Tag Archive | "GM"

Approved Death Claims Related to GM Ignition Switch Recall Rise to 90

DETROIT – The number of approved death compensation claims related to a recall of a faulty General Motors ignition switch has risen to 90, reported MLive.

The claims were approved by a fund set up by GM to compensate victims of a defective part in mid-to-late-2000s model cars that has led to a massive recall and a federal investigation.

The number of approved claims stood at 19 in mid-September and had grown steadily to 36 at the beginning of December and then to 42 in January. They hit 57 in February, reached 77 last month, and stood at 87 at the end of last week.

The victim compensation fund is being overseen by Kenneth Feinberg, a Washington, D.C. attorney who oversaw similar compensation facilities for disasters such as the BP Gulf of Mexico oil spill and the Sept. 11 terrorist attacks. The GM ignition switch claims facility released its latest report Friday.

The deadline to file claims was Jan. 31. New claims cannot be submitted, but the facility is still accepting the electronic filing of supporting documents for existing claims.

The latest tally of claims received stands at 4,342, including 475 death claims, 289 “Category One” injury claims, or those resulting in quadriplegia, paraplegia, double amputation, permanent brain damage or pervasive burns, and 3,578 “Category Two” injury claims, or injuries that required a hospital visit within 48 hours of an accident.

Those numbers have remained unchanged for the past several weeks.

To date, there have been 253 claims determined eligible, a rise of nine claims over the past week. That total includes the 90 death claims, as well as 11 Category One injury claims and 152 Category Two claims.

According to the claims resolution facility’s program statistics, 1,420 claims have been deemed ineligible, an increase from 1,335 claims in last week’s report, while 1,181 claims are considered deficient, versus 1,141 in the last report. Another 997 remain under review, down from 1,085 in the previous report, and 491 claims have been submitted with no documentation.

GM has estimated that compensating all victims of the defective car part could cost the Detroit automaker anywhere from $400-600 million.

GM has recalled 2.6 million vehicles, including 2.2 million in the U.S., affected by the ignition switch. The recall includes 2003-2007 Saturn Ions, 2007-2010 Saturn Skys, 2005-2011 Chevrolet HHRs, 2006-2010 Pontiac Solstices, and 2005-10 Chevrolet Cobalt and Pontiac G5 models.

The faulty ignition switches at the heart of the unprecedented recall can move out of the “run” position to the “accessory” or “off” positions, leading to a loss of power. The risk may be increased if the key ring is carrying added weight or if the vehicle goes off road or experiences some jarring event, including rough roads. If the key turns to one of those positions, officials say the front air bags may not work if there’s a crash.

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Court Rules GM is Shielded from Death Claims by Bankruptcy

DETROIT – A federal bankruptcy judge ruled Wednesday that General Motors is shielded from death and injury claims potentially totaling billions of dollars tied to defective ignition switches in certain GM small cars, reported MLive.

In 2009, a bankruptcy court allowed GM to emerge from bankruptcy protection free from the liabilities of the old company. Plaintiffs argued that GM misled the court because it knew about but failed to disclose the problem with the ignition switches. The switches are now linked to at least 84 deaths.

Judge Robert Gerber denied that argument, but did rule that under narrow circumstances, some plaintiffs who sued over a loss to the value of their cars due to faulty ignition switches can file claims against the company for actions after it left bankruptcy protection in 2009.

The ruling is a victory for GM. One plaintiffs’ attorney said the decision shields GM from $7 billion to $10 billion in potential liabilities from lawsuits.

Lawyers for plaintiffs in more than 140 lawsuits had argued that their clients never got a chance to dispute the bankruptcy order because GM concealed the defective ignition switches.

But the new GM contended that when it bought assets from the old GM in the 2009 government-funded bankruptcy, the new company got them “free and clear” of liabilities before the bankruptcy.

Texas attorney Robert Hilliard, who represents multiple wrongful death and injury plaintiffs in lawsuits against GM said the ruling cuts off court options for victims in crashes that happened before GM left bankruptcy protection in July of 2009.

“Hundreds of victims and their families will go to bed tonight forever deprived of justice,” he said. “GM, bathing in billions, may now turn its back on the dead and injured, worry free.”

GM said the judge ruled properly that claims based on the conduct of the pre-bankruptcy GM are barred, and that the judge’s order “doesn’t establish any liability against GM, and the plaintiffs must prove the merits of their claims.”

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DRIV Technologies Responds to GM Maintenance Cutbacks

SCOTTSDALE, Ariz. – GM announced on Wednesday, March 11, 2015 that they would reduce their coverage for their free maintenance program on Chevrolet, Buick, and GMC vehicles for 2016 model year cars. This comes in addition to extended powertrain warranty reductions for Chevrolet and GMC.

