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GM Move to Freeze Lawsuits May Cut Customer Payouts by Billions

3K views 30 replies 25 participants last post by  doh 
#1 ·
By Linda Sandler Apr 16, 2014 3:41 PM ET



General Motors Co. (GM)’s move to freeze ignition-defect lawsuits in California and Texas has solid legal precedent behind it and could help slash customer demands for compensation by billions of dollars.

GM asked federal judges in both states last week to delay litigation over the defect in several of its models until a U.S. bankruptcy judge in New York rules whether some accident victims’ claims can be brought without violating a sale order in its 2009 reorganization.

The aggressive legal strategy runs the risk of further damaging GM’s image with lawmakers and the public. Offsetting that impact is GM’s customer-focused hiring of lawyer Kenneth Feinberg to advise on how to compensate people who had accidents in recalled Cobalts, Saturns and other GM models. Feinberg ran funds for victims of the Sept. 11 terror attacks and the BP Plc oil spill in the Gulf of Mexico.

“They’re running on parallel tracks but the trains are going to different stations,” said Chip Bowles, a bankruptcy lawyer at Bingham Greenebaum Doll LLP, who called the freeze maneuver “clever.”

http://www.bloomberg.com/news/2014-...its-may-cut-customer-payouts-by-billions.html
 
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#3 · (Edited)
As I said before, I thought Mary erred in not meeting the families, sans attorneys, prior to the Inquisition in that well-known center of honesty, integrity, and sound financial policies, Washington DC.

She should have offered them each $5 mil, set up some sort of remembrance fund such as for advanced driver training, college or trade school scholarships, advanced education in the US Constitution, etc., say to the tune of $2 mil each.

So for 11 x 7 = $77 million she could have bodychecked the bloodthirsty attorneys, given fair settlement to the families, had SOMETHING to say to the Inquisitors other than the Sergeant Schultz line, and promised to not pursue legal action against some of the families for harassment and false legal jeopardy for the most egregious cases of drunken driving and reckless driving that could have gotten the cases thrown out of court, in a sane world.

In other news, Mary could have recited chapter and verse of the various (in the hundreds) decapitations and traumatic brain injury cases of MANDATED air bags blowing off unexpectedly and killing children and smaller adults.

Then she could have asked the fed Inquisitors if anyone at NHTSA or anyone in Congress who wrote some of the airbag laws was ever fired or prosecuted.

In a fair and just world....well, never mind, we're not in heaven yet so fuggeddaboutthat. Blumenthal. Center for Auto Safety. Serpents.

It seems rational to pursue an aggressive defensive legal strategy, knowning what a pack of wolves the tort lawyers can be. Not to mention the Inquisitors.


http://www.straightdope.com/columns...can-kill-people-do-they-actually-save-anybody

http://www.caranddriver.com/columns/airbags-kill-more-kids-than-school-shootings

http://www.thetruthaboutcars.com/2012/05/airbag-saves-man-then-slowly-kills-him/

After reading a few of these easily-searched reports, I just hope none of us or our loved ones EVER is in a situation where an air bag deploys.
 
#8 ·
My friend's 2010 was recalled/repaired for this about two years ago. Makes me wonder if this 2009 bankruptcy filing was their "trump card"?
 
#10 ·
That actually brings up a good point. If GM is not legally bound to pay these victims, and then they choose to pay anyway. Could share holders sue GM for misusing GM assets? Investors bought stock in GM knowing that all previous liabilities were discharged in the BK. This could get very sticky.....
 
#13 ·
Here is a little insight to what you are talking about: http://community.cengage.com/GECRes...lose-the-cobalt-defects-bankruptcy-fraud.aspx

In the company’s Chapter 11 2009 bankruptcy restructuring, GM was split into two companies. The old GM was given all the closed plants and liabilities from the company, including liabilities related to product suits by car owners. The new GM was given immunity from liability for any product liability claims that were made prior to the 2009 bankruptcy. However, one of the requirements for the deposit of the claims in the old corporation and the release of liability for the new corporation is that the bankruptcy filing must be complete. That is, GM must disclose to the court all potential liabilities that it might have. GM has already admitted to federal officials investigating the car safety defects that it was aware of the safety problems as early as 2001. GM has also disclosed to NHTSA investigators that it explored fixes for the ignitions in 2004 and 2005, but took no action.
 
