Business
5:05 pm
Wed April 16, 2014

Legal Moves Might Mean Fiscal Relief, And More PR Troubles, For GM

Originally published on Wed April 16, 2014 8:20 pm

General Motors is signaling its plans to ask a bankruptcy judge for protection from lawsuits related to a defective switch recall. As Michigan Radio's Tracy Samilton reports, the action could further complicate its current public relations crisis.

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Transcript

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General Motors has signaled that it will seek court protection from numerous lawsuits it's facing over defective ignition switches. The auto giant is looking to stay litigation related to the faulty switches, which prompted a massive recall. The company has argued that the problems occurred at the old GM before its restructuring under bankruptcy.

While not unexpected, the legal moves could worsen the public relations crisis sparked by the recall. Michigan Radio's Tracy Samilton reports.

TRACY SAMILTON, BYLINE: GM wants the hodgepodge of ignition switch lawsuits consolidated and sent to the same judge who oversaw the company's 2009 bankruptcy. The claims range from aggrieved customers who complain that they own a car with a defect to the families of some of the 13 people believed killed in accidents related to that defect.

John Pottow is a bankruptcy expert at the University of Michigan Law School. He says there will be a big fight to keep the lawsuits just where they are, but he thinks they'll ultimately end up in bankruptcy court. There, the new GM can argue, the bad ignition switch was made by the old GM.

JOHN POTTOW: So we feel bad for these people but they can't sue us for these old acts that occurred prior to our bankruptcy.

SAMILTON: But Pottow isn't sure the bankruptcy judge will simply throw out the cases. That's because there's an allegation that GM knew about the bad switch and hid it during bankruptcy proceedings. The worst-case scenario for GM is that the judge reopens the bankruptcy case and that would not be just your average can of worms.

POTTOW: It opens a can of seething, squiggling, writhing, angry worms.

SAMILTON: Everyone might flood to the court seeking a second crack at GM, including the company's former bondholders who got pennies on the dollar. But for now, that is largely speculative.

Crisis communications expert, Jonathan Bernstein, thinks GM's lawyers are leading the company astray.

JONATHAN BERNSTEIN: Doing something that's correct according to a court of law and ignoring the court of public opinion in the process, you know, can be suicidal to an organization's reputation.

SAMILTON: GM has signaled its intent to try to compensate victims of the defective ignition switch outside of court. But so far, the company hasn't indicated just how it will do that. It did hire Kenneth Feinberg to look into the claims, a lawyer who handled payouts to the victims of 9/11 and the Gulf oil spill. No matter what happens in the courts, ultimately, the court of public opinion will steer the carmaker toward trying to resolve its PR nightmare. For NPR News, I'm Tracy Samilton. Transcript provided by NPR, Copyright NPR.