General Motors Gets Nailed With Its Biggest Lawsuit Yet

Source: General Motors

It’s really been anyone’s guess as far as what the fallout of General Motors’ 30-million unit strong recall campaign this year would be, but the latest lawsuit smacked on the Detroit-based automaker gives us kind of an idea: The suit, which represents about 27 million vehicles, is demanding about $10 billion in compensation for declining car prices. The case, as Bloomberg explains, intends to “represent owners who bought or leased a recalled car from July 2009 to July 2014 and still have it, or sold it after mid-February when the recalls started, or had an accident that destroyed it after that date.”

One of the lawyers told Bloomberg that over 20 million people could become apart of a class-action movement against the company. “New GM repeatedly proclaimed that it was a company committed to innovation, safety and maintaining a strong brand,” Bloomberg quoted the filing as saying. “The value of all GM-branded vehicles has diminished as a result of the widespread publication of those defects and New GM’s corporate culture of ignoring and concealing safety defects.”

There are actually two lawsuits that were combined as they both related to vehicle value. The larger of the two actually refers to vehicles made after GM’s bankruptcy and subsequent bailout, and asserts that 2010 and 2011 Chevy Camaros lost $2,000 in value as a result of recalls, and the 2009 Pontiac Solstice saw a value of $2,900 deteriorate.

GM, for its part, swore in an email to Bloomberg that it would “vigorously defend against plaintiffs’ claims that GM vehicles have reduced resale value.” The suits come as GM’s compensation fund has agreed to reimburse 27 families of those who died as a result of a vehicular failure, and another 151 cases are being reviewed.

Source: Thinkstock
Source: Thinkstock

GM has tagged between $400 million and $600 million for settlements to victims and their families, rather than attempt to fight the claims in court. Bloomberg says that Kenneth Feinberg, the lawyer charged with overseeing the payments, has received 1,371 claims in total, including 1,193 for non-fatal injuries. Twenty-five of those injury claims so far have been ruled valid, it said.

With so many vehicles out on recall, many are concerned that the factors acting on them have caused the resale value of the affected units to plummet. While the real world effects of the widespread recalls are still being unraveled, the issues haven’t seemed to have had much of a material impact on GM’s sales, as the company is coming off its best third quarter since 1980.

What this implies is that many shoppers fall into two camps: GM’s detractors — likely still peeved about the whole bailout fiasco — who believe that the ignition switch recall’s simmering for ten years is an unforgivable offense, and take every recall as a sign that the company’s products are inferior on a quality scale. Or, into the other camp that believes that GM’s cleaning house (it has launched over 70 different recall campaigns this year) is a sign of positive change, and that the company is doing everything in its power to turn a new leaf and start fresh.

It seems that the latter camp is the larger, as the conglomerate’s sales hit their best note since the Carter administration, thanks to a solid performance from GM’s Chinese and European divisions. As for the $10 billion court tab, that likely won’t be the final amount, but the true settlement has yet to be seen.