Bankruptcy shields GM from suits over ignition issues | Business| Economy and finance news from a German perspective | DW | 16.04.2015
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Bankruptcy shields GM from suits over ignition issues

A US judge has ruled that the bankruptcy of General Motors (GM) in 2009 protected the auto giant from a number of lawsuits related to ignition-switch defects. At least 84 people died in connection with the fault.

US bankruptcy judge Robert Gerber ruled Wednesday that General Motors (GM) wasn't liable for claims related to defective ignition switches that dated back to before the US auto giant's insolvency.

In 2009, GM filed for Chapter 11 bankruptcy protection that led to the splitting up of the US auto industry giant into an Old GM, holding its toxic assets and liabilities, and a new car company.

Plaintiffs argued the legal shield over past conduct normally granted to companies exiting bankruptcy should be breached because GM, they alleged, fraudulently concealed the ignition defect during the bankruptcy process.

But Judge Robert Gerber, who oversaw the original bankruptcy, said the court needed to discount claims "that are supposedly against New GM" but are in fact against "Old GM." Gerber also concluded there was no evidence of fraud during the bankruptcy.

"If the fraud has taken place elsewhere [and is unknown to those actually communicating with the court], the requisite attempt to defile the court itself and subvert the legal process is difficult, if not impossible, to show," he ruled.

GM not on the safe side yet

In February 2014, GM began recalling about 2.4 million cars over ignition problems that caused vehicles to abruptly switch off their engines during driving. At least 84 people died due to the ignition-recall defect, according to an independent compensation fund set up by the automaker.

GM has maintained its senior executives did not know about the ignition defect until late 2013. But documents uncovered in litigation and in congressional investigations alleged the automaker might have known of the ignition problem more than a decade earlier.

On Wednesday, the US carmaker praised the ruling, saying the judge had "properly concluded that claims based on Old GM's conduct are barred."

"With respect to any claims that were not expressly barred, Judge Gerber's decision doesn't establish any liability against GM and the plaintiffs still must prove the merits of their claims in the proceeding," GM said in a statement.

GM is facing a total of $7 to 10 billion (6.5 to 9.3 billion euros) in claims for losses associated with the ignition-switch defect. GM is also under investigation by the US Justice Department for its conduct and numerous other lawsuits into the scandal.

uhe/sgb (dpa, Reuters, AFP)

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