This year has not been the best year for auto manufacturers. It is currently on pace to be a record year for recalls, with the most recent announcements over the defective Tanaka airbag.
General Motors (GM) has recalled millions of vehicles due to the ignition switch defects, which could cause the car’s electrical system to shut down while the car is in motion and render the airbag non-functional in the event of a collision.
As a result of the massive GM recalls, most affected GM-vehicles have seen a loss in value. A class action lawsuit has been filed on behalf of GM owners to recover some of this loss, which the lawsuit attributes to a “corporate culture of ignoring and concealing safety defects.”
These issues are made more complex because of the variability of potential liability for vehicles manufactured prior to the GM bankruptcy. A suit involving those vehicles could be disallowed if the bankruptcy judge rules in favor of GM. Bankruptcy typically eliminates liabilities for a company that occurred prior to it reemerging from a Chapter 11.
The lawsuits allege that GM built “a grossly inordinate number of vehicles with serious safety defects” and that most of the safety systems in their vehicles were included in various recalls.
They also allege that GM structured it internal operations in such a way as permit these safety defects to fester. This year, the company released its own internal report that was scathing to the management, citing examples of a “silo” culture, where groups within GM had no idea of problems or issues relating to safety matters in other groups.
A class-action lawsuit like these may be the only way for millions of GM vehicle owners to obtain compensation for the value reductions in their vehicles caused by GM’s negligent management of safety issues.
Bloomberg.com, “GM Sued for $10 Billion Over Losses on 27 Million Cars,” Linda Sandler, October 15, 2014