profitable anytime in the foreseeable future, certainly not this decade,” said Sam Abuelsamid, principal research analyst at Guidehouse Insights. “If they need to make cuts, robotaxis seem like the obvious place to do that.”
Some Wall Street analysts are holding out hope that GM and Barra can turn Cruise around and eventually refocus on growing the business, as the Detroit automaker takes a more hands-on approach with the company. Several are expecting updates at an investor event in March.
“The plan to pause Cruise operations and reduce spending on Cruise in 2024 are only first steps. Once again, we expect these concerns to be addressed and cured at the capital markets day in early 2024 but expect skepticism to remain in the interim,” Morgan Stanley analyst John Murphy said in a Nov. 29 investor note.
If GM can’t turn the operations around, Cruise would join a list of its past defunct growth businesses, partnerships and investments since 2016. They include:

2016-20: A “Maven” mobility brand that offered carsharing from the company as well as peer-to-peer
Starting 2016: Partnerships with Uber and Lyft, including a $500 million investment stake in the latter. (GM made $78 million off its Lyft investment.)
2017-22: In-vehicle Marketplace app
2017-18: Book by Cadillac, a vehicle subscription service
2018-20: E-bikes
2019-21: Tie-ups with EV startups Nikola and Lordstown Motors, in which it had an equity stake as part of a deal to sell an Ohio plant, as well as a reported investment in Rivian that ended up not happening

The automaker also has discussed personal autonomous vehicles as early as mid-decade and evaluating “flying cars” for the mid-2030s, among other things that have been de-emphasized more recently. In 2021, the company said it had about 20 initiatives in its pipeline that targeted $1.3 trillion in new total addressable markets.
“Cruise has been both vastly more ambitious and vastly more costly than any of those other programs,” Abuelsamid said. “It certainly could end up on the trash heap. … They’ve got to take a long hard look at what they want to prioritize.”
Not all of GM’s noncore businesses that were launched in recent years have failed. GM Energy and the BrightDrop commercial EV unit continue to operate; however, GM recently brought BrightDrop in-house from being a wholly owned subsidiary.
GM’s financial arm continues to operate an insurance business that was launched in late 2020 as part of its growth initiatives.
“It’s about reprioritizing … and making sure that you’re reducing what you don’t need to do anymore,” GM CFO Paul Jacobson told media Nov. 30 about the company’s overall cost-cutting measures, including “considerably” scaling back its energy and BrightDrop units.

Brightdrop EV600 van
Source: Brightdrop

Jacobson said the change in Brightdrop was to reduce redundancies and cut costs, as business cases have changed. BrightDrop was expected to generate $1 billion in revenue this year; it’s unclear where that stands.
Jacobson declined to disclose whether GM could bring Cruise into the automaker, which has its own autonomous vehicle unit and recently appointed Anantha Kancherla from Meta Platforms to the newly created position of vice president of advanced driver-assistance systems.
GM continues to operate a military defense unit and fuel cell business that have both recently announced new contracts or partnerships. The company does not report revenue or earnings for these units.
GM says it remains bullish on its software initiatives and investments in joint ventures for EVs — for example, an investment projected to exceed $1 billion with POSCO Future M to increase production capacity of key battery elements in North America.

Are autonomous vehicles viable?

GM acquired Cruise in 2016. At the time, the company was trying to quell Wall Street concerns that traditional automakers wouldn’t be able to compete against emerging competition from Apple and Google, as well as emerging “mobility” companies such as Lyft, Uber and a litany of other startups that were expected to disrupt traditional car ownership.
But commercializing autonomous vehicles didn’t pan out for most, and it’s been far more challenging than many predicted even a few years ago. The challenges have led to a consolidation in the sector after years of enthusiasm touting the technology as the next multitrillion-dollar market for transportation companies.
Cruise was considered one of two front-runners left when it comes to robotaxis in the U.S., along with Alphabet-backed Waymo, which is also operating limited self-driving fleets for consumers. Amazon-backed Zoox also continues to test autonomous vehicles in several states.

