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GM Agrees to Take on Product Liability Claims

Chrysler walked from liability under Chapter 11.

by on Jun.29, 2009

While Chrysler used bankruptcy laws to walk away from product liability claims, GM officials -- CEO Fritz Henderson shown here -- will remain liable after emerging from Chapter 11.

While Chrysler used bankruptcy laws to walk away from product liability claims, GM officials -- CEO Fritz Henderson shown here -- say it will remain liable after emerging from Chapter 11.

General Motors Corp. and the Obama administration Auto Task Force have agreed that the new GM will cover all product liability and lemon law claims after it emerges from behind protection of an expedited bankruptcy.

The decision to accept the product claims, which was filed over the weekend with the federal bankruptcy court, represents a departure from the Chrysler bankruptcy but also removes one of the most contentious objections to GM’s sales of assets designed to release GM from Chapter 11.

Nevertheless, the bankruptcy court has still received 750 written objections to the plan to sell the automaker’s best assets to the new company, which would be financed by billions in government loans. GM responded the objections in an “omnibus” answer that dealt not only with the product liability issue but objections by salaried retirees and unsecured creditors.

GM’s lawyer’s dismissed the claims of the unsecured creditors by citing a long list of cases, including the Chrysler bankruptcy, which went all the way to the U.S. Supreme Court before being decided in the smaller maker’s favor. GM’s brief also dismissed claims that the union VEBA had gotten a better deal than creditors.

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