#14 ·
GM is taking a very risky step here. As mentioned above:

one of the requirements for the deposit of the claims in the old corporation and the release of liability for the new corporation is that the bankruptcy filing must be complete. That is, GM must disclose to the court all potential liabilities that it might have. GM has already admitted to federal officials investigating the car safety defects that it was aware of the safety problems as early as 2001. GM has also disclosed to NHTSA investigators that it explored fixes for the ignitions in 2004 and 2005, but took no action.
This means that if GM did not fully disclose the ignition switch issue during the bankruptcy proceedings, they committed a bankruptcy fraud. The fact that they actually changed the part in 2007 without documenting it is a very strong argument in any lawyer's hands that GM did know and kept it hidden from the bankruptcy judge. The worst outcome for GM could be that all bankruptcy agreements may be thrown out, and "new GM" will not only liable for issues associate with "old GM", but will also have to compensate people who lost money on the bankruptcy (for example bond holder who got pennies on the dollar).

I think this move was a knee-jerk by some mid-level GM lawyer and will cost them dearly. They will end up paying way more than settling with victims' families.
 
#15 ·
GM is taking a very risky step here. As mentioned above:



This means that if GM did not fully disclose the ignition switch issue during the bankruptcy proceedings, they committed a bankruptcy fraud. The fact that they actually changed the part in 2007 without documenting it is a very strong argument in any lawyer's hands that GM did know and kept it hidden from the bankruptcy judge. The worst outcome for GM could be that all bankruptcy agreements may be thrown out, and "new GM" will not only liable for issues associate with "old GM", but will also have to compensate people who lost money on the bankruptcy (for example bond holder who got pennies on the dollar).

I think this move was a knee-jerk by some mid-level GM lawyer and will cost them dearly. They will end up paying way more than settling with victims' families.
This is getting good , real good. I would love to see the BK blow up in thier face, who new what and when, including the Gov't officials that orcherstrated it.
 
#18 · (Edited)
By Linda Sandler Apr 16, 2014 3:41 PM ET



General Motors Co. (GM)’s move to freeze ignition-defect lawsuits in California and Texas has solid legal precedent behind it and could help slash customer demands for compensation by billions of dollars.

The aggressive legal strategy runs the risk of further damaging GM’s image with lawmakers and the public.

http://www.bloomberg.com/news/2014-...its-may-cut-customer-payouts-by-billions.html
Not a big fan of the compensation pay out culture to the vultures but this strategy could be dangerous strategy for GM, especially as lots of lives have been lost in some of the cases.

One marketing told me that for every guy you piss off big time they tell another 10 and it starts a nasty pyramid of people that don't buy your products anymore, l hope GM know what they are getting into its a bit of a dodgy high risk game which could probably cost billions in discounting to win back the hearts and minds of those they have pissed off in the long term in the future.
 
#20 ·
Yeah no ****!!!! A stitch in time saves nine.

Most of the problems we face could be solved by listening to childhood proverbs.
 
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#22 · (Edited)
I own three of the little crapboxes, have given my oldest son another one, and traded one in.
4 post-bankrupcy 09s,and a '10.

4 of the 5 had to have the ignition switch replaced due to locking up and not being able to shut the car off.
Which was interesting seeing as the car was specially engineered with a hidden emergency key release button.
 
#24 · (Edited)
Yeah, when word gets out that GM is trying to weasel out of compensating victims because the liability was left with "old GM", they might as well stop advertising because this will be all that anyone thinks about when they hear "GM", or "Chevy", etc.

Besides, if GM is not liable for accidents that happened before June 2009 when the "Old GM" was created to assume all these liabilities, then why is the "New GM" recalling cars built by "Old GM"?

If the "New GM" is truly a new company, why wouldn't they simply say that ANYTHING having to do with cars built and sold before June 2009 isn't their problem, and be done with it?

Could it be that they know that the logistical nightmare that would cause would cripple them for years? For instance, I own a 2009 Tahoe that was built in late 2008 by the "Old GM", but was sold to me in September 2009 by the "New GM". I guess if I had bought that vehicle in May 2009 I'd be SOL making any claims against the New GM, right? Plus, GM still sells parts for cars built and sold by "Old GM", like the discontinued GMT800 Tahoe or Buick Lesabre and others. Why do they stock parts for cars built by "another company"? Shouldn't you have to go to an "Old GM" store to get those parts?

There's only one way to clear this up - recall/repair/replace as many of the junky Cobalts, etc as possible, compensate the victims (families), and eat the financial hit.

