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GM could avoid liability for pre-2009 defective cars

Product recalls are often necessary in a world of complex consumer goods. A company, either voluntarily or involuntarily with help from government regulators, will issue a recall for a product that suffered a type of defect that potentially places consumers at risk. Sometimes a product is designed badly, other times, poor materials or shoddy quality control will lead to failures that cause injury.

With complex manufactured devices, like automobiles, which are comprised of thousands of parts, many things can go wrong. Once discovered, consumers expect that the manufacturer will repair or replace at the manufacturer's expense, the defective part. But what happens when the company is no longer the same?

This potential has been raised by the ignition switch defect involving a group of cars manufactured by General Motors (GM). The defective product was installed on Chevrolet Cobalt, Pontiac G5 and Saturn Ion vehicles, and dates back to 2001. The defective switch failed to properly deploy the airbag, and GM has reported that there were 31 accidents and 13 fatalities involving these vehicles.

Because of the bankruptcy filing, the GM of today is legally a different company. The new GM did not assume liability for pre-2009 accidents, which is when it emerged from bankruptcy.

GM, during the bankruptcy proceedings, had originally proposed that the new GM would be immune from any liability for any defect in their vehicles manufactured pre-bankruptcy. Consumer advocates felt they had achieved a victory it requiring GM to accept responsibility for crashes that occurred after 2009 for vehicles manufactured earlier.

Of course, they could accept responsibility for the defect, but it is unclear how they will handle the defect.

Source: Automotive News, "Bankruptcy terms limit GM liability in crash lawsuits," Gabe Nelson, March 8, 2014

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