GM Seeks Protection from Bankruptcy Court in Ignition Defect Lawsuits

In the wake of the massive recall of 2.6 million small cars due to a deadly ignition switch problem, General Motors is bracing for an onslaught of lawsuits from car owners who claim that their cars lost value due to the recall.

The auto giant is now turning to Bankruptcy Court for protection, claiming that the “bankruptcy shield” should protect the “New GM” from any economic loss claims. The company also claims that it should not be responsible for damages in accidents prior to the Chapter 11 filing.

GM’s Bankruptcy

In 2009, after years of losses and market share declines, General Motors filed for bankruptcy. The automaker’s trip to bankruptcy court resulted in the reorganization of the company and the emergence of a new, separate entity, informally named the “New GM” that now operates as General Motors Co. The bankruptcy proceedings helped GM to shed several plants, dealerships and a great deal of debt.

When the company filed for bankruptcy, it owed approximately $55 billion in debt; after the reorganization, the “new GM” owed just $17 billion. Along with residual debt, the “New GM” agreed to take on some of “Old GM’s” legal liabilities including some warranty obligations and those for accidents that occurred after the bankruptcy but which involved vehicles manufactured before the bankruptcy. In the face of these new claims, however, the “New GM” contends that they are not responsible for these “economic loss” claims and they should not be on the hook for accidents that resulted in injuries prior to the reorganization.

Claims of Fraud Against the Auto Giant

While attorneys for GM have headed back to bankruptcy court asking the presiding judge to enforce part of the restructuring agreement, plaintiffs around the country are claiming that the bankruptcy shield should not be extended to the “New GM” because the company was aware of the defect and did not disclose this information. Some evidence suggests that the company knew about the defective switches as far back as 2001 but continued to install them in select vehicles. Plaintiffs who suffered losses as a result of these faulty parts claim that GM should have revealed the potential liability during the bankruptcy proceeding. GM is currently the subject of two congressional investigations trying to identify who in the organization knew about the defective parts, and why no action was taken sooner to protect consumers and fellow motorists.

Earlier this year, General Motors issued a recall of over 42,000 Chevrolet Malibu vehicles and just this week the embattled car giant recalled approximately 60,000 Saturn Aura sedans over transmission cables that can fracture. Attorney Timothy Abeel has dedicated his career to helping consumers in lemon law and breach of warranty claims.

If you have purchased a new or slightly used car, and it is a lemon, you may be entitled to receive a full refund, new car or a partial refund. Call our offices at 888-611-5481 for a free consultation with a member of our experienced legal team.

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