GM's Problems Could Grow

GM's Problems Could Grow AP Photo, File IMAGE PROBLEM: The brand name 'GM' has been tarnished, a plaintiffs attorney said.

General Motors Co.’s record recalls of nearly 30 million cars and trucks across the globe, including those for ignition-switch defects, has so tainted the brand that every one of its customers has lost money, according to plaintiffs attorneys planning a nationwide class action against GM next month.

That claim will be the heart of a consolidated complaint lead attorneys in the ignition-switch litigation plan to file by Oct. 14. GM, which has sought to limit its legal liability to claims arising from the ignition switch, moved in U.S. bankruptcy court on Aug. 1 to ban consumer class actions filed over the subsequent recalls.

“As there’s a deluge of information about problems with GM’s safety involving not just switches but all defects, the brand name ‘GM’ has been tarnished,” said Steve Berman, managing partner of Seattle-based Hagens Berman Sobol Shapiro and co-lead counsel for the plaintiffs steering committee in the ignition-switch litigation. “The brand itself has taken a beating and, as a result, all these cars have suffered.”

GM spokesman James Cain declined to comment. The company’s chief counsel in the multidistrict litigation is Andrew Bloomer, a partner at Chicago’s Kirkland & Ellis.

While the ignition switch has been the focus of congressional inquiries and an internal investigation by GM, which has acknowledged 13 deaths caused by the problem, the other defects have gone largely unnoticed even as they affected millions of additional cars and trucks.

The recalls arose from various malfunctions, including additional ignition problems, steering wheels, airbags, electrical systems, transmissions, brakes and seat belts. Some have been identified as having caused accidents and injuries. At least one resulted in three deaths.

More than 100 lawsuits have been filed on behalf of consumers who claim their vehicles have lost value due to the ignition-switch recalls. But at least half a dozen cases have cited recalls involving as many as 35 additional defects — most of which involve safety issues. [See Chart] The plaintiffs assert that GM knew of the defects well in advance of the recalls, in some cases issuing service bulletins to dealers but not telling customers or the U.S. National Highway Traffic Safety Administration.

Many of the class actions cite an electronic power-steering recall of more than 1.3 million Chevrolet, Pontiac and Saturn cars made between 2004 and 2010. A March 31 recall involved a defect that could make vehicles switch from power steering to manual on their own.

In 2010, GM recalled Chevy Cobalt and Pontiac G5 models over the problem. But it didn’t recall additional marques, like the Saturn Ion, which the traffic safety administration began investigating in 2011 following consumer complaints, the suits say.

The plaintiffs also cite a 2011 email from a senior engineer to GM chief executive officer Mary Barra, then senior vice president for global product development, about the Ion’s power-steering problem.

Another recall cited in the ­lawsuits involved nearly 1.2 million cars and trucks, made between 2008 and 2013, with defective wiring ­harnesses that could disable airbags and seat belts during crashes. Since 2008, GM had released at least six service bulletins involving the defect but didn’t issue its recall until March 17.

Two cases cite 35 defects. But Berman, who is involved in both of those cases, said defects in subsequent recalls would be added to the consolidated case. He declined to say how much his team estimates GM cars have dropped in value but insisted that it’s not just the ones being recalled.

BIGGER THAN TOYOTA

“The diminution we’re seeing is much higher than we found in the Toyota case,” said Berman, who was co-lead of the plaintiffs steering committee that obtained a $1.6 billion consumer class action settlement with Toyota Motor Corp. over its sudden-acceleration recalls. “The magnitude of what happened in GM is so much greater than what happened with Toyota.”

Regardless of its scope, the consolidated case faces challenges. Many state consumer-protection laws require that plaintiffs suffer some actual injury — that their car malfunctioned, for example, said Cari Dawson, chairwoman of the class action practice at Alston & Bird, who was lead counsel for Toyota in its consumer litigation. And GM could challenge certain class representatives’ standing or argue for arbitration, she said.

Most importantly, she said, plaintiffs must prove that GM’s recalls caused their cars’ value to decline. “That can be a challenge to prove because, in certain instances, looking at the various price variables and different models and different model years, you might see values go up,” she said. Prices of used GM vehicles actually increased during the ignition-switch recalls compared to the same period the year before, Joe Spina, a senior analyst at Edmunds.com, wrote in an email to The National Law Journal. “Recalls are ever-present in the news cycle, and shoppers may be experiencing recall fatigue,” he wrote. “Consideration for GM brands on our site has not wavered and loyalty is still strong.”

LOAD MORE