General Motors Co. (GM) urged a judge to reject lawsuits demanding $10 billion for the lost value of millions of cars recalled this year for ignition-switch fixes and other flaws, reported Bloomberg.
The automaker yesterday told U.S. Bankruptcy Judge Robert Gerber in Manhattan that he freed it from responsibility for past errors when he signed off in 2009 on a $49.5 billion government bailout. In a court filing, GM challenged customers’ claim that it forfeited immunity by hiding a long-known defect and exposing them to accidents and financial losses.
If Gerber scraps or adjusts earlier rulings, the judge might let customers fight for billions of dollars in damages and penalties, or at least the lost value of their cars. If Gerber sides with GM, customers suing over the defect might get nothing or be sent to old GM, the corporate remnant the automaker left behind when it reorganized. That company has little money to pay claims after being saddled with the carmaker’s worst assets and liabilities.
“New GM had no involvement” in what old GM, which was responsible for switch defects, told customers about them, the company said in the filing. “New GM purchased old GM’s core assets in good faith.”
GM’s filing yesterday is the first step toward a 2015 decision by Gerber on whether his earlier rulings on immunity still apply after an investigator found that GM engineers and lawyers knew about the defect for at least a decade. A report by Anton Valukas, a former federal prosecutor, spurred federal probes, a record fine and more than 150 lawsuits.
Separately, a federal judge in Manhattan yesterday set a January 2016 trial date for a group of GM’s accident victims, said customer lawyer Bob Hilliard.
Recall Crisis
GM has responded to a recall crisis by starting to settle claims for people who had accidents in older cars with faulty switches. The Detroit-based automaker has said it will fight all other suits. It has asked Gerber to reject non-switch claims for pre-bankruptcy accidents as well as money-loss claims and penalties over ignition-switch defects in vehicles made before bankruptcy.
About 130 car-price lawsuits against GM have been combined in two class actions in U.S. District Court in Manhattan. One group suit is over cars made before the bankruptcy, and the other is for automobiles purchased afterward. Of 30 million cars represented in the suits, 14.7 million were made by old GM, the carmaker said.
While customers in the two suits don’t say how much they want for price declines, GM said their “alleged reductions in value” since the recall imply actual damages of $7.4 billion. That’s without counting the punitive damages that most customers want.
In its filing yesterday, GM focused on cases over older cars.
Car owners haven’t proved their contention that new GM owes them money because old GM denied customers a chance to put in claims during the bankruptcy, the automaker argued. The company also objected to customers’ “opaque hypothesis that they could have coerced new GM” into compensating them if they had demanded it at the time.
