GM blasts $1 billion deal
between ignition switch plaintiffs, creditor trust
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[August 12, 2017]
By Brendan Pierson
(Reuters) - Plaintiffs suing General Motors
Co <GM.N> over faulty ignition switches and other alleged vehicle
defects have reached a $1 billion settlement requiring the automaker to
turn over that amount of stock, a lawyer for the plaintiffs said in a
court hearing on Friday.
GM lawyer Richard Godfrey strongly criticized the agreement, telling
U.S. District Judge Jesse Furman in Manhattan the Detroit-based company
was given no say in the deal negotiated between the plaintiffs and a
trust set up for creditors of “old GM,” which holds many liabilities
predating the automaker's 2009 bankruptcy.
Godfrey said the settlement was a result of collusion between the
plaintiffs and the trust, and "a complete surrender and sellout using
new GM's money."
The ignition switch litigation consolidated before Furman stems from
GM's 2014 recall of 2.6 million vehicles with defective switches. One
type of switch has been linked to nearly 400 injuries and 124 deaths.
The claims have expanded to include a variety of alleged defects in
millions of cars.
GM said in a statement it would fight the settlement in court, calling
it a “contrived scheme” doomed to fail.
According to Steve Berman, the plaintiffs' lawyer, the settlement called
for the trust to take on $10 billion of ignition switch claims, which
would boost the total claims against the trust to more than $35 billion.
He said that would trigger a provision in GM’s bankruptcy reorganization
plan requiring "new GM" to transfer about $1 billion in stock to the
trust, which would be used to fund the settlement.
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The GM logo is seen at the General Motors Assembly Plant in
Valencia, Venezuela April 21, 2017. REUTERS/Marco Bello
In a phone interview after the hearing, Berman said the settlement would resolve
about 11.9 million economic loss claims and between 400 and 500 personal injury
and wrongful death claims. He added that he expected to ask the federal
bankruptcy court in Manhattan by Tuesday to set the deal in motion.
About 2.4 million claims, involving vehicles sold after GM's bankruptcy, would
remain, Berman said.
"The notion from new GM that this is somehow an inappropriate procedure is
crazy," he said. "They bargained for this."
Godfrey told the hearing the trust had $400 million in its own assets that could
be used to fund a settlement, instead of requiring GM to turn over stock.
After the hearing, GM spokesman Patrick Morrissey said the automaker had been
told the deal would include a $15 million payment from the trust releasing it
from liability, effectively shielding that $400 million. That was not discussed
at the hearing, and Berman declined to comment.
(Reporting By Brendan Pierson in New York; Editing by Tom Brown)
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