General Motors freed of some ignition-switch related lawsuits image

According to a U.S. bankruptcy judge ruling announced on Wednesday, the largest US automaker and the third biggest in the world will avoid the numerous lawsuits that have claimed it concealed an ignition-switch flaw for years, ultimately leading to a recall of 2.6 million vehicles.

Numerous plaintiffs that associated in large lawsuits have said the company allegedly broke the consumer’s constitutional rights by withholding information about the defective part. On the other hand, General Motors argued that today it’s an entirely different automaker from the one that hid the flaw and thus should be protected from claims predating its 2009 Chapter 11 bankruptcy exit. U.S. Bankruptcy Judge Robert Gerber took a decision that could lead to the US automaker avoiding potential liabilities worth billions of dollars, as well as associated costs from going through all the lawsuits. The carmaker can still be held accountable for the actions it took after the government- assisted bankruptcy bailout.

The Judge ruled that plaintiffs will now have to address the courts citing as a defendant the financially limited “Old GM,” the shell company that retained General Motors assets discarded by the automaker during its bankruptcy. That company only has assets worth around $9.25 billion, while the plaintiffs have so far laid claims for a total of $32 billion – meaning they could only recuperate around 29 cents on the dollar. Judge Gerber added that economic-loss plaintiffs could still fight in court against the “new” GM entity – but only for wrongdoings that can be proved to have happened post-bankruptcy.

Via Reuters