GM faces $2B hit if bankruptcy protection provision fails

General Motors could face settlements totaling near $ 2 billion if US bankruptcy judge Robert Gerber rules that executives knew the company might be liable to owners of cars with faulty ignition switches built before its July 2009 bankruptcy. An additional $500 million, according to calculations by Bloomberg News, could be added to that total for vehicles with bad ignition switches that were built post-bankruptcy.

The big question of whether or not 'New GM' is liable for defects on cars built before its bankruptcy filing will be answered by Gerber, likely early in 2015. The decision will determine if owners of recalled vehicles will be compensated for lost value to vehicles they own due to recall and safety worries. Two separate class-action lawsuits – one on behalf of owners who bought vehicles after the automaker's bankruptcy and one for those who purchased before – hinge on the results of Gerber's ruling.

Importantly, those two class-action suits could trigger further litigation, should Gerber decide that GM's protection from pre-bankruptcy obligations and liabilities isn't completely solid. In other words, this ruling could open a whole floodgate of financial pain for General Motors moving forward – a total that could exceed $2 billion, say Bloomberg. Stay tuned.

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