General Motors has announced it will give US owners of vehicles included in its ignition switch recall a US$500 discount on the lease or purchase of a new GM model.
“In keeping with our commitment to help customers involved in this recall, a special $500 cash allowance is available to purchase or lease a new GM vehicle. We have been very clear in our message to US dealers that this allowance is not a sales tool and it is only to be used to help customers in need of assistance. Neither GM, nor its dealers will market or solicit owners using this allowance,” the automaker told just-auto in an emailed statement.
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In other developments in this fast-moving issue this week:
- The Wall Street Journal and other media reported GM knew of the potential problem with the switch design as far back as 2001. A timeline released by the automaker last month acknowledged a first appearance of a problem with the switch in 2004.
- A safety watchdog group, the Center for Auto Safety, claimed US regulators had recorded 303 deaths due to airbag non-deployment across 1.6m of the GM cars included in the ignition switch recall (GM had reported 12 deaths in 34 crashes) though the automaker said the report was based on “raw data” and “without rigorous analysis, it is pure speculation to attempt to draw any meaningful conclusions”.
- GM is facing increasing pressure to compensate victims for the ignition switch defect even if some would-be plaintiffs are barred from suing the auto maker under the terms of its emergence from bankruptcy in 2009.
According to a Reuters report, the Center for Auto Safety said it referenced crash and fatality data from the National Highway Traffic Safety Administration’s (NHTSA) Fatal Analysis Reporting System (FARS).
GM responded the new report was based on “raw data” and “without rigorous analysis, it is pure speculation to attempt to draw any meaningful conclusions.”
But Clarence Ditlow, the centre’s executive director, said: “NHTSA could and should have initiated a defect investigation to determine why airbags were not deploying in Cobalts and Ions in increasing numbers.”
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By GlobalDataGM recalled the cars because when the ignition switch is jostled, a key could turn off the car’s engine and disable airbags, sometimes while traveling at high speed. The safety agency has been criticised for not pressing GM to recall the cars with defective switches, despite receiving hundreds of consumer complaints in the past 10 years and implementing its own investigations of two fatalities related to the faulty ignition switches.
According to Reuters, US Transportation Secretary Anthony Foxx has promised an “aggressive investigation” into whether GM was slow to report to the federal government problems with ignition switches on the 2005-2007 Chevrolet Cobalt and 2003-2007 Saturn Ion.
As reported earlier, the US attorney in Manhattan has opened a criminal probe and House and Senate committees have pledged to hold hearings about GM and NHTSA’s behaviour.
According to Reuters, Ditlow said the centre’s study, conducted by Friedman Research of Austin, Texas, also cross-referenced fatality data supplied by GM to NHTSA’s Early Warning Reporting (EWR) database.
“Combining EWR and FARS data as (the centre) did should have raised a red flag to NHTSA,” Ditlow said in a letter sent to the safety agency.
In a review of the EWR filings, Reuters itself found GM reports of three fatal crashes involving the Saturn Ion in 2003 and 2004, well before the first confirmed fatality in a Chevrolet Cobalt. Two of the three Ion crashes involved non-deployment of airbags, according to the centre’s analysis of the data.
A GM spokesman declined to provide specifics to the news agency on the early warning crash reports or confirm whether the deaths in those crashes were among the fatalities counted by the company as recall-related.
GM did say its investigation into the massive recall and the impact of the defective switch was “ongoing.”
GM’s slow recall, 13 years after the company first saw signs of a problem, is the subject of several investigations, including by Congress and by NHTSA, which investigated a 2005 crash in Maryland of a 2005 Cobalt in which a teenager was killed.
GM engineers also were aware of four fatalities in crashes involving the 2004 Saturn Ion, the automaker said in filings published by the National Highway Traffic Safety Administration. GM did not give dates of those crashes, Reuters noted.
The new agency’s review of the Early Warning Reporting database, includes reports of at least two fatal crashes involving the 2004 Ion, one in December 2003 in Connecticut, the other in November 2004 in Texas. The database cites airbag issues in both incidents, without providing details.
A third report provided by GM to NHTSA involved the May 2004 crash of a 2003 Ion in Pennsylvania, citing engine problems, but no further details.
In a statement on its website, NHTSA said some information provided by automakers to the EWR database remains confidential, including “warranty claims, consumer complaints to the manufacturer, field reports” and the full vehicle identification number in death and injury claims.
Compensation push
Meanwhile, Reuters reported separately that GM is facing increasing pressure to compensate victims for the ignition that prompted the recall of the 1.6m vehicles, even if some would-be plaintiffs are barred from suing the automaker under the terms of its emergence from bankruptcy in 2009.
GM is a different legal entity than the one that filed the 2009 bankruptcy and the so-called ‘new’ GM is not responsible under the terms of its bankruptcy exit for any legal claims relating to incidents that took place before July 2009, the news agency noted.
But with a massive recall on its hands and accusations the company knew of the defect for a decade, the automaker is now facing pressure from consumer groups that say the arrangement would unfairly bar victims from getting the compensation they deserve.
According to the report, two prominent consumer advocacy groups called on GM CEO Mary Barra to create a $1bn trust fund to pay victims.
“Don’t you think in your heart of hearts that it is cruel and unfair to use those defences to escape liability for a defect GM concealed and failed to remedy for 10 years?” Clarence Ditlow, executive director of the Center for Auto Safety, and Joan Claybrook, president emeritus of Public Citizen, stated in a letter they made public.
In a statement, GM did not rule out the possibility of setting up such a fund to compensate victims.
“We appreciate the concern expressed in the letter,” the company said. “It is true that new GM did not assume liability for claims arising from incidents or accidents occurring prior to July 2009. Our principle throughout this process has been to put the customer first, and that will continue to guide us.”
Reuters said that plaintiffs’ lawyers had expressed confidence that solid lawsuits would emerge stemming from incidents that occurred after GM’s bankruptcy. Lawsuits from older incidents, however, must be brought against a shell entity that retained the liabilities of pre-bankruptcy GM, and which has little in the way of money to pay plaintiffs.
A recent precedent was BP‘s agreement to set up a $20bn trust fund under pressure to speed up payments to victims of a massive 2010 oil spill in the Gulf of Mexico.
Creating trusts to finance legal liability is not uncommon in bankruptcy, though it can take various forms, Reuters said.
GM is already out of bankruptcy and, most experts say, has no legal obligation to create such a trust, even if authorities eventually conclude that there was wrongdoing.
Nevertheless, some experts told the news agency, as lawsuits start to fly and the various investigations keep the issue in the headlines, GM could see advantages in a relatively quick resolution in the form of trust.
The size of the $1bn trust proposed by the Center for Auto Safety and Public Citizen would generally be in line with the $1bn-$1.5bn in legal judgments and settlements that Guggenheim Securities analyst Matthew Stover estimated GM would ultimately face from the recall.
