Consumer groups object to GM bankruptcy

As expected, today plaintiffs’ lawyers and attorneys general for eight states filed objections to the General Motors bankruptcy, saying it may deny hundreds or thousands of consumers access to due process if they are injured in or by vehicles sold by General Motors before the bankruptcy. (Read: "What does the GM bankruptcy mean to you?")

As in the Chrysler sale, GM’s Chapter 11 filing under “Section 363” of the bankruptcy code would allow the new GM to emerge “free and clear” of any liabilities for its older cars (although the company has said it will honor basic warranties for those cars that still qualify, and the federal government is backing up those warranties during the restructuring.)  In the Chrysler bankruptcy process, certain lemon law claims were protected, while others were not. (Read: "Automaker bankruptcies may limit liability and lemon-law claims."

Critics say that nullifying all lemon-law and product liability claims allows GM to walk away from responsibility for its products and will make second-class citizens of uninformed or poor consumers who drive older GM and Chrysler vehicles. And by avoiding consumer protections that are standard with other automakers, they say it gives consumers a reason to avoid buying GM or Chrysler products in the future.

While there are an estimated 10 million used Chryslers on the road today, the number for GM is as high as 30 million. Sean Kane, CEO of Safety Research and Strategies, estimates that 3,400 more Americans may be injured or killed in GM or Chrysler vehicles in the year after the two companies emerge from bankruptcy.

While both companies would be liable for launching recalls and repairing defects in these vehicles, under current provisions they would not be responsible for injuries caused by those defects. In the Chrysler bankruptcy deal, New Chrysler will take responsibility only for lemon law claims on vehicles produced by the pre-bankruptcy Chrysler within the past five years.

The two companies combined account for a disproportionate number of claims against automakers, 47 percent, while their combined market share is just 38 percent.

To make matters worse, recalls are often based on liability claims filed in court. So if those cases can no longer be filed, there is concern that some defects may no longer trigger recalls.

We hope that as GM moves through the bankruptcy process, legitimate consumer claims do not become casualties of the restructuring.

—Eric Evarts

Read "What does the GM bankruptcy mean to you?" To get more answers to the most common questions and concerns about GM’s bankruptcy, visit our Auto Crisis hub.

Also see the Detroit News report: "Bankruptcy takes away plaintiffs' day in court."

Comments

[Cale]

There are a lot of "uncharted waters" being crossed with these bankruptcies. A long term ownership nature of the product and the inherently dangerous nature of driving make for very unique "challenges" for the automakers and the public that buys them.

I think it is important not to loose sight that the point of saving GM and Chrysler (through bankruptcy protection) is to have a very real and positive impact on the communities where these cars are built and sold.

[Julie Johnson]

Of course they are objecting. This fraud of a bankruptcy is a ripoff off taxpayers. Let GM go into a regular BK so they can have a chance to rebuild into a good car company. This fake Bk is getting rid of the people who sale cars, getting rid of the people who put up the money, yet keeping $70/labor. Currently there are lots of unimployed workers who would like a job in the $20/hr range. This would be a great savings. This 363 gets rid of the good people, and keeps the worthless. Totally confused over how this bankruptcy does anything but prolong the same problems. Please let them restructure in real bankruptcy, as it will give GM a real chance of success.

[IvanG]

The nature of bankruptcy is that even existing creditors' claims are imparied or lost completely. Yet readers want people who do not even currently have claims to receive full compensation when those claims arise. That makes no sense.

The alternative to reorganization under Chapter 11 is liquidation under Chapter 7. In a liquidation, the consumer claims likely would receive no value because they accrued after the bankruptcy filing.

[Ann]

GM does not care who they pay or how much, as the money comes from US Taxpayers. They have not skin in the game, as no matter how much, cost is passed along to the Treasury. Taxpayers will lose 100's of billions of dollars, GM will lose nothing. Keep a auto plant open, but no build cars, FINE, pass the cost to the taxpayers, workers furlowed, sitting home with pay, pass the cost to the taxpayer, need more lobby money, send bill to taxpayer, cost overruns, send bill to taxpayer, lawsuits, send bill to taxpayers. Please change this to a regular bankruptcy.

[WilliamR]

I don't see how I can buy another car from GM knowing that they can't guarantee a warranty or a claim. The people who have claims pending will have to fight it out with the OLD GM for relief. What will stop the NEW GM from defaulting on any new claims and warranties.

No more GM cars (OLD or NEW)for me. GM you just lost a loyal customer.