Ryan Williams, President of DRIV technologies and Fidelis PPM, a leading provider of dealer-branded PPM programs, says “this is an excellent opportunity for Dealers to cement the value of their own dealership maintenance programs with their customers. The DRIV platform allows our dealers unlimited flexibility to make changes on the fly and control their own destiny as the OEM comes in and out of the PPM market.”

Fidelis PPM’s unique model for prepaid maintenance is built around building Dealer loyalty vs. manufacturer loyalty. While GM feels that the data from their maintenance program hasn’t netted the returns they were hoping for, Fidelis PPM has a proven track record of increasing customer retention for Dealers from a dismal industry average of 11% to an impressive 67% or more!

Scott Smith, Dealer principal of automotive associates of Atlanta, which is part of the Ken Page auto group, says “I have been using the DRIV platform to create my own PPM plan for close to five years. I am able to make any change I need to as quick as I need to and react to each OEM individually. As a result we lead each market for customer retention in for all four franchises.”

Fidelis PPM specializes in developing partnerships and integrations for their product that make it easy to sell in the finance department, service drive or preloaded on every vehicle – new or used. In fact, Fidelis PPM is approved by Ford Credit for their e-contracting platform and they also provide a turnkey wrap program for GM, Toyota, Mazda and any other manufacturer that provides a maintenance plan.

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GM Sets Buyback, Placating Activists

General Motors Co. on Monday became the latest company to return billions of dollars to shareholders amid tussles with investors over how to better allocate corporate cash, reported The WSJ.

Facing a potentially contentious fight over a board seat and a larger buyback, the car maker tried to walk the line between placating big investors and spending more on its future.

GM disclosed a $5 billion stock repurchase, a sum that comes on top of a previously announced dividend increase, and an additional $9 billion it will spend this year to improve brands including Cadillac, boost fuel efficiency and develop electric and driverless cars, among other things.

GM’s decision highlights a dilemma facing many companies as activists cement their toehold in boardrooms: Who is better at determining the appropriate use of cash as corporate balances grow?

Some data suggest activists discourage companies from investing in their businesses, something many activists would readily admit, citing wasteful spending.

Companies in the S&P 500 targeted by activists between 2003 and 2013 reduced their spending on plants, equipment and research to 29% of their cash from operations in the five years after activists bought their shares from a median of 42%, according to an analysis conducted for The Wall Street Journal by S&P Capital IQ’s Quantamental Research unit.

That compares with the much smaller drop to 25% from 27% for nontargeted companies over the same period.

Meantime, corporations targeted by activists boosted dividends and stock repurchases to a median of 37% of operating cash flow in the first year after being approached by activists, from 22%. S&P 500 companies that weren’t targeted by activists showed a 10-point increase, to 36%.

“Companies only have a finite amount of cash,” said David Pope, a managing director at S&P Capital IQ. “If they spend it on shareholder returns, there is less cash to spend on everything else.”

GM made its buyback decision after top officials determined its $25 billion in cash was more than enough to fulfill spending plans and handle uncertainties like the federal investigation into a botched ignition-switch recall. People familiar with the decision said a buyback already was under consideration and investor talks sped it up.

“We believe an initial $5 billion share buyback is good for our owners because we cannot earn better returns by investing that cash in the business at this time,” GM finance chief Chuck Stevens said on a conference call.

Separately, on Tuesday, some large investors and corporate chiefs are gathering in New York to debate the social and economic impact of rising shareholder pressure.

The nation’s largest auto maker had come under fire from Harry Wilson, a former architect of GM’s federal bailout, who wanted an $8 billion buyback and had the backing of four hedge funds in his bid to get a seat on the company’s board.

“Capital allocation is an underappreciated discipline,” Mr. Wilson said in an interview on Monday.

“When activism works well, one of the things it does is try to create a disciplined framework around this decision.”

GM had said last month that it would discuss more capital returns later this year.

The company was waiting for clarity around any fine the Justice Department might levy as well as other litigation that may result from a massive recall due to faulty ignition switches, the people said.

Mr. Wilson and the funds have dropped the request for a board seat in light of the buyback and GM’s pledge to better explain its spending and goals.

GM stock rose 3.1% to $37.66 in 4 p.m. New York Stock Exchange trading on Monday.

Not all investors were excited. James Potkul, a Parsippany, N.J., investment manager who controls about 10,000 GM shares, said the auto maker should instead marshal its cash to protect against uncertainties. “Are they worried about a downturn? They should be,” he said. “These companies can burn cash pretty badly when a downturn comes.”

How and when to use capital will be the topic of debate when the group of prominent investors and executives calling itself Focusing Capital on the Long Term meets in New York.

As a sign of the issue’s weight, U.S. Treasury Secretary Jacob Lew is expected to discuss how public policy can support the goals of the group’s members, including chief executives such as BlackRock Inc. ’s Laurence Fink , Unilever PLC’s Paul Polman and Barclays PLC Chairman Sir David Walker.

Elliott Management Corp., a New York-based hedge fund