GM’s ignition-flaw toll seen rising

Automaker puts deaths at 12; lawyer to challenge immunity

The death toll related to an ignition flaw in eight small-car models that General Motors Co. sold a decade ago is likely to climb, lawyers and safety advocates said.

Automakers often make upward revisions to fatality figures related to recalls as they uncover fresh information, while attorneys are racing to line up plaintiffs seeking compensation for purported wrongful deaths or injury. GM’s liabilities are also poised to rise as lawyers and safety advocates press the biggest U.S. automaker to pay restitution to victims even from before GM’s 2009 bankruptcy reorganization, which shielded the new GM from the old company’s liabilities.

GM, which said it has identified 12 deaths in connection with the recall of 1.6 million models made in the mid-2000s - including some Chevrolet Cobalts and HHRs and other Opel, Pontiac and Saturn models - has said it continues to review data and information related to the recall.

“For every incident that gets reported to the automaker, there are usually nine or 10 more,” said Clarence Ditlow, executive director of the Washington-based Center for Auto Safety, a consumer advocacy group. “You can expect the number of deaths associated with this recall to rise.”

That happened with Toyota Motor Corp. As allegations of unintended acceleration in some 2009 and 2010 vehicles generated publicity and congressional hearings, the number of deaths the government tied to 10 million recalled Toyota and Lexus models rose from a handful to at least 59. More wrongful-death lawsuits have been filed since the hearings ended.

The GM recall, and the multiple U.S. investigations that it has spurred, come as the company has sought to shed the “Government Motors” stigma tied to its $49.5 billion U.S. bailout. Since the U.S. sold its last GM shares in December, the company has named Mary Barra as chief executive officer, making her the first woman to lead a major automaker.

A lineup of new vehicles helped improve GM’s reputation among consumers and raised quality to record levels, according to reviewers including Consumer Reports magazine.

The biggest risk to GM from the recall so far is reputational, Fitch Ratings Senior Director Stephen Brown wrote in a report Friday. The recall costs to fix vehicles may be less than $100 million and the fines from the National Highway Traffic Safety Administration are capped at $35 million, he said. Costs for lawsuits and settlements are still unknown and may be a risk, he said.

Because GM no longer sells the recalled models, customers’ biggest concerns will be over how those inside the company address similar issues today, Brown said. “GM’s management will need to convince potential customers that the internal issues that led to the recall delay have been rectified,” he wrote in the report.

GM has apologized for its delay in recalling models with faulty ignition switches that can in some cases be turned off when the key is jostled or weighed down by heavy objects on its ring. That, in turn,shuts off the engine and cuts power to the airbags. “The process employed to examine this phenomenon was not as robust as it should have been,” GM has said in statements, adding it is studying ways to improve how it addresses defects.

That has drawn attention from trial lawyers.

One has said he plans to challenge GM’s immunity for any pre-reorganization crashes, which would require asking the judge who oversaw the U.S.-backed bankruptcy of GM to reconsider its terms, including the liability shield.

The time to revoke court orders dating from GM’s bankruptcy “has long passed,” said the automaker’s bankruptcy lawyer, Harvey Miller of Weil Gotshal & Manges LLP. “They cannot be reopened at this point in time.”

This week, Ditlow and Joan Claybrook, a former National Highway Traffic Safety Administration administrator, sent a letter to Barra asking her to establish a $1 billion fund to cover losses for victims and their families for any claims that have been extinguished by the bankruptcy, even beyond the ignition complaints. GM hasn’t responded to that request.

GM has settled claims for an undisclosed amount regarding a 2005 death in Maryland, before its bankruptcy, and last year in connection with a 2010 death in Georgia.

The automaker’s statement on the crashes suggests it may eventually help more drivers than required under its bankruptcy reorganization.

“GM is focused on ensuring the safety and peace of mind of our customers involved in the recall,” GM said in a statement.

“It is true that new GM did not assume liability for claims arising from incidents or accidents occurring prior to July 2009. Our principle throughout this process has been to put the customer first, and that will continue to guide us.” Information for this article was contributed by Jeff Plungis of Bloomberg News.

Business, Pages 29 on 03/15/2014

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