Renderings from GM of the “Cadillac halo portfolio” that includes concepts of an autonomous shuttle (right) and an electric vertical take-off and landing (eVTOL) aircraft, also known as a flying vehicle.
Screenshot via GM

Others competitors such as Lyft, Uber and Ford Motor/Volkswagen-backed Argo AI have ended their autonomous vehicle programs, citing the massive investments needed for an unprofitable and untested industry. Stellantis has announced partnerships with BMW and Waymo, but nothing along the lines of Cruise and Argo.
“I want to know what needs to be done to get Cruise back running commercial services for consumers in a safe manner,” said Morningstar analyst David Whiston. “And then by not operating the consumer operations and, perhaps, not growing in other cities for the time being, how much costs can you save? Because the losses have gotten pretty big.”
GM’s investment in Cruise and its share of the company’s losses have cost the automaker more than $8 billion since 2016, according to annual public filings. The losses have been increasing, including $1.9 billion through the third quarter of this year.
After purchasing Cruise, GM brought on investors such as Honda Motor, SoftBank Vision Fund and, more recently, Walmart and Microsoft. However, last year, GM acquired SoftBank’s equity ownership stake for $2.1 billion.
GM has said it will significantly cut spending on Cruise. Barra, who leads Cruise’s board of directors, declined to say at the Dec. 4 press association meeting how much money the automaker is willing to spend on Cruise going forward until it completes its assessments and has a plan to move ahead.
Cruise had $1.7 billion in cash to end the third quarter, enough to last through a majority of next year at the current cash burn rate.
Barra and other proponents of autonomous vehicles have consistently touted that self-driving cars have the ability to significantly reduce crashes and roadway fatalities, while also providing transportation for those who may not be able to drive themselves.
“We’ll work through the challenges we have right now at Cruise,” Barra said Dec. 4. “We have to have the right plan.”
– CNBC’s Michael Bloom and Hayden Field contributed to this report.

Read more about Cruise and GM More

Delta is adding 11 new Austin flights in April, weeks after American said it plans to cut 21 routes from the city.
Austin’s passenger growth has outpaced the broader U.S. since 2019.
Tech companies such as Apple, Tesla and IBM have invested in the area.

Angel Di Bilio | iStock Editorial | Getty Images

Delta Air Lines is adding more flights next year at Austin-Bergstrom International Airport, in a bid to gain market share in one of the country’s fastest-growing airports.
The carrier plans to add 11 nonstop flights from Austin in April, giving it almost 50 peak-day flights, the airline said Friday.

Flight additions include Midland-Odessa and McAllen in Texas, as well as Raleigh-Durham in North Carolina, Nashville and Cincinnati. The announcement comes weeks after rival American Airlines said it planned to cut 21 Austin routes.
It will also route connecting passengers through the hub, a shift for the Atlanta-based carrier.
“This is the first time we’ll be using Austin as a connecting point to access our network with the addition of McAllen and Midland,” Eric Beck, managing director of network planning, said in an interview. “For us here at Delta, Texas has historically been a white space for opportunity on our network.”
Austin’s population has grown rapidly in recent years and the city has drawn investment from big companies such as Apple, Tesla and IBM.
Beck said no single company drove the decision to expand in Austin. But “over time as we talk to our corporate accounts and look to where they’re traveling that we don’t have service,” McAllen and Midland, a base for the oil-rich Permian Basin, topped the list, he added.

Beck said both cities have strong business communities and tourism attractions.
Austin’s airport served more than 7.1 million passengers last year, up 11% from 2019, before the Covid-19 pandemic, according to aviation analytics firm Cirium. Passenger counts fell 5% in the U.S. overall during that period.
Delta had a market share of close to 14% in Austin as of September, behind Southwest Airlines’ 40% share and American’s 22%, according to airport data.

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