General Motors Stands To Lose $2B If Bankruptcy Protections Collapse

Cameron Aubernon
by Cameron Aubernon

Remember all of those bankruptcy protections sought by General Motors that were made against any and all future lawsuits linked to ignition-related accidents and fatalities that occurred prior to the automaker’s exit from said bankruptcy in July 2009? Guess how much it would owe if the shield collapsed?

Bloomberg reports GM could be on the hook for as much as $2 billion if federal bankruptcy judge Robert Gerber of Manhattan rules in favor of the plaintiffs of a class action aimed at bringing said shield down.

The suit calls for damages to be paid due to lost resale value as a result of the February 2014 ignition switch recall, citing alleged fraud committed by the company during the proceedings, claiming executives knew of the issues affecting a handful of models made between 2003 and 2011. Bankruptcy attorney Chip Bowles explains:

In bankruptcy, you have to disclose your assets and liabilities. Those are basic requirements — and GM didn’t do it. It would be very easy for Gerber to say, “Guess what? If you know someone is a creditor you have to give them notice. If you fail to do so, they aren’t constitutionally bound by my orders.”

The collapse would only be the beginning: Aside from the 2.2 million vehicles that could be affected, another 9.6 million vehicles suffering similar ignition woes — 90 percent of which were made prior to the July 2009 reorganization — would likely see their owners wanting a part of GM.

A ruling could be made as early as late February of 2015.

Cameron Aubernon
Cameron Aubernon

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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  • Rday Rday on Nov 06, 2014

    But it wasn't a regular bankruptcy. the UAW did not take a haircut. Neither did the corrupt management. Just the shareholders and bond holders....and customers that had bought GM cars. So the whole deal was a corrupt and smelly deal. The employees conspired to bypass the regular rules for bankruptcy. So the customers and shareholders are just wanting to get their fair share...and this is the only way to get it. GM deserves to be punished for all of their greed from the past and evidently the greed/corruption that still is going on. This is what attorneys and courts are for.

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    • Stuki Stuki on Nov 06, 2014

      "GM deserves to be punished for all of their greed from the past and evidently the greed/corruption that still is going on. This is what attorneys and courts are for." Say what you want about GM, but as a societal problem they rank so far below "attorneys and courts" as to be entirely irrelevant. Just buy a different car if you don't like them. Now try that with your "attorneys and courts" as see how it goes.

  • Whittaker Whittaker on Nov 06, 2014

    If the new GM is a completely different entity from the old bankrupt GM then why are they allowed to use old GM losses to avoid paying taxes on new GM profits. This bankruptcy was anything but normal.

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    • Alluster Alluster on Nov 06, 2014

      "If the new GM is a completely different entity from the old bankrupt GM then why are they allowed to use old GM losses to avoid paying taxes on new GM profits." The tax breaks were in exchange for not dumping pension obligations on taxpayers, that GM could legally do in a bankruptcy. $20B in unfunded pension obligations vs $14B in tax breaks..You do the math. The tax breaks were also meant to make the stock more attractive. Uncle Sam owning 60% of the stock stood to gain the most. But you are right, the bankruptcy was anything but normal. It was a payback to the unions for helping win Ohio in 2008 and guaranteeing a win in 2012.

  • Burgersandbeer Burgersandbeer on Nov 06, 2014

    You managed subject-verb disagreement and inconsistent tense in the headline. I think you wanted "General Motors Stands To Lose $2B If Bankruptcy Protections Are Lost". I'm not even going to attempt to edit the headache-inducing opening sentence. I realize TTAC lacks editorial resources and 90% of the B&B don't care, but is getting the headline right that much to ask?

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    • Cameron Aubernon Cameron Aubernon on Nov 07, 2014

      @Cameron Aubernon I do wish I had Rarity's and Frasier Crane's Trans-Atlantic accent now and again. Their respective accents are the best balance of sounding British, but not.

  • Mitchw Mitchw on Nov 06, 2014

    Maybe we'll see a settlement between the plaintiffs and GM, if GM doesn't want to risk a legal judgement on their bankruptcy. Going to court is leverage for those looking to get money out of New GM.

    • Pch101 Pch101 on Nov 06, 2014

      The risk of that is about zero. This is a non-issue. This is simply an effort made by the tort lawyers to get the new GM to shell out money to those who are owed money by the old GM. It's a public pressure tactic, not a legal argument.

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