Arizona sues GM over alleged drop in car values

David Shepardson and Melissa Burden
The Detroit News

Arizona’s attorney general is suing General Motors Co. for about $3 billion, saying it sold millions of unsafe vehicles and should be forced to compensate the state over the alleged lost value of vehicles.

The lawsuit was filed Wednesday by Attorney General Tom Horne under the Arizona Consumer Fraud Act and seeks about $3 billion from GM based on the about 300,000 GM vehicles registered in Arizona that have been recalled this year.

But that money wouldn’t go to owners of the cars and trucks; instead Horne in a telephone interview said if successful in the suit, money recovered would go to the state and could fund things such as education. He said any recovery likely would be less, but still substantial.

The lawsuit makes Arizona the first state to sue GM over allegations the company endangered motorists, concealed safety defects and sold consumers cars that have dropped in value. The suit seeks up to $10,000 for every violation of the Consumer Fraud Act, seeks a court order barring GM from further alleged improper conduct and an order forcing GM to give up unspecified profits from the sale of those cars.

“(GM) manufactured and sold millions of vehicles that were not safe, including hundreds of thousands in Arizona, and it failed to remedy serious defects in millions of older GM-branded vehicles,” alleges the complaint filed in Arizona Superior Court in Maricopa County.

The automaker said it had reviewed the complaint and disagrees. “It misrepresents the facts, the performance of our vehicles and our work to ensure the safety of our customers,” GM said in the statement. “We intend to vigorously defend ourselves.”

Horne said state lawyers studied allegations against GM brought forth by the Hagens Berman law firm in Seattle — outside counsel who signed the new lawsuit and who are representing plaintiffs in class-action suits against GM related to the ignition switch defect. Horne said Arizona lawyers found it was a valid suit and he opted to break away from a group of 48 state attorneys general investigating GM and file a suit now.

A new attorney general, Mark Brnovich, takes over in January and it will be up to him whether to continue the lawsuit against GM, Horne said.

The suit claims that GM concealed known defects and enticed Arizona consumers to buy GM vehicles under a false pretense that they were safe.

GM faces investigations by the Justice Department, Securities and Exchange Commission and Canada over its delayed recall of 2.59 million older Chevrolet Cobalts, Saturn Ions and other small cars for faulty ignition switches now linked to 33 deaths and 39 serious injuries. Defective switches in the cars can allow the key to accidentally turn off the engine, disabling power brakes and air bags.

The lawsuit says the defects go beyond ignition switches. “The defects affected 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,” it said.

The Arizona suit alleges the “New GM,” formed as it emerged from bankruptcy in 2009, was aware of the ignition switch defects. “New GM was not born innocent,” according to the complaint.

It cites several estimates of lost value in 2013-model cars, including a more than $1,700 drop for a Cadillac XTS and a $357 drop in value for a 2008 Chevy Cobalt.

Earlier this year, the Orange County, Calif., district attorney sued GM under its state consumer protection statutes for economic damages, civil penalties and punitive damages.

Michigan Attorney General Bill Schuette in September told The Detroit News that Michigan was taking a leading role in investigation of GM’s recall and safety procedures. Schuette is among a handful of state attorneys general on an executive committee overseeing the investigation.