Last week Seattle-based consumer rights law firm, Hagens Berman Sobol Shapiro, filed a class-action lawsuit against General Motors seeking damages of as much as $10 billion for the for loss of resale value of customer’s cars. The law firm argues owners of certain GM products, such as the Chevrolet Cobalt and Camaro, will get back less money for trade-ins due to the recall of the cars and the automaker should compensate them for that. But as The Detroit Bureau points out, the lawsuit is unlikely to stand in court as it is based on questionable data and emotional appeal.
According to Kelley Blue Book, Black Book and ALG, three firms which track the resale values of used vehicles, the recalled cars haven’t lost much value. In fact, Black Book saw the residual value of the Cobalt increase by $150 between March and May of this year when compared with the same three-month period last year.
“As far as any impact on value, we haven’t seen it,” said Black Book Editor Ricky Beggs. He added there has been “no effect on residuals from these recalls whatsoever.”
KBB also saw in increase in the residual value of the Cobalt, while ALG saw a slight dip, but said the difference is very small, probably only short-term and most notably, in line with normal changes in the used car market.
The Berman lawsuit also alleged that customers paid more for their cars than they should have, and that they would have paid much less for the cars if they had “known that the manufacturer had gone to such great lengths to hide safety defects.”
“GM came out of bankruptcy making claims that the company would produce high-quality, safe vehicles, a branding position that served GM well, and that consumers relied upon,” lawyer Steve Berman said in a statement. “Now we know that contrary to those claims, GM was instead wallowing in a dysfunctional culture more concerned about hiding defects and safety flaws than living up to its purported brand promise.”
This claim also rests on shaky ground. It’s hard to hypothetically say how much the typical Camaro buyer would have paid for their vehicle had GM came out with information on its ignition switch defect early on. Sales of the Camaro rose 12.6% in the first five months of 2014 and KBB says GM’s average transaction prices for its cars rose to $34,783 in May, the second highest of any mainstream automaker.
GM may have painted itself in a darker corporate light with its recent safety crisis, but it doesn’t appear as if this has also affected the value of its customer’s cars. The residual value of GM’s cars has essentially remained the same, making Berman’s case far-fetched at best.