GM asks bankruptcy court to bar most ignition claims
Tuesday, April 22, 2014
New York - General Motors asked a US bankruptcy court to bar most suits filed over its faulty ignition system, arguing its 2009 court-approved bankruptcy reorganization shields it from liability in most cases.
In papers filed late Monday, GM said it is not seeking protection from suits over the 13 fatalities and other injuries linked to the defect.
But GM argued that under the 2009 bankruptcy agreement, which came after the government took the company over to save it from collapse, it should be shielded from economic damages due to product defects.
These would include the decline in value of a damaged vehicle, or the cost of child care or alternative transportation while the car was out of use.
"It was an absolute condition of New GM's purchase offer that New GM not take on all of Old GM's liabilities," the filing said.
"That was the bargain struck by New GM and Old GM, and approved by the court as being in the best interests of Old GM's bankruptcy estate and the public interest."
GM said the plan to restrict liability was also endorsed by the US Treasury as the company emerged from bankruptcy.
Treasury, which on the government's behalf held a majority stake in the automaker at the time, wanted the structure that "would best position new GM for a successful business turnaround," GM argued in the brief.
A GM spokesman said the company "has taken responsibility for its actions and will keep doing so."
The company has hired victim compensation expert Kenneth Feinberg to advise it on how to deal with victims of accidents tied to the ignition problem.
But attorneys in a class action suit on behalf of people whose GM cars have been recalled for the ignition defect asked the court on Monday to reject GM's request.
They argued that the company had "fraudulently concealed" the ignition problem from its government shareholder, from the bankruptcy court and from consumers in the bankruptcy reorganization.
GM knew of the ignition problem for more than a decade and did not disclose it, they said.
"As a result, consumers did not have an opportunity to assert or have any reason to believe that they should try to assert any objections or claims in the bankruptcy case concerning damages caused by the defect," said the complaint.
Plaintiffs attorneys noted GM faces a criminal probe by the Department of Justice into its actions. They also cited a letter from five US Senators requesting the US to oppose GM's efforts to avoid liability for the pre-2009 problems.
Meanwhile GM announced Tuesday a restructuring of its global engineering division into divisions overseeing product integrity and vehicle components and subsystems, appointing chiefs of both sections.
GM has said the creation of the global integrity division will bolster safety and prevent another debacle like the ignition recall.
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