Lawsuit kicks off class-action claims against GM

[March 15, 2014]  By Jessica Dye

NEW YORK (Reuters) — General Motors was hit on Friday with what appeared to be the first lawsuit related to the recall of 1.6 million cars, as customers claimed their vehicles lost value because of ignition problems blamed for a series of fatal crashes.

The proposed class action, filed in federal court in Texas, said GM knew about the problem since 2004, but failed to fix it, creating "unreasonably dangerous" conditions for drivers of the affected models.

"GM's mishandling of the ignition switch defect....has adversely affected the company's reputation as a manufacturer of safe, reliable vehicles with high resale value," the lawsuit said.

The recall has led to government criminal and civil investigations, an internal probe by GM, and preparations for hearings by Congress. All ask why GM took so long to address a problem it has said first came to its attention in 2001.

A GM spokesman, Greg Martin, said the company has apologized for how it handled the recall and that taking care of customers was its first priority. He did not comment on the lawsuit.

The plaintiffs are seeking damages from GM that include compensation for loss of the use of their vehicles and repairs and diminished resale value. They are not claiming they were injured in accidents stemming from ignition problems.

The lawsuit is reminiscent of claims faced by Toyota Motor Corp, which recalled more than 10 million vehicles starting in 2009. Toyota last year received approval for a settlement valued at $1.6 billion to resolve economic loss claims and is currently negotiating the settlement of hundreds of personal-injury lawsuits.

GM announced the recall in February, despite learning of problems with the ignition switch in 2001 and issuing related service bulletins to dealers with suggested remedies in 2005.

GM said that when the ignition switch was jostled, a key could turn off the car's engine and disable airbags, sometimes while traveling at high speed. GM has said it received reports of 12 deaths and 34 crashes in the recalled cars.

The Center for Auto Safety, a watchdog group, on Thursday said that data from the National Highway Traffic Safety Administration showed 303 deaths occurred when airbags failed to deploy in two of the models GM recalled. GM called the report "pure speculation" and the Insurance Institute for Highway Safety and the National Center for Trauma and EMS at the University of Maryland said the figure did not take into account whether airbags would be expected to deploy in some crashes.

The plaintiffs in Friday's lawsuit, Daryl and Maria Brandt, said they own a 2007 Chevy Cobalt, which was one of several models recalled by GM. They said that they have driven their car less than they otherwise would because they feared being in an accident stemming from the ignition issues, according to the complaint.

Carl Tobias, a professor at the University of Richmond School of Law who specializes in products liability, said he did not expect GM would have to pay as much as Toyota did if it seeks to resolve the economic loss claims.

The GM recall applied to older models and was significantly smaller than the Toyota recall, although that could change as the investigations against GM continue, he said.

GM also has offered owners of recalled vehicles $500 toward the purchase of a new GM vehicle, a factor that could mitigate any liability, he said.

(Reporting by Jessica Dye, additional reporting by Ben Klayman; editing by Andre Grenon, Noeleen Walder, Leslie Adler and Peter Henderson)

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