GM Still Claims Bankruptcy Protects Them From Ignition Switch Lawsuits


The saga of GM's ignition switch scandal continues.

GM's recall of 2.4 million vehicles due to faulty ignition switches has been controversial, to say the least. It all started when the company noticed the issue on a Saturn Ion, but failed to do anything about it for a decade. This proved to be disastrous, because the fault was serious enough to cause engines to stall and cut power to the brake, steering and air bag systems, leading to the death of 124 people, 275 injuries and, unsurprisingly, hundreds of lawsuits. To many, the recall in 2014 was too little, too late.

GM tried to claim that its bankruptcy in 2009 shielded the company from lawsuits, but this was overruled by the US Supreme Court. This week, Autotmotive News reports that the carmaker has made one last attempt to overturn the ruling, claiming that the 2009 bankruptcy sale to a new corporate entity protects them. GM’s petition said that the federal bankruptcy code permits a purchaser, i.e. a newly formed company, to obtain a debtor’s deteriorating assets and be “free and clear” of its liabilities. It also raised concerns that if the court’s ruling was left standing, it would undermine a key component of its corporate rescue and make future deals more difficult.

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In short, "this case presents exceptionally important questions, and the Second Circuit's answers were exceptionally wrong," GM's lawyers said in the petition. "The Court should grant review." GM acknowledged that employees were aware of the ignition switch defect for several years before the recall was initiated, and has already paid around $2 billion in criminal and civil penalties and settlements as a result.

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