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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]


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  • 32 Comments
      • 5 Years Ago
      This is so wrong, hopefully it will be overruled in court.
      • 5 Years Ago
      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.
        • 5 Years Ago
        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.
      • 5 Years Ago
      Greasy....
      • 5 Years Ago
      Just one more reason my next car is VERY likely to be a Ford.
      • 5 Years Ago
      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.
      • 5 Years Ago
      This whole thing will end up in the Supreme Court in 5 years or when Obama is gone.

      You CANNOT screw bond holders.

      You CANNOT escape liability.

      You CANNOT screw over the taxpayers.


      The U.S. government having funded all this WILL pay every bond holder BILLIONS.

      THIS WHOLE THING IS ILLEGAL. What is most disturbing is very few Americans see what is happening or care! Complete insanity. I get you think Obama is the savior, but is it worth flushing the Constitution, freedom and liberty down the toilet?

      Wake up idiots.

      Just wait.
        • 5 Years Ago
        Ignoramus.
        The only way this will get to the Supremes is an application for certiorari. And IMHO it will be turned down. I guess that counts for getting to the Supremes.
      • 5 Years Ago
      I would think that the New GM would at least be held responsible for claims levied against Chevrolet, Buick, GMC and Cadillac.
      • 5 Years Ago
      Great, now I'll never get this Corvair sold!
      • 5 Years Ago
      LOL...look at the ATTORNEYS that are bitching they won't get their fees! Much less the poor SOB clients that have been damaged.
      • 5 Years Ago
      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.
      • 5 Years Ago
      What a horrible move for GM. Here I was piling the hate on Ford last year. Oddly enough, Ford's looking better and better.
      • 5 Years Ago
      wow, what companies really want to do business with these companies if they get out of paying for things that easy.
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