GM's $121 Million Lawsuit Hits San Francisco Over Tax Dispute

Dec 29, 2023 12:20 AM EST

VIEW OF CITY STREET — (Photo : PEXELS/PIXABAY)

US automotive manufacturer General Motors (GM) has initiated legal action against San Francisco, alleging the city's imposition of inequitable taxes and interest on the company from 2016 onwards. The lawsuit, seeking to reclaim $ 108 million in taxes and an additional $13 million in interest, was formally lodged in the California Superior Court within San Francisco County.

Legal Battle for General Motors

General Motors contends that the city overcharged it for taxes and interest linked to its self-driving car Cruise division, acquired by GM in 2016. According to reports, GM's court petitions emphasize Cruise's independent revenue model since its acquisition and arms-length operation within GM.

The lawsuit underscores GM's assertion that Cruise's finances are independent and that the city's tax assessments were unreasonable.GM filed lawsuit to contest what is being viewed as the city's unfair financial burden and an erroneous tax assessment for its subsidiary's operations.

As per The Hill's report, the $121 million lawsuit against San Francisco, filed on Friday in the California Superior Court within the County of San Francisco, alleges that the city imposed excessive taxes on the company. San Francisco supposedly considered the revenue of General Motors (GM) inclusive of its Cruise self-driving car sector, totaling $3 billion worldwide, despite GM's claim that Cruise operates independently.

Additionally, reports revealed the company reported minimal sales of $677,000 in San Francisco for 2022, with no physical presence such as employees, manufacturing, or dealerships. The case might impact San Francisco, which faces a $800 million budget deficit over the next two years due to poor post-pandemic recovery. Mayor London Breed has directed city agencies to reduce budgets by 10% to counter this deficit.

GM stated that San Francisco incorrectly applied Cruise's presence in the city to tax GM's worldwide earnings of $3 billion instead of focusing on its locally generated income. However, GM had consistently settled the tax obligation and did not clarify in legal papers the reason for delaying the challenge against the combined charges involving Cruise until this point.

Cruise has encountered recent difficulties, marked by the departure of nine executives amid an ongoing inquiry into the company's response to an October incident in San Francisco. Amidst safety concerns from collisions, the Cruise CEO resigned as their self-driving fleet was temporarily removed for updates after an incident where a pedestrian was moved by a Cruise vehicle involved in an accident.

This occurs within the backdrop of the $121 million lawsuit against San Francisco, involving GM, as California revoked Cruise's driverless permits due to safety concerns, deeming them unsuitable for public operation.

About Cruise

As shared on GM's webpage, established and based in San Francisco, Cruise aims to enact transformation by constructing the globe's most sophisticated self-driving, entirely electric, communal vehicles, ensuring safe connections between individuals and the locations, items, and moments that matter to them.

General Motors Co. (NYSE: GM) revealed plans to buy SoftBank Vision Fund 1's shares in Cruise for .1 billion and inject an extra .35 billion into Cruise, substituting for the fund's earlier commitment in 2018. Cruise has led the way toward commercial autonomous ridesharing and delivery since GM acquired a majority share in 2016. This decision ought to benefit GM stockholders and Cruise's minority owners.