GM makes some concessions to clear restructuring path

posted on:
June 29, 2009

author:
KURT NILAND

gm makes some concessions to clear restructuring path GM makes some concessions to clear restructuring pathThe public outcry over Chrysler and General Motors Corp. declaring bankruptcy and leaving vehicle owners high and dry on liability claims has been loud and intense, but new reports surfacing from GM indicate it has been heard … to a degree.

Product liability had become the albatross around GM’s neck as it sought to become a new company with a fresh start, unhindered by personal injury and death claims attached to the very cars it once produced. Victims, consumer groups, and several lawmakers threatened to block the sale of “Old GM’s” assets to “New GM.” However, by assuming responsibility for future product liability claims, GM’s restructuring will likely proceed without these major obstacles to block it.

Consumer advocacy groups have rallied for weeks against the restructuring plans that would have allowed New GM to leave its product liability claims behind with the Old GM. Claimants injured by Old GM’s cars would have had to pursue their cases against Old GM, a residual corporation with a smattering of assets that wouldn’t have the funds to settle product liability claims.

In its concession to consumer groups, GM said it would assume liability for the vehicles made by the old company, but it still would not settle claims by people already injured in defective GM vehicles. GM cited bankruptcy law and Chrysler’s precedent in its decision.

Some 300 people have pending claims against GM, nearly twice as many as Chrysler victims. These victims will likely be victimized a second time as their injury and death claims fall through the cracks.

“General Motors made safety decisions that affected the health and welfare of the citizens of our country. Everyone who purchased a vehicle was told that their GM vehicle was safe and if it wasn’t GM would stand behind its product. Far too often though, we discover that GM made decisions where profit was paramount over safety. Maybe this type of business environment has led to their financial demise,” said Beasley Allen attorney J. Cole Portis.

“Now, our great country is seeing a continuation of GM’s lack of care for its consumers.  GM wants to avoid responsibility for its failures that are detailed in over 300 current claims filed against them,” he says. “GM wants the bankruptcy court to extinguish all current claims against it. If General Motors and the Treasury Department are successful in their conspiracy to ensure that current victims of General Motor’s conduct do not receive a penny for their injuries, then our Country will have experienced a cruel act of injustice.”

Portis is urging the public to take action to prevent this miscarriage of justice, urging, “Please contact the White House and your congressman and let them know that GM’s failure to accept responsibility for its actions is unacceptable.”

The Ad Hoc Committee of Consumer Victims of Chrysler and GM issued a statement on Saturday, saying “the fact that ‘New GM’ will protect consumers injured by defective ‘Old GM’ is a positive development for public safety,” but claimed the plan falls short of helping those already hurt by GM vehicles.

Even with the concessions, GM still faces numerous protests to the sale. Objections have been filed by a group of unsecured bondholders, a number of cities and states, and several individual retirees and shareholders, all of whom will be hurt by the bankruptcy.

The U.S. government will have a 60 percent ownership of New GM. United Auto Workers will have 17.5 percent ownership, followed by the Canadian government at 12.5 percent and unsecured bondholders with 10 percent.

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