General Motors faces the possibility of a $1 billion stock charge if a judge declares the latest settlement with customers affected by faulty ignition switches valid.
The trust that handles Old GM’s liabilities prior to bankruptcy reached the settlement with owners who sued GM years ago, Bloomberg reported on Thursday, and the deal would cover millions of car owners involved in personal-injury and class-action lawsuits. The trust has worked to reach a settlement for months after a nearly identical deal fell through last January.
Then, a judge threw out the settlement agreement after saying it didn’t “pass the smell test.” GM’s lawyer argued at the time that the trust simply could have got cold feet and lawyers for the car owners never signed the deal.
Now, the nearly identical deal could force GM’s hand to provide adjustment stocks to compensate affected owners. The harm to GM comes in a 2009 provision that would force New GM to contribute adjustment shares to pay for claims. If a judge values the latest claims at $10 billion or more, it would trigger the provision.
Naturally, GM plans to fight any attempts.
“At this time, we have not seen the purported settlement agreement and thus have no details to provide,” GM spokesman David Caldwell said. “We will vigorously contest any attempt to obtain adjustment shares from GM.”
Details on the settlement should be published on May 2. The faulty ignition switches have been linked to 124 deaths and GM has paid over $2.5 billion to settle other related claims.