Class Action Lawsuit Targets GM "One Percent Doctrine"

GM recently settled an SEC investigation into its accounting practices. The automaker didn’t admit guilt or pay a fine, but it was confirmation– if confirmation was needed– that GM under Rick Wagoner has played fast and loose with the numbers. And when you’re as big as GM, little “tweaks” here and there can have a significant effect on the bottom line. In fact, I’d go as far as to say that history will eventually regard Wagoner as an accountant gone wrong: a GM lifer whose only genius lay in his ability to make numbers his bitch. Until he couldn’t. As part of that legacy, this [press release after the jump]. I’m no lawyer, but it appears that GM violated rules regarding mark-ups to dealers and, thus, customers. And once again, the “winners” of a legal action against an automaker get discounts on the offending company’s products, while the lawyers get millions of dollars. Not to coin a phrase, but how great is that?

“A notification program began today, as ordered by the Court of Common Pleas of Lancaster County, to alert those who bought certain new GM vehicles from Pennsylvania GM Dealers about a proposed class action settlement involving GM’s marketing programs.

The case is about GM adding 1% of the Manufacturer’s Suggested Retail Price (“MSRP”) to the invoice for certain new vehicles it sold to its dealers, as part of their “Marketing Initiative” programs. The lawsuit claims that GM required dealers to use the 1% amount for advertising, and that this violated Pennsylvania law. The lawsuit also claims that dealers passed this amount on to consumers when they purchased vehicles. GM denies any wrongdoing, and states that the 1% was a legal, wholesale price increase to its dealers, and that dealers did not necessarily pass on the 1% amount to each purchaser.

The settlement includes a group of people, called a “Class” or “Class Members,” who bought a new vehicle at retail in Pennsylvania from a franchised dealer that was made or distributed by GM. The GM dealer must have purchased the new vehicle on or before March 31, 1999, but after (a) September 1, 1998 for Chevrolet or GMC Truck vehicles; (b) July 1, 1989 for Cadillac or Oldsmobile vehicles; (c) July 1, 1990 for Pontiac vehicles; and (d) August 1, 1990 for Buick vehicles. The Class does not include anyone who purchased vehicles under the GM Employee Purchase Plans, GM qualified fleet purchasers, government entities, attorneys of record in this case, lessees, or anyone who previously requested exclusion from the Class.

The settlement provides rebates certificates worth up to $200 toward the purchase or lease of a new GM vehicle. Certificates will be valid for three years after the settlement receives final court approval. Up to two certificates can be used toward the purchase of one vehicle.

Notices informing Class Members about their legal rights are scheduled to appear in Pennsylvania newspapers and magazines leading up to a hearing on April 28, 2009, when the Court will decide whether to grant final approval to the settlement.

The Court has appointed Joseph F. Roda and Michele S. Burkholder, RodaNast, P.C. of Lancaster, Pennsylvania, to represent the Class as “Class Counsel.”

Those affected by the settlement can send in a claim form to ask for a rebate certificate, object to the settlement, or ask to appear and speak at the fairness hearing. Claim forms must be postmarked no later than June 15, 2009. The deadline to object to the settlement or request to appear and speak at the hearing is March 16, 2009.

A toll-free number, 1-888-866-1738, has been established in this case (called Soders v. General Motors Corp., No. CI-00-04255), along with a website, www.onepercentcase.com, where notices, claim forms, the settlement agreement, and the Court’s preliminary approval order may be obtained. Those affected may also write to Soders v. General Motors Corp., PO Box 91196, Seattle, WA 98111-9296 for more information.