GM Compensation Plan — The Right Choice?

General Motors compensation fund director, attorney Kenneth Feinberg, announced details about the company's plan to compensate victims of the ignition switch recall in lieu of a lawsuit. But is the company making the right decision?

It appears that GM is upholding its promise not to limit compensation for victims of the ignition switch defect. Earlier in June, the company gave fund director, attorney Kenneth Feinberg, the authority to determine the breadth of victim settlements.

When GM CEO Mary Barra made that original announcement, she said, "Our goal is to make sure everyone who is impacted by the ignition switch issue is appropriately compensated.” GM must "do the right thing for those who were harmed."

Yesterday, Feinberg indicated how victims can expect to be compensated. GM is offering $1 million to the families of those who died as a result of the defect. The automaker also will give another $300,000 for each surviving spouse and dependent, in addition to a sum of money that will be determined by the victims' earning potential.

According to a CNN story, under Feinberg’s plan, the family of a married 25-year-old who had two children and was earning $46,400 would receive a total award of $4 million under his protocol.

In response to this plan, Barra said it a statement:

"We are pleased that Mr. Feinberg has completed the next step with our ignition switch compensation program to help victims and their families. We are taking responsibility for what has happened by treating them with compassion, decency and fairness. To that end, we are looking forward to Mr. Feinberg handling claims in a fair and expeditious manner."

At this point, Feinberg would not speculate as to the actual number of deaths or injuries caused by the faulty switch. But he did say that he would count deaths that weren't included in GM's original list of 13.

Payment Plan For GM Victims

Died in crash

If seriously injured

If injured

- $1,000,000

(such as paralysis or permanent brain damage)

- Payments based on hospital stay

- $300,000 for surviving spouse and dependents

- Payment determined on a case-by-case basis

- 1 night; $20,000

- Plus more based on earnings potential


- 32+ nights; $500,000


Clearly with this plan, GM is trying to limit its legal liabilities and control the damage to its image. Today, with the company announcement that it barely beat last June’s sales with only a 1 percent increase, it's clear that GM needs to move beyond this crisis if it intends to maintain market share.

Those injured will have a series of options going forward. They can either follow the formula and get a quick payment, or try to justify a bigger payment through "an individual negotiation tied to the extraordinary circumstances of the claim," Feinberg said. Claimants still not satisfied after that can sue GM.

So what do you think? Is GM smart for trying to get out ahead of a long list of potential lawsuits? Are they doing the right thing or should they just let the courts sort things out? Do you feel that GM has done irreversible damage to its image or will this all pass soon enough? 

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