June 5, 2014 at 2:44 pm

GM program established to compensate families affected by ignition switch defect

GM's compensation program will cover about 1.6 million 2003-07 recalled vehicles with the ignition switch defect and about 1 million 2008-2011 vehicles that may have been repaired with a recalled ignition switch. (Daniel Mears / The Detroit News)

Warren — General Motors Co. CEO Mary Barra said Thursday the automaker will compensate families who have lost loved ones and peoplewho have been seriously injured stemming from the company’s ignition switch defect in 2.59 million cars. The program could begin to accept claims on Aug. 1.

“We’re creating the compensation program because we think it’s the right thing to do,” Barra told reporters at a news conference. “We want everybody who’s either lost a loved one or suffered a serious injury to be part of the compensation program.”

Barra, who again offered sympathy for families who lost loved ones or who were injured, said the company is taking responsibility for its actions, has admitted to mistakes and is taking action to ensure recall issues like the ignition switch defect don’t happen again.

“I realize there are no words of mine that can ease their grief and pain,” she said.

GM did not have details on what criteria people would need to meet to apply for the program or how soon people accepted could receive payments. But GM President Dan Ammann said the participation in the program is voluntary for victims and their families.

Barra, who made the announcement during an employee town hall meeting at its Warren Tech Center, said the program will be independently handled by compensation expert Kenneth Feinberg. GM hired Feinberg in April to look at options for possibly compensating victims related to the recall. GM has said the defect is linked to 13 deaths, but lawyers say the death toll is much higher.

GM said it will be up to Feinberg to determine the size of the compensation fund.

“Our objective is to do the right thing and to go out and compensate all of those people who should be compensated,” Ammann said.

GM Chief Financial Officer Chuck Stevens, in a call with analysts, said the company will treat an estimated cost of the fund as a special item and hopefully included in second quarter earnings. Stevens said that figure then would be adjusted as claims are paid.

“Our expectation is as Mr. Feinberg works through finalizing the protocol is we’d like to be in a position to do the financial evaluation by the conclusion of the second quarter, which means up through the second quarter earnings release,” Stevens said.

“Our objective is to do the right thing and to go out and compensate all of those people who should be compensated,” Ammann said.

Feinberg, in a statement Thursday, said he will spend the next few weeks gathering advice and input on crafting terms and conditions.

“I have already drafted some preliminary compensation ideas and plan to share them in confidence over the next few weeks with lawyers, public interest groups, GM and others interested in the compensation program,” Feinberg said.

Barra, in a call with analysts Thursday, said GM will make public the number of fatalities and injuries that Feinberg determines. So far, GM has confirmed 13 deaths related to the defect.

“We are not saying the eligible parties will be limited to 13,” she said. “Mr. Feinberg will review the facts and he alone will determine the final number of eligible individuals.”

GM said the compensation program will cover about 1.6 million 2003-2007 recalled vehicles with the ignition switch defect and about 1 million 2008-2011 vehicles that may have been repaired with a recalled ignition switch.

The company expects details for the program guidelines, including where and how to apply for compensation, to be developed in the coming weeks.

mburden@detroitnews.com