GM must pay for pre-bankruptcy ignition deception: lawsuit

Wed Mar 19, 2014 7:05pm EDT
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By Jessica Dye

NEW YORK (Reuters) - General Motors Co was hit with a lawsuit on Wednesday demanding that the company be held liable for allegedly concealing ignition problems before its 2009 bankruptcy.

The ignition switch problems led to the recall of 1.6 million vehicles last month.

GM is a different legal entity than the one that filed the 2009 bankruptcy that shook the U.S. economy. The so-called new GM is not responsible under the terms of its bankruptcy exit for legal claims relating to incidents that took place before July 2009. Those claims must be brought against what remains of the "old" or pre-bankruptcy GM.

But the proposed class action, filed in federal court in California, said plaintiffs should be allowed to sue over the pre-bankruptcy actions, "because of the active concealment by Old GM and GM."

The lawsuit also said that GM was responsible for reporting to the federal government any safety-related problems for cars made before its bankruptcy.

A spokesman for the automaker declined to comment specifically on the lawsuit, saying the company has apologized for the recall and that taking care of customers was its top priority.

GM announced the recall in February, despite learning of problems with the ignition switch in 2001. GM has said that when the ignition switch was jostled, a key could turn off the car's engine and disable airbags, sometimes while traveling at high speed.

Wednesday's lawsuit is one of several filed by car owners who claim the recent recall caused their vehicles to lose value. It appears to be the first to raise the issue of "successor liability," meaning that GM could be liable for actions of the company before it emerged from bankruptcy.   Continued...

General Motors Co's new chief executive Mary Barra addresses the media during a roundtable meeting with journalists in Detroit, Michigan January 23, 2014. REUTERS/Carlos Osorio/Pool