GM Recall Claims Are Coming in and It’s Not Pretty
In the wake of the massive rash of recall campaigns that General Motors (NYSE:GM) has levied throughout the past nine months or so, the first indications of exactly how much responsibility is going to fall on the company is starting to emerge.
According to a report from Bloomberg, it appears that as many as 125 people could have been killed as a direct result of GM’s defective ignition switches. That’s just from the first group of claims from the company’s compensation fund for victims, meaning it could grow even higher. GM hired lawyer Kenneth Feinberg to validate the claims, and he said that so far, 19 families will be receiving compensation.
“GM was asking its engineers can you definitively say ignition switch defects caused the accident,” Feinberg told Bloomberg. “Our standard, as you know, is much more liberal. It’s easier to apply. It’s a legal standard, was the ignition switch the proximate cause, a substantial likelihood as the cause of the accident.”
So far, GM has set aside between $400 million and $600 million in its compensation fund, but the exact amount that the payouts will amount to won’t be known for some time until every claim has been substantiated. The 19 families that are due to receive settlements are a very small portion of the overall 445 claims. Of those 445 accidents, 58 involved serious injuries, and 262 of required that victims be hospitalized.
The victim’s fund is limited to victims of crashes of the first 2.6 million vehicles GM recalled at the beginning of the year in which the air bags failed due to cars shutting off while driving down the road. The genesis of the issue with the ignition is that certain components of the ignition could come loose and effectively cause the vehicle to turn off — along with the power. With the power off, cars that are still currently traveling down the road lose power steering and airbags deployment, as the car needs to be operating for those features to work.
That initial recall included cars like the Chevy Cobalt and Saturn Ion, among others.
From Feinberg’s perspective, figuring out which victims actually receive compensation is a fine science. So far, in addition to the 19 deaths he has identified, he has also found at least four cases in which victims suffered very serious injuries, including paraplegia, quadriplegia, and double amputation, according to CNN.
In order to find out whether or not GM was responsible, Feinberg is looking at each claim on a case by case basis, applying a legal standard to determine his findings. “GM had its engineers determine, with certainty, that there were 13 deaths caused by the ignition switch defect,” Feinberg said. “The program we are administering is much easier to satisfy.”
By the terms that GM has defined, the faulty ignition switch has to be found to be the cause of the accident. The 13 mentioned above fit that criteria. For those injured, GM plans on giving compensation ranging from $20,000 all the way up to $500,000.
The ignition switch recall turned out to be the proverbial tip of the iceberg for GM, which has since gone on to announce several other recalls, although none quite as serious. The news has levied a serious hit against GM in the eyes of the public, and it has suffered on the bottom line as a result. Even still, sales for Chevrolet vehicles in particular haven’t suffered nearly as much as one might expect.
Thankfully for GM — but not so much for consumers — other auto manufacturers have had its fair share of difficulties this year as well. Toyota (NYSE:TM) has issued a handful of sizable recalls, including up to 130,000 Tundra trucks just last week. News has also recently broke that another huge recall may be on the way, this time from airbag manufacturer Takata. Apparently, its airbags can malfunction during deployment, sending projectiles flying at passengers. There have been deaths linked to these airbags, and its effects have been felt by up to 11 different manufacturers.
It looks like GM may be able to lay low for a little bit while other auto makers’ faults take the headlines for the time being, giving the company more time to sort out the claims made by victims of its faulty ignition switches. A break from the limelight may be exactly what GM needs to regroup and prepare for the next model year, effectively putting an ugly 2014 behind it.