GM Being Blindsided By The Number Of Lawsuits

 

 

General Motors Co. (GM), which as we all know has been under intense media, congressional and courtroom scrutiny over fatalities caused by its defective ignition switches, is now defending 104 death and injury lawsuits brought by victims whose accidents were caused by defects in the company’s cars. Another 108 suits seeking class action status over depressed car prices are pending in federal and state courts. GM released the numbers in early February in a filing with the U.S. Securities and Exchange Commission (SEC). The company is also the target of investigations by state and federal agencies. GM had this to say in the SEC filing:   Such lawsuits and investigations could in the future result in the imposition of damages, substantial fines, civil lawsuits and criminal penalties. We cannot currently estimate the potential liability, damages or range of potential loss as a result of the legal proceedings and governmental investigations.

GM spent $2.9 billion last year on recalls and loaner cars after calling in 36 million vehicles for repairs worldwide. Recalls in the United States were a record 26.9 million. GM recalled 2.59 million vehicles because the ignition switch in some cars can slip out of the “run” position, shutting off the engine and safety features including air bags while the car is moving. GM now admits to at least 57 deaths having been linked to the defective switch. Based on what we have learned in the GM litigation, we believe the number to be much higher. The program set up by GM to settle claims by victims of accidents related to faulty ignition switches in the U.S. has paid out $93 million so far. We have learned that GM estimates the settlement program will eventually cost $600 million. GM had net income of $2.8 billion in 2014.

GM received another 33 claims for compensation for ignition switch defects in its cars during the week of Feb. 11-22, bringing the total to 4,345. This comes from a report by Ken Feinberg, the administrator of the company’s compensation program. At press time, GM had received 479 claims for death, 292 for catastrophic injuries and 3,574 for less-serious injuries requiring hospitalization. This puts the total injury claims at 3,866. According to the Feinberg report, the number of claims found to be eligible for compensation so far is 151. So far, Mr. Feinberg has determined that 57 deaths, nine severe injuries and 85 other injuries are eligible for compensation.

The report also said 666 claims have been deemed ineligible, while 1,457 are still under review. Another 1,104 lacked sufficient paperwork or evidence and 967 had no documentation at all. The deadline for filing claims was Jan. 31, but any claims postmarked by that date are eligible for review.

Detroit-based GM was aware of faulty ignition switches on Chevrolet Cobalts and other small cars for more than a decade, but it didn’t recall them until 2014. Fienberg’s office has said that it likely will take until late spring to sort through all of the claims it has received. It should be noted that those who agree to payments give up their right to sue the automaker.

While GM set aside $400 million to make payments, it has now conceded that the payouts could grow to $600 million. GM placed no cap on the amount of money that the Feinberg fund can spend. At the end of last year, Feinberg had paid out $93 million in claims, according to GM’s annual report. But it should be noted that GM still faces 104 wrongful death and injury lawsuits due to the faulty ignition switches, as well as 108 class-action lawsuits alleging that the ignition switch debacle reduced the value of customers’ cars and trucks. The lawsuit filed by Ken and Beth Melton got all of this started and it’s the one case—out of hundreds—that GM has no answer for.