GM Sued for $10 Billion Over Losses on 27 Million Cars

General Motors Co. (GM) was hit with its biggest lawsuit so far over serial recalls, brought on behalf of drivers of 27 million vehicles seeking more than $10 billion in compensation for fallen car prices.

The would-be class action against GM seeks to represent owners who bought or leased a recalled car from July 2009 to July 2014 and still have it, or sold it after mid-February when the recalls started, or had an accident that destroyed it after that date. More than 20 million customers could join the suit, Steve Berman, one of the plaintiffs’ lawyers, said in an e-mail today.

Detroit-based GM spurred the price drops by hiding at least 60 serious defects in around 27 million vehicles sold in the U.S., according to the complaint filed yesterday in federal court in Manhattan against “New GM,” as the carmaker became known after its 2009 bankruptcy and government bailout.

“New GM repeatedly proclaimed that it was a company committed to innovation, safety and maintaining a strong brand,” according to the filing. “The value of all GM-branded vehicles has diminished as a result of the widespread publication of those defects and New GM’s corporate culture of ignoring and concealing safety defects.”

Hundreds of individual car-price complaints against GM were combined in two separate class actions, according to a Web post by Berman, of Hagens Berman Sobol Shapiro LLP.
Second Suit

The larger suit concerns cars made after the bankruptcy.

A smaller one, focused on ignition-switch faults in cars made before the bailout, may be curtailed by a bankruptcy judge’s ruling next year on whether older claims for accidents and economic losses are allowed. GM has asked the judge to rule that his earlier orders, which enabled the U.S. to rescue the stumbling company, bar most of the claims over old cars.

According to the suits, 2010 and 2011 Chevy Camaros lost $2,000 in value as a result of recalls. The price drop of the 2009 Pontiac Solstice is $2,900.

GM said in an e-mailed statement that it would “vigorously defend against plaintiffs’ claims that GM vehicles have reduced resale value.”

The number of fatalities tied to the ignition-switch defect has more than doubled from initial company estimates, based on the latest data from the automaker’s compensation program aimed at settling rather than fighting such suits.

The victims’ fund, run by lawyer Kenneth Feinberg, said this week that it approved 27 payouts as of Oct. 10 for cases of death. At least 151 other fatality claims are under review.
Victim Fund

GM, the largest U.S. automaker, said in July that it was setting aside $400 million to $600 million to pay victims. Feinberg has received 1,371 claims in total, including 1,193 for non-fatal injuries. Twenty-five of those injury claims so far have been ruled valid.

An investigator paid by GM this year said that for at least a decade the company failed to promptly resolve complaints from consumers, dealers and others about abnormal crashes in the Chevy Cobalt and Saturn Ion and later replaced the faulty ignition switch without alerting the public or changing the part number as required.

The defective switches could be inadvertently shut off when jarred, cutting power to the engine and deactivating air bags.

GM produced “a grossly inordinate number of vehicles with serious safety defects,” according to the complaint, and until this year “was successful in concealing both its disregard of safety and the myriad defects that resulted from that disregard.”
‘Safety System’

The 2014 recalls covered “virtually every safety system in GM-branded vehicles, including but by no means limited to the air bags, seat belts, brakes, brake lights, electronic stability control, windshield wipers, sensing and diagnostic modules, and warning chimes,” according to the complaint.

Lawyers for the customers cited the administrator of the National Highway Traffic Safety Administration saying the automaker withheld documents and created “firewalls” inside the company to stop employees from “connecting the dots” on safety issues and defects.

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