‘Old GM’ trust says it shouldn’t pay ignition claims

David Shepardson
Detroit News Washington Bureau

Washington — The trust representing creditors of the bankruptcy General Motors Corp. estate asked a federal judge to reject efforts by “new GM” to pay ignition switch claims using funds set aside for creditors of the “old” Detroit automaker that filed for bankruptcy in 2009.

It’s the latest salvo in the battle over who — if anyone — will pay billions in claims filed arising from GM’s actions before its 2009 bankruptcy.

“These issues will be decided by bankruptcy court,” GM spokesman James Cain said. “Our motion to enforce the sale order sets forth the company’s positions on these issues, which we continue to believe are correct.”

Detroit-based General Motors Co. emerged from bankruptcy in July 2009 as a new government-sponsored firm created from the “good assets” of the 100-year-old automaker. The old company remains in bankruptcy as does GM’s liability for incidents before the filing.

GM has been sued more than 170 times seeking billions of dollars including for the reduced value of GM cars after its recall of 2.6 million older cars linked to 42 deaths and 58 injuries for ignition switch defects. In May, the company agreed to pay a record-setting $35 million fine to the National Highway Traffic Safety Administration for delaying disclosure of the deadly defects for a decade. It also agreed to intense oversight of up to three years by the agency.

“Only New GM could be liable for economic injuries arising out of New GM’s violations of federal recall laws,” the creditor trust wrote in a court filing this week. “No notice of the defects at issue here was provided until five years after the (bankruptcy.)”

At issue is whether GM committed bankruptcy fraud by failing to disclose the ignition switch defects in 2009 when it filed for bankruptcy.

GM has agreed to compensate owners involved in deaths or injuries in its recall of 2.6 million vehicles for ignition defects, but not — as the trust noted — for injuries or deaths connected to another 13.5 million vehicles recalled worldwide this year for other ignition problems. GM also won’t pay for economic loss claims — owners who say the value of their vehicles has been diminished by GM’s record setting 80 recall campaigns this year covering 30 million vehicles.

The U.S. Attorney’s Office in New York aided by a federal grand jury and the FBI along with 48 state attorneys general are investigating GM’s conduct.

The trust said owners and family of those involved in crashes before the 2009 GM bankruptcy “had no reason to believe that their accidents, or the deaths of their loved ones, were caused by serious defects in those cars (i.e., the defects that New GM revealed for the first time in 2014). Instead, they may well have believed one of the drivers was at fault, that road or weather conditions were to blame, or even that one of the drivers suffered a sudden health crisis.”

Those involved “did not forfeit their right to adequate notice of their claims simply because they or their loved ones were personally injured or died in pre-(bankruptcy) accidents involving vehicles that, unbeknownst to them at the time, featured serious safety defects.”