Lawsuit Slaps a $10 Billion Claim on GM’s Alleged Lost Vehicle Value

GeneralMotorsDetroit

One of the first of what may likely be many lawsuits has been cast against General Motors (NYSE:GM) for the alleged loss of resale value of its 20 million recalled vehicles globally, because the recall dilemma has gotten so out of hand. The price tag on the table for GM to make the complaints of “as many as 15 million GM car owners” disappear is to be $10 billion, maybe more. 

“GM came out of bankruptcy making claims that the company would produce high-quality, safe vehicles, a branding position that served GM well, and that consumers relied upon,” said Steve Berman, a managing partner of Hagens Berman Sobol Shapiro, the firm bringing forth the suit. “Now we know that contrary to those claims, GM was instead wallowing in a dysfunctional culture more concerned about hiding defects and safety flaws than living up to its purported brand promise.”

Hagens Berman is hoping that GM will compensate the 15 million or so affected drivers for damage to its brand and reputation, as the vehicles are supposedly worth less on a resale basis since others will be allegedly less willing to pay better prices for vehicles with such a long string of safety infractions. 

Greg Martin, a GM spokesperson, declined to comment on the lawsuit when speaking with Reuters, but he did add that, “Customers and analysts recognized the strength of the GM brand and that the market recognition has resulted in increased sales, transaction prices and residual values.” To his credit, GM’s sales figures have been seemingly unperturbed by the record-setting levels of safety recalls, even on newer models. 

Source: Thinkstock

Source: Thinkstock

Reuters noted that the suit illustrated a “‘disturbing picture’ of GM’s approach to safety, including how ‘in truly Orwellian fashion’ the largest U.S. automaker would encourage employees to avoid words such as ‘bad’ and ‘failed,’ and use euphemisms such as ‘issue’ or ‘condition’ rather than ‘problem’ when discussing defects,” the site said.

“GM’s egregious and widely publicized conduct and the never-ending and piecemeal nature of GM’s recalls has so tarnished the affected vehicles that no reasonable consumer would have paid the price they did when the GM brand meant safety and success,” the suit said, as Berman added in the announcement that “had a purchaser of a 2010 Camaro known that the manufacturer had gone to such great lengths to hide safety defects on other GM cars, there is no way that purchaser would have paid full price; the economic reality is that all GM owners are bearing the costs of GM’s actions.”

The primary plaintiff is Anna Andrews, who lives in La Quinta, California. Reuters quoted her as saying that said she would not have bought her used 2010 Buick LaCrosse, or would have paid less for it, had GM done a better job of disclosing vehicle defects. 

To date, GM has initiated 40 recalls spanning over 20 million vehicles in the first six months of the year, and it’s possible that the recalls will continue as GM continues to clean out the house and rebuild from the ground up. CEO Mary Barra once again appeared before a House subcommittee on Wednesday, though she didn’t shed any especially bright light on the situation’s developments.

More From Wall St. Cheat Sheet:

More Articles About:   , , , ,