Bankruptcy May Save GM Once Again

Filing terms prevent pre-2009 product liability lawsuits.

by on Mar.10, 2014

The 2004 Saturn Ion Coupe is on the list of vehicles being recalled by GM, but the automaker may not be accountable for the vehicles.

Bankruptcy saved General Motors and it may save the company again, at least from a significant liability issue and the millions of dollars that might go with it.

When GM went through bankruptcy it created a “new” GM leaving the debt and many of the liabilities with the “old” GM. This separation extends to product liability, according to an Automotive News report.

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Under the terms of its restructuring, GM’s product liability extends only to accidents that happened after the “new” company exited bankruptcy in July 2009, Automotive News reported. Plaintiffs injured before that time would have to take “old” GM to Bankruptcy Court. The chances of getting compensation in that setting are very low.

In fact, no one who has tried to sue the “new” automaker for claims before 2009 has won, and since the problem began before 2009 it doesn’t bode well for anyone involved in this faulty ignition issue.

The faulty switches, and their failure to provide power to front airbags, have been linked to 31 crashes and 13 deaths. It’s not known how many of those accidents occurred after July 2009, although there are reports of at least one. GM’s reportedly known about the problem since 2004.

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It issued the recall for the 2005-07 Chevrolet Cobalt, 2007 Pontiac G5, 2003-07 Saturn Ion, 2006-07 Chevrolet HHR, 2006-07 Pontiac Solstice and Saturn Sky: a total of 1.6 million vehicles.

If potential plaintiffs cannot sue for anything that happened before “new” GM exited bankruptcy, then they are left with only GM’s willingness to go above and beyond what’s called for in the situation.

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In an email to employees last week, GM CEO Mary Barra said the company “will hold ourselves accountable and improve our processes so our customers do not experience this again.”

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GM seems to be considering all options.

“It is true that new GM did not assume liability for claims arising from incidents or accidents occurring prior to July 2009,” GM spokesman Greg Martin wrote in an e-mail to Automotive News. “Our principle throughout this process has been to the put the customer first, and that will continue to guide us.”

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4 Responses to “Bankruptcy May Save GM Once Again”

  1. Jorge M. says:

    You can bet there will be Hell to pay if GM escapes accountability for legitimate claims – and there should be. GM shorted tax payers $10.5 BILLION on the loan and they should be held accountable for it also.

  2. Mike says:

    If you have payments for buying a vehicle from the “old” GM, you can stop paying. The “NEW” GM is a different company, thus they have very little right to the money. Makes NO sense

    • Paul A. Eisenstein says:

      Unfortunately, Mike, your car payment is not a deal with the “old’ or the “new” GM, but a lender with whom you have a written contract. I strongly recommend against trying this.

      Paul E>

  3. eric says:

    Our Justice dept. needs to take strong criminal actions against all those who knew about the defects and did nothing. They knowingly sent those people to their deaths for profit! The CEO should be proactive and say she will work with the authorities to bring those responsible to justice. Her words have been absolutely insulting the American people.

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