In response to claims of deaths and injuries related to its defective ignition switch, General Motors (GM) established a victim compensation fund, telling the public that it is uncapped. But in a recent financial report to its stockholders, GM says it estimates the fund will cost the company about $400 million. As we have stated, GM has recalled more than 17 million vehicles directly related to the ignition switch problem. With the number of vehicles involved, $400 million works out to just $22 per car. But as we have mentioned previously, the economic loss to the owners of the recalled cars isn’t even in the compensation fund.
GM has admitted the ignition switch defect is the cause of 13 deaths and 54 crashes, but independent consumer advocates believe the numbers are very much higher. Some experts say more than 300 deaths. Investigations have revealed GM knew about the ignition switch defect for 11 years before disclosing it to the National Highway Traffic Safety Administration (NHTSA) and the public. Hundreds of people have been killed or seriously injured, never knowing of the link between their GM vehicle and the crash, and that is a national tragedy.
This estimation to pay claims for death and serious, disabling injuries is totally inadequate, and is not consistent with a no-cap compensation fund. The fund doesn’t even include all of the recalled cars and there have been deaths and injuries involving those cars. As Lance Cooper, our partner in the GM litigation, says:
The $400 million is an arbitrary number that should not matter if GM has truly given Ken Feinberg complete discretion to make awards. If throwing out a firm number is supposed to send Mr. Feinberg a message, then GM is, once again, saying one thing but doing another. Obviously, GM is guessing what it may have to pay under the plan unless they have an understanding with Mr. Feinberg, which I do not believe they have, given his public representations to date. What is most important is that Mr. Feinberg do the right thing and make full and complete awards for all eligible claims regardless of the ultimate total amount awarded. If he does that, given our understanding of the number of claims, the number will certainly wind up being much higher than $400 million.
GM’s estimated cost of the compensation fund is especially low considering GM is currently trying to get the Bankruptcy Court to enjoin victims from filing claims against “Old GM” related to its defective ignition switch. This would force more victims to use the victim compensation fund, shutting them out of the right to trial by jury, thus avoiding punitive damages. GM says Mr. Feinberg has full decision-making power over the fund, as to who qualifies and how much they are awarded. GM says both to the American people and to Congress that it will take care of all of their victims. But the question on the table is: Can GM be trusted to live up to that promise? Considering that the automaker misled the Bankruptcy Court, NHTSA, and the public for years including its own customers, hiding a known defect, and the fact that death and injuries had been caused by the defect, I seriously doubt that GM can be trusted.
When GM CEO Mary Barra addressed her employees and the public June 5, she expressed sympathy for victims and their families, saying, “… we are going to do the right thing for the affected parties.” Now it appears that somebody else at GM is calling the shots on the automaker’s litigation strategy. In any event, it’s time for GM to quit playing games and come clean about its massive safety problems.
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