"New" GM Only Responsible For Post-Bankruptcy Ignition-Related Accidents
In addition to pledging to do business differently in the wake of a 1.6-million vehicle recall over a faulty ignition switch and the decade-long delay behind the recall, post-bankruptcy General Motors may find itself protected by its former self before the court of law for any accidents resulting from the switch.
Automotive News reports that under the terms of reorganization that helped the current structure at GM emerge from bankruptcy in July 2009, the automaker would only be responsible for accidents post-bankruptcy, while accidents before the aforementioned point in time would need to seek compensation from “old GM” in bankruptcy court.
However, the original plan would have shut the door on liability for any product made pre-bankruptcy — including the 1.6 million vehicles under the recall — had not GM bowed to pressure from critics and consumer advocates.
The division has proven successful thus far for “new GM,” as lawsuits made for pre-2009 claims against the automaker have failed thus far, as spokesman Greg Martin acknowledged:
It is true that new GM did not assume liability for claims arising from incidents or accidents occurring prior to July 2009. Our principle throughout this process has been to the put the customer first, and that will continue to guide us.
With 31 known accidents and 13 deaths tied to the faulty ignition switch — discovered in 2004 prior to the introduction of the Chevrolet Cobalt, but only corrected beginning last month — the more that fall under “old GM,” the more potential for savings for “new GM” in litigation that could come as a result; the automaker paid $601 million in 2012 for liability claims, according to a filing with the Securities and Exchange Commission.
Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.
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Legal liability or no, GM needs to make it right with these victims and or families. Otherwise GM is just putting a pox on themselves. The can't keep screwing over Americans just because they can. It's too competitive out there.
There is definitely repetitional risk with this. Marry Berra is smart to get this behind her. Right now, she can blame the prior guys. In a year or two, she will own it. Getting in front of it to get it behind her and GM is also smart because it wasn't going to go away -- so why not appear proactive? Or be proactive (don't want to sound overly cynical here). The first rule of management after getting control is to 'clear the decks' of existing problems and blame the last guy. I'm sure there are other things she would like to clear up, but GM can't afford them. After 6 months or a year, she will own the problems. You only get a brief honeymoon period to blame the last guys. This was one of Jeff Imemelt's problems @ GE. Jack Welsh was taking victory laps and just had a new book out. Immelt wasn't in a position to seriously miss earnings, fix the obvious problems, and blame Jack. Immelt became CEO on September 10, 2001. If there was ever a time to throw in the kitchen sink (on the financials) -- it was then. Jeff still reminds people of his start date.