GM Cruise may face fines for ‘misleading’ regulator over accident

By Hyunjoo Jin and David Shepardson

(Reuters) -General Motors’ Cruise robo-taxi unit could face fines and sanctions over its failure to disclose details of an Oct. 2 accident in which a robotaxi dragged a pedestrian 20 feet (6.1 meters) after being struck by another vehicle, a California agency said.

The growing regulatory pressure could hamper GM and Cruise’s effort to rebuild trust and re-start operations in California after coming under fire for allegedly withholding information about the crash in San Francisco.

Last month, Cruise paused all driverless and supervised car trips in the United States and expanded a safety review of its robotaxis, and CEO Kyle Vogt and chief product officer Daniel Kan both stepped down.

The California Public Utilities Commission (CPUC) on Friday ordered Cruise to appear at a Feb. 6 hearing for “misleading the Commission through omission regarding the extent and seriousness of the accident” and “making misleading public comments regarding its interactions with the commission.” The ruling was made by CPUC Administrative Law Judge and a Commissioner.

On Oct. 3, Jose Alvarado, a senior manager of government affairs at Cruise, telephoned commission analyst Ashlyn Kong and informed her of the collision, according to the ruling. The description “omitted that the Cruise AV had engaged in the pullover maneuver which resulted in the pedestrian being dragged an additional 20 feet at 7 mph (11.27 km per hour),” the documents said, using the abbreviation AV for autonomous vehicle.

Kong said in a statement that GM’s blog posting that it “proactively” shared information with the commission “including the full video” is “inaccurate.”

“The full video was shared only in response to a data request more than two weeks after the incident,” she said.

“Cruise is committed to rebuilding trust with our regulators and will respond in a timely manner to the CPUC,” the company said in a statement.

But GM investors said it will take time for Cruise to turn around.

“I don’t think there’s any expectation from our standpoint that this is going to be a one, two, three or even six month issue. It’s going to be a longer time item for them to repair,” said portfolio manager Tim Piechowski at ACR Alpine Capital Research, which has a $290 million in investment in GM.

The commission did not propose a specific penalty. The commission has the authority to fine a public utility up to $100,000 per day there is a violation plus other penalties, according to the judge’s order. It has an authority to impose regulatory sanctions including suspending or revoking any operating permit.

CPUC commissioners in August voted in favour of a plan by Cruise and Alphabet (NASDAQ:) Inc’s Waymo to take paying passengers day or night throughout San Francisco, despite vigorous opposition from some residents and city agencies. One of CPUC commissioners is John Reynolds, a former Cruise Managing Counsel who was appointed by Governor Gavin Newsom in 2021.

In October, California’s Department of Motor Vehicles barred Cruise self-driving vehicles from public roads following the accident.

Cruise’s troubles are also a setback for an industry dependent on public trust and the cooperation of regulators. The company had in recent months touted ambitious plans to expand to more cities, offering fully autonomous taxi rides. GM had told investors Cruise and its technology could generate $50 billion a year in revenue by 2030.

GM CEO Mary Barra said last week that the automaker will sharply cut spending on the unit next year. Cruise has lost more than $8 billion since 2017, including $728 million in the third quarter of this year.

GM has hired an outside law firm to conduct a review of Cruise management’s handling of the Oct. 2 incident and the response to regulators. Cruise has also said it is planning to re-launch in one unspecified city before expanding to others.

By Dec. 18, GM is supposed to hand-deliver a “verified statement” which include facts and arguments regarding CPUC’s charges, all attachments, along with a three-ringed binder containing a copy of all authorities, to the administrative judge.

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