There is something else that GM could do, and this was done by Nissan in the late 1990s. They could start buying up as many of the older models as possible, just getting them off the road to prevent any more safety and PR problems. Either just buy them straight out, or give the owners an "extra trade in coupon" for them. For example, a year 2000 Chevy Cavalier can be bought for about $1500. GM could offer a $2000 coupon for this car, then they could scrap it when it is traded in. Kind of a "Cash for Clunkers" program run by the company itself. This has the benefit of getting potentially problematic vehicles off the road, and cleaning up the brand's image (if you only see newer Chevys out there you would naturally think more highly of the brand).

The only older cars Chevy would really want on the road are Corvettes, some Camaros, and maybe very well maintained trucks and sedans. Nobody gets a thrill seeing a dented and rusty 1998 Monte Carlo with 160k miles on it rumbling down the road. Like I said, Nissan did this to get every older Quest minivan model off the road before they introduced the new one, and it paid off for them. I've also heard that Toyota covertly does this with older worn-out Priuses to protect the value of the "Prius brand".
 
#27 ·
There is something else that GM could do, and this was done by Nissan in the late 1990s. They could start buying up as many of the older models as possible, just getting them off the road to prevent any more safety and PR problems. Either just buy them straight out, or give the owners an "extra trade in coupon" for them. For example, a year 2000 Chevy Cavalier can be bought for about $1500. GM could offer a $2000 coupon for this car, then they could scrap it when it is traded in. Kind of a "Cash for Clunkers" program run by the company itself. This has the benefit of getting potentially problematic vehicles off the road, and cleaning up the brand's image (if you only see newer Chevys out there you would naturally think more highly of the brand).

The only older cars Chevy would really want on the road are Corvettes, some Camaros, and maybe very well maintained trucks and sedans. Nobody gets a thrill seeing a dented and rusty 1998 Monte Carlo with 160k miles on it rumbling down the road. Like I said, Nissan did this to get every older Quest minivan model off the road before they introduced the new one, and it paid off for them. I've also heard that Toyota covertly does this with older worn-out Priuses to protect the value of the "Prius brand".
Are you thinking of the Nissan Vanette? That probably was more cost-effective than trying to fix them, and not nearly as many units.

That said, GM does have an additional $500 rebate for affected owners right now (assume they still do).
 
#25 ·
There is something else that GM could do, and this was done by Nissan in the late 1990s. They could start buying up as many of the older models as possible, just getting them off the road to prevent any more safety and PR problems. Either just buy them straight out, or give the owners an "extra trade in coupon" for them. For example, a year 2000 Chevy Cavalier can be bought for about $1500. GM could offer a $2000 coupon for this car, then they could scrap it when it is traded in. Kind of a "Cash for Clunkers" program run by the company itself. This has the benefit of getting potentially problematic vehicles off the road, and cleaning up the brand's image (if you only see newer Chevys out there you would naturally think more highly of the brand).


And how many of these owners would not want to take the $2,000 because you are now forcing them to buy another, more costly, vehicle? I have a 98 G Caravan with 91,000 miles so it's only worth about $3,000. But it is in excellent shape and runs better than most newer cars (the tranny and 3.8L are reliable and the body is solid). So, giving me 3 grand is no big favor. Besides, I don't worry about GM timing chains failing, now. So, your point, although noble, is not that acceptable in most cases.
 
#28 ·
"For example, a year 2000 Chevy Cavalier can be bought for about $1500. GM could offer a $2000 coupon for this car, then they could scrap it when it is traded in. Kind of a "Cash for Clunkers" program"

Thats the best way to go, just get rid of the junk. There will be owners that never get this fix done and, unfortunately, more people might die.
 
#31 ·
Follow Ford's lead. The Windstar axle rust recall. They offered to pay Fair Market Value, for any 2000 or older Windstar.

Repair Any 2001 or newer Windstar, and Rent the Custoer a car until thier unsafe vehicle can be repaired.

It cost Ford about $6000 for my 2001 Windstar over a rust problem? I expected Rust Problems in our area in a 10 YO Vehicle.

A letter stating "Watch for this problem" would have done it.

GM's answer to this problem? Remove everything from the Key Chain except the Vehicle key, and hand the vehicle back to the Customer. Saying this is the Only Key until we fix it.
 
#29 · (Edited)
I'm confused, New GM is obligated to recall potentially defective vehicles produced by Old GM
but has no liability when it comes to deaths and injuries attributed to the defective part.

Oh, I can see the class action law firms lining up with glee, GM better pray that it can have
liability limited to Old GM because if this jumps the fence to new GM ... look out.

But then, Recalls are different to liability.
Recall inheritance is dictated by statute, liability can be negotiated away in bankruptcy.
Probably the same way that GM is no longer liable to Asbestos exposure from old brake linings.
 
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