Bankruptcy filing reportedly allows GM, Chrysler to shed hundreds of product liability lawsuits
Outside of bankruptcy, General Motors and Chrysler were no longer competitive enough to remain solvent. After Chapter 11 reorganization, the two automakers will have a clean financial statement and a whole lot fewer employees, plants, and dealers. Another area where the two automakers will receive a clean bill of health is product liability lawsuits, and the savings will be huge, The Detroit News reports. GM, for example, had $928 million in liability expenses (including court costs and lawyer fees) in 2008 and $1.1 billion in 2007.
The government has ruled that the new GM and Chrysler will not be held liable for vehicles sold by the old GM and Chrysler. Lawyers are still debating whether or not cars and trucks purchased after bankruptcy proceedings began will be covered, but anything before bankruptcy is apparently out of the picture. University of Michigan law professor and bankruptcy scholar John Pottow told the DetNews that GM lawyers gave him the impression that it was the government that was driving this issue:
"What's fascinating about this is that it is the government taking the hard line here, insisting that the new company should emerge free of those liabilities. It's the government actually thinking like hardheaded investors instead of taking the more predictable, more socialist line."While the two companies' ledgers will look better without the threat of liability, the move is brutal for those who are awaiting trial or have already been awarded money but have yet to receive any funds. Those who have been permanently disabled as a result of alleged vehicle defects will now likely never receive a dime for their injuries. While pre-bankruptcy liabilities will be swept under the rug, GM and Chrysler will continue to cover all applicable warranties both pre- and post-bankruptcy.
In the meantime, attorneys general from a number of states aren't taking the matter lying down – eight separate states have filed objections to the provision in federal bankruptcy court on Friday.
[Source: The Detroit News]
Get a WordPress.com Blog
Reader Comments (Page 1 of 3)
Yaroukh 2:34PM (6/22/2009)
Is it only me or are they trying really hard to damage the "New GM" brand image as badly and as soon as possible?
Reply
AC 2:40PM (6/22/2009)
There is really nothing new about the new GM.
If anything, they are just trying to play the irresponsible card like the GM spoof video said.
The debt and bankruptcy trick isn't going to do much when the economy is pushed to the cliff. If they gonna play the old trick like before maybe people should start jumping off buildings.
akboss302 3:03PM (6/22/2009)
What these companies have done (and are doing) is a disgrace. Count me as one who's not interested in a "New GM".
SimbaDogg 3:33PM (6/22/2009)
this is actually really sad. i was watching this story about cnn about a little girl who was involved in a somewhat minor car accident, but the seat belt that was holding her malfunctioned and ended up sliding up her body and breaking her neck. so now her parents have to spend thousands of dollars a year for 24/7 medical care...and weren't even allowed to get their day in court w/ GM.
anyways, i know there's probably thousands of people who are in situations similiar. just sad if you ask me....
Majarvis 2:36PM (6/22/2009)
Unbelieveable that they're allowed to get away with this.
Reply
dave1w41 3:01PM (6/22/2009)
Unbelievable? Considering that the Product Liability litigation industry has been putting the cob to these companies for 3 decades I don't find it so "unbelieveable". If more than 5% of these claims had some merit the reasonable ones might not have gotten tossed out with the 95% that are completely bogus.
Alex 2:41PM (6/22/2009)
I would think that the New GM would at least be held responsible for claims levied against Chevrolet, Buick, GMC and Cadillac.
Reply
Rboyett 2:43PM (6/22/2009)
Just one more reason my next car is VERY likely to be a Ford.
Reply
Who 'Dis? Who 'Dat? 2:45PM (6/22/2009)
FOUL!!! Why don't they just put on a mask and snatch the consumer into a back alley? At least then folks would know they were about to get robbed!
Reply
Gardiner Westbound 2:44PM (6/22/2009)
If he believes in justice and fair play Hopey-Changey will do the right thing for people disabled by defective vehicles.
Reply
jinsei888 2:44PM (6/22/2009)
Only further reinforcing the reason why particular critics avoid these brands...
Reply
stas peterson 2:47PM (6/22/2009)
Oh i feel bad fro all the downtrodden abulance chasing grifters.
While I do feel bad for the injured, I won't shed a tear for the legal grifters, who rob the injured of 33 cents on the dollar, and amass great fortunes by doing so.
Reply
xspeedy 3:03PM (6/22/2009)
Another nail in the coffin for GM and Dodger, I mean Dodge, I mean Chrysler.
Reply
the4thheat 3:04PM (6/22/2009)
I think it's bad for the brand image but they're legally allowed to dump these liabilities and it would have been done in a private bankruptcy anyway (if they even still existed in a private bankruptcy). So as far as business decisions go dumping liabilities is the whole point of a bankruptcy.
Of course it still sucks if you bought the old GM lol.
Reply
Julius 3:09PM (6/22/2009)
I wonder if those that have received judgements can file those lost payments on their taxes as overall losses. Then again, the majority shareholder IS the Government, so maybe they would have an issue with not "paying what's owed them"...
Reply
MajorGeek 3:09PM (6/22/2009)
Thanks again Ford. Not only do I LOVE my new F150 Platinum, I will see you next year for my 2010 vehicle. It will be Ford or foreign for me for as long as I can forsee and I have an 08 Challenger to deal with.
Those of you who hollered at me before when I said these companies should go south due to all the jobs that would be lost, now tell me again why we have sent them billions of our tax money, let them go bankrupt AFTERWARDS and now have to pay out of pocket if we bought one of their turds. Should have let the jobs go.
Told you so.
Reply
dave1w41 6:18PM (6/22/2009)
Geek,
This isn't about warranty..... it's about product liability judgements and cases against GM and Chrysler for injuries "caused" by their product. Most of these cases are entirely baseless crap that clogs our court system and is an anchor on these companies. If Ford could figure out a way to ditch the leeches and lampereys that inhabit their legal sea - they would do it in a hearbeat. Don't apply any moral superiority to Ford that isn't actually there.
MajorGeek 3:21PM (6/22/2009)
Uh, they didnt take billions in bailouts. They are making some nice cars. They are not filing bankruptcy on our dime. Ill apply that moral superiority all day long. Ford is being forced now to survive against two crap companies backed by the government and taxpayer dollars.
John 3:20PM (6/22/2009)
Yet one more group of individuals being screwed for the benefit of Ron Gettelfinger's golf course. So much for the party of the little guy.....
And I love the line about the government taking the "hard core capitalist" tack instead of the "socialist" one. What is hard core capitalism about the GOVERNMENT using its pretty much overwhelming force and influence (when you write the rules, you can change them any time you want.... or throw them out entirely) to force a bankruptcy through, disregarding most legal precendent and lawfully made contractual obligations?
Reply
Andrew 5:06AM (6/23/2009)
They are "hardcore capitalists" because they are thinking more about the health of their company than the people that will suffer from their decision. That is a far more "capitalist" attitude (or "investor" if you like) than a bleeding heart "socialist".
P.S. You Americans have no clue what "socialist" means anyway. Not that it really matters to us in Europe who are slightly more socialist.