New GM to be liable for old car defects
BANKRUPT US carmaker General Motors (GM) has agreed to accept liability for legal claims over defects on products it has sold over the years, in a key concession to US officials and consumer groups.
As part of its Chapter 11 bankruptcy plans the group is to split into a “New GM” of healthy assets being lined up for a quick sale, and an “Old GM” made up of unprofitable assets being left out of the sale.
The carmaker had proposed to pass liability over legal claims about cars made before the sale to “Old GM”, which would be unlikely to ever be able to afford pay out any damages, but it has now agreed that “New GM” will be liable.
This comes after eight state attorneys general and US consumer groups opposed the plans to free the post-bankruptcy group from liability, fearing this would leave countless US motorists with no legal rights if harmed because of a defect in a GM product. The concession emerged in legal documents submitted by GM ahead of a 30 June hearing over the restructuring plans.
Current legal claims that are in progress against GM will still have to be filed against “Old GM”, however, meaning many could face a long and possibly futile fight for compensation payouts.
Under the restructuring the US government is set to take a 60.8 per cent stake in “New GM”, the United Auto Workers Trust will own 17.5 per cent and the Canadian government will get 11.7 per cent.
FAST FACTS GENERAL MOTORS
The world’s second-largest automaker, GM was the global car-sales leader for 77 consecutive years from 1931 to 2007
In 2008 alone 8.35m GM cars and trucks were sold under various brands globally