Among everything General Motors is doing to turn its recall fiasco around, it is now asking a federal bankruptcy court for protection from lawsuits stemming from the defective ignition switches that are at the root of the company’s woes.
In an AP story today, GM revealed in court filings that it will soon ask a federal judge to shield the company from legal claims for conduct that occurred prior to its 2009 bankruptcy. This strategy was revealed in a motion filed in a Corpus Christi, Texas, federal court case, and in other cases across the U.S. — including a class-action case in San Francisco — that involve the defective ignition switches that have led GM to recall 2.6 million small cars.
The company's motion says GM will ask the bankruptcy court in New York to enforce an order made during the 2009 bankruptcy case that split GM into a new company and an old company. At the time of GM’s bankruptcy in 2009, it received a legal shield from about 2,500 various lawsuits it was facing. Claims from before the bankruptcy would go to "Old GM," called Motors Liquidation Co., while claims after the bankruptcy would go to the new General Motors Co. In most of the cases prior to bankruptcy, plaintiffs have been awarded pennies on the dollar.
Is General Motors being smart to distance itself from past problems? Or is it trying to just move on? Do you think it’s right for a company to use bankruptcy protections to shield itself from legal issues if it emerges as essentially the same company? Tell us what you think by leaving your comments below.