GM Faces $10B Lawsuit Tab Following Its Federal Fines
General Motors (NYSE:GM) CEO Mary Barra isn’t leaving any stone unturned in the company’s newfound quest to right its past wrongs. The push for change at the automaker is so deep that even the legal department didn’t escape the shakeup. The news comes as GM stares down a gun loaded with $10 billion worth of lawsuits from upset owners of its recalled vehicles, spread over 79 individual lawsuits.
However, a panel of judges are working on how to give those 79 suits class-action status in order to combine them into one. Autoblog reports that “most of the 79 suits allege that the ignition switch problem has lowered the resale value of the recalled vehicles,” though some are arguing directly against General Motors’ bankruptcy defense (which argues that the company, as successor to Old GM, remains liable). One suit outright accuses the Old GM of committing “deceptive and unfair acts and omissions,” the publication said.
The suits follow a $35 million fine imposed on the company for delaying the recall of 2.59 million vehicles for the now-infamous faulty ignition switch. GM General Counsel Michael Millikin has brought on board a legal adviser to work with the heads of global safety and vehicle development to allow information about defects to be shared more quickly between departments, sources told Bloomberg.
The news service added that shifting General Motors’ legal culture won’t be as straightforward as moving heads around to facilitate better dynamics. “Transforming GM’s legal culture won’t be easy because in-house lawyers have spent their careers battling to keep potentially incriminating safety information out of the hands of trial lawyers,” Bloomberg reports. “In one case, lawyers tried to bury an internal memo that calculated the cost to the automaker of fuel-fed fire deaths.”
Barra has already overturned the communications, public policy, human resources, and engineering departments since taking the helm in January. The book value for the used cars affected by GM’s widespread recalls is really the focal point for the lawsuits against the company, but The Detroit News — citing data from ALG, a company that predicts future vehicle values — says that the recalls haven’t seemed to have a large immediate impact on their value. ALG found the Cobalt transaction price has fallen $300 compared to the average of comparable vehicles since the February recall, and while unfortunate for the owners, it’s not exactly an amount worth suing over.
“Similar to Toyota’s widespread ‘unintended acceleration’ recall from 2009, GM has seen short-term impacts to its resale values,” Eric Lyman, the ALG vice president of editorial, said in a statement, per The Detroit News. “It’s unlikely there will be any long-term effects, however, and ALG has no reason to forecast lower values than previously projected.”
He added: “In fact, the data ALG has recorded since 1964 has proven that few ripples in the market have substantial long-term sales implications. We expect GM’s values to mimic what happened to Ford and Toyota after their mass recalls, with the affected vehicles hurting little more than GM’s reputation for several years.”
Whether the overhauling measures will cut deep enough remains unclear, but there are concerns now over General Motors’ ability to weather many billions of dollars in lawsuits, plus the costs of recalls and the costs of restructuring. The idea is that GM will emerge as a stronger entity once the storm passes — but will it?