It seems GM’s chances of being protected from the alleged faults of “Old GM” are seriously in doubt. And that’s from the mouth of the judge who originally allowed “New GM” to build a financial shield in the wake of its $49.5-billion government bailout.
Six years ago Judge Robert Gerber made a decision: “New GM” couldn’t be held responsible for lawsuits over cars made before the bailout. Last month, Gerber said he wasn’t so sure anymore and suggested his previous decision could allow the company to shirk alleged misconduct in relation to its massive ignition switch recall case, according to Bloomberg.
At a hearing in New York on February 17th Gerber suggested the automaker may have acted “very badly” in delaying the recall of vehicles it knew to be defective.
At the hearing he said that he was deciding how to “fix” the landmark decision he made in 2009, and he may take more than a month to do it.
He also said that while he ruled “people couldn’t sue based on anything” pre-bankruptcy, he should have added that people could sue if the new company failed to warn them about what the old company had done.
“It’s rare for a judge to admit he might have made an error,” Chip Bowles, a bankruptcy lawyer at Bingham Greenebaum Doll LLP who isn’t involved in any GM cases, told the report.
The judge said his old ruling essentially gives New GM a “get out of jail free card”, even if the company condoned the installation of the defective switch.
At this point it’s impossible to tell what this potential flip-flop might cost New GM, but that hasn’t stopped people from guesstimating.
David Wheston, an analyst with Morningstar Inc., suggests that it could cost GM more than 7$-billion “if the U.S. bankruptcy court amends GM’s bankruptcy shield for vehicles manufactured under old GM,” he told the news outlet.
We’ll keep you posted on the results. Or anymore flip-flops, depending on which comes first.
Comments
This is very serious , the consequences could prove so expensive to GM that , I speculate , there could be a substantial downsizing and adjusting of divisions and functions , therein ! What is the old saying , ” hope for the best and expect the worst ” . I do not envy Ms Barra’s job , in the slightest . No pay is big enough to be the Boss , where ” the buck stops here ” ,,,, when litigations could drag this company through the dirt for years and billions of dollars . She didn’t deserve this , she really doesn’t !!
There is no doubt GM will appeal an overturn which could tie this up in courts for a couple more years. The judge better consider the can of worms he would be opening for all manufacturers as anyone who announced a recall will face some lawyer who decides the recall devalues consumers automobiles. GM will pay for their ignition debacle with a huge penalty and settlements for those who died. They have issued replacement parts for all vehicles which should not affect their value afterwards.