General Motors' Bankruptcy Protections Could Narrow Pending Ruling

Cameron Aubernon
by Cameron Aubernon

Should a federal judge decide General Motors acted in the wrong during bankruptcy proceedings, the automaker may see its protections considerably narrowed.

According to Reuters, the point of contention is whether or not GM purposely hid the defects linked to the February 2014 ignition switch recall during proceedings in 2009. Judge Robert Gerber of the U.S. Bankruptcy Court for the Southern District of New York said that he would reassess the terms that carved Old GM from New GM if the latter violated due process, allowing affected consumers to go after the automaker for defects it knew of after the exit from bankruptcy.

Gerber’s potential decision won’t sit well with those filing lawsuits over issues of lost value, injury and death as a result of those defects. The plaintiffs are asking for GM to pay compensation in the billions of dollars for its pre-bankruptcy actions, which a modified sale order would mitigate. Gerber is expected to make his decision sometime in the coming weeks at the earliest.

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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  • Ktm Ktm on Feb 19, 2015

    As PCH and APaGttH have been saying, new GM is not liable for cars sold by old GM. Lie2Me made the point I am reaffirming, the LAW is the issue, not new GM. Is it "morally" wrong that new GM can wash their hands of this liability that has killed people? Yes. Is it legal? Yes. The way the BK laws are structured the new GM is not liable for the wrong-doings of the old GM. Saying that, as a licensed civil engineer, I firmly believe that all engineers should be licensed. According to the law, I am PERSONALLY liable for my professional acts. Read this scary bit: Why should other engineers who design systems that can kill people get a pass? Point is, they shouldn't. The victims would have recourse in this matter if they had similar licensure requirements. However, blame the law again as they are usually exempt if it runs afoul of the interstate commerce laws.

    • See 1 previous
    • Ktm Ktm on Feb 20, 2015

      @Pch101 Thank you for the clarification, though I doubt it will mollify the lynch mob.

  • Star_gazer Star_gazer on Feb 19, 2015

    @Pch101 I disagree with you on two points: 1. The separation of Old GM and New GM is contingent on liability disclosure. If upper management knew of malfeasance, the terms of the bankruptcy may be under review. That is what Judge Gerber will determine. 2. You have indicated that there is no fraud; I think there is evidence. GM dictates that a part number change is warranted if the form, fit or function of a part is change. This is not GM’s philosophy as much as their religion. We have a difference of opinions. I don’t think our opinions matter as much as Judge Gerber’s ruling. -Stargazer

    • Pch101 Pch101 on Feb 19, 2015

      You guys need to learn what a 363 sale is. Perhaps an example would help: Let's suppose that Dave Default files for bankruptcy. The trustee's job is to sell Dave's assets in order to pay Dave's creditors. The trustee sells the assets free and clear because that maximizes the price, which is good for the creditors. Nick Newmoney buys Dave's assets. Nick buys those assets free and clear -- whatever happened prior to the BK is not Nick's problem. A couple of years pass and it turns out that Dave didn't include one creditor on his list of creditors. (We'll call her Sally Shafted.) What does this mean for Nick? Nothing. He bought the assets free and clear. This problem remains Dave's problem. Sally has no claim against Nick. Her problem is with Dave and the other creditors who presumably got some of what should have been her money. There is no reason for Nick to pony up anything more in this situation. He bought some stuff from Dave without strings attached. That was by design -- the court structured it this way on purpose in order to get Nick to pay as much as possible; if there has been strings attached, then Nick would have paid a lower price, which would have left even less money in the pot for the creditors.

  • Star_gazer Star_gazer on Feb 20, 2015

    @Pch101- You are missing my point. A rule of law (i.e. a 363 sale) is not a law of nature. It can be changed. Perhaps I can illustrate with an example. Say that I was an engineer for Delphi (which I was). I spin electrons for a living. The fruits of my labors can be checked and verified. Solutions to problems are always in the back of the book. Now, Delphi goes bankrupt. Not world-wide, mind you, but just in the US. Pensions are frozen and sent to the PBGC, but only for the salary workers. Also, salary workers are not allowed to transfer to GM plants but hourly workers have that right. Who made these decisions? The politicians and the courts. Unlike the laws of physics, the rule of law is fungible. As an engineer down here looking up, the decisions seem to me biased. But again, this is my opinion. Judge Gerber may rule that Dave Default just changed his name to Nick Newmoney and that the new boss is the same as the old boss. Judge Gerber may suspend the 363 guidelines and change Nick Newmoney’s name into Nick Shafted. Now, if you’ll excuse me, I have some engineerin’ to do. Before I go, I want to give a shoutout to Mikey in Canada. Mikey, I’m busting my hump to keep you in the retirement lifestyle that you are accustom to. Give that Impala another coat of wax for me! -Stargazer

  • Stanczyk Stanczyk on Feb 20, 2015

    Old GM 'CEO's' should pay for their decisions .. that now make so much trouble .. They've got their bonuses for ruining GM , .. so lets now charge them for that ! ..