A new GM lawsuit, which could exceed $10 billion, says millions of customers who bought cars and trucks lost a great deal of money in the resale value of their vehicles because of the ignition switch debacle, which has damaged the GM brand.
The complaint, filed with the Federal Court in Riverside, California, says GM harmed customers by not revealing known faults and giving cost-cutting a higher priority than safety.
So far this year, there have been more than forty different recalls affecting about 20 million vehicles.
According to the lawsuit, which was filed by Hagens Berman Sobol Shapiro on Wednesday, GM’s procedures have caused a range of late-model vehicles to lose resale values of between $500 and $2,600.
GM, based in Detroit, is the second biggest automaker in the world, after Toyota. It has 219,000 employees.
New GM lawsuit may involve 15 million owners
The lawyers said the total payout could be more than $10 billion because they are seeking compensation for 15 million vehicle owners. They emphasized that not only owners whose cars or trucks were recalled are effected, but also other GM owners because of damage to the GM brand and reputation, which have undermined the resale price.
According to the lawsuit, GM behaved “in truly Orwellian fashion”, encouraging its employees not to use such words as “failed” or “bad” and to adopt words like “condition” or “issue” instead of “problem” when talking about faulty parts.
The complaint said:
“GM’s egregious and widely publicized conduct and the never-ending and piecemeal nature of GM’s recalls has so tarnished the affected vehicles that no reasonable consumer would have paid the price they did when the GM brand meant safety and success.”
Several GM customers now say they would never have bought their vehicle or paid the asking price had GM been prompter and more forthcoming regarding its vehicles’ defects.
Earlier ignition-switch recalls which were linked to 13 deaths are not included in this lawsuit.
The lawsuit involves cars and trucks that were sold between July 10th, 2009, and April 1st, 2014. They were recalled due to potential ignition switch defects. It does not include other vehicles which were sold before or after those dates.
Congress dissatisfied
Last week, Mary Barra, GM’s CEO, met the US Congress again to answer questions regarding the 2.6 million cars and trucks with faulty ignition switches.
Congress fails to see how removing fifteen employees who did not identify the fault and acted improperly regarding the recall, out of a total of 200,000 workers, makes any difference. It is also complaining that the safety committee that was recently formed is has no teeth because its members come from GM.
Ms. Barra told Congress (again) that GM is changing its culture by placing vehicle safety on top of its list of priorities. She added that the US’ largest automaker aims to have a productive, and not adversarial, relationship with NHTSA.
The faulty ignition switches resulted in airbags not being deployed and the sudden shutoff of the engine in certain models.
US law stipulates that automakers must notify the National Highway Traffic Safety Administration Board (NHTSA) about any safety-related defect no later than five days after identifying it. GM admits that it failed to do so.
GM was fined $35 million in May for delays in recalling small cars with faulty ignition switches. The NHTSA said it was the single biggest civil fine ever imposed following a recall investigation.
The NHTSA says it has obtained $124.5 million in fines during the last five years from car manufacturers that failed to report defects in time.
NHTSA’s acting administrator, David Friedman, who appeared before a Senate panel during an April hearing, along with Transportation Secretary Anthony Foxx, have been urging Congress to raise the fine-ceiling of $35 million to $300 million for carmakers that drag their feet on disclosing defects that can pose a safety risk.
The defective ignition switch affected the Chevrolet Cobalt, Chevrolet HHR, Pontiac Pursuit, Pontiac G5, Pontiac Solstice Saturn ION, and Saturn Sky.
Many carmaker recalls
Honda and Nissan today announced they are adding 2.755 million vehicles (Honda 2m, Nissan 755,000) to the recall they issued in 2013 over faults in passenger airbags. A defective part may cause the airbag inflator to rupture, resulting in its abnormal deployment in a crash, the companies say.
Earlier this month, Toyota recalled a further 650,000 cars because of a passenger airbag fault, bringing the total so far for this reason to 2.79 million. The world’s largest carmaker received one report of a burnt seat cover related to the defect.
The three Japanese car companies say the defect originates from parts maker Takata Corp.
In April 2014, Toyota recalled more than six million cars. At the end of May, Ford recalled 1.4 million cars in North America because of corrosion problems and power steering loss.