U.S. bankruptcy judge urges settlement on GM ignition defects

Fri May 2, 2014 2:27pm EDT
 
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By Nick Brown

NEW YORK (Reuters) - A U.S. bankruptcy judge on Friday urged settlement talks in a dispute between General Motors Co and plaintiffs seeking compensation for the lost value of their cars stemming from a massive recall over a faulty ignition switch, though neither side seemed ready to negotiate quite yet.

Judge Robert Gerber, of the U.S. Bankruptcy Court in Manhattan, said he would welcome the prospect of a resolution that avoided a "monstrous battle."

"Frankly, it would be great if whatever money is available for injured people could go to them, and not to litigation costs and attorneys' fees," Gerber said at a court conference with GM and the plaintiffs.

Gerber ended up deferring the idea after both sides said they would rather let the dispute play out a bit before they arrive at the bargaining table.

Gerber is the same judge who in 2009 oversaw GM's whirlwind Chapter 11 bankruptcy case. Now facing dozens of lawsuits over a faulty ignition switch that has led to the recall of some 2.6 million vehicles, GM is asking Gerber to enforce the so-called bankruptcy shield, in a pre-emptive move aimed at staving off dozens of lawsuits from customers who say they took a financial hit from the recall.

Under the plan approved by Gerber, GM channeled its burdensome liabilities into a shell known as "Old GM," while selling its profitable assets to "New GM," a separate corporate entity that took GM out of bankruptcy and now operates as General Motors Co.

Accident victims are not involved in the dispute before Gerber, which concerns only claims for loss of car value.

The new entity agreed to take on certain of Old GM's legal liabilities, including those for accidents that occurred after the bankruptcy but which involved cars made before the bankruptcy.   Continued...

 
Lawyers for General Motors Richard Godfrey (C) and Arthur Steinberg (R) arrive at the U.S. District Bankruptcy Court in lower Manhattan section of New York May 2, 2014. REUTERS/Brendan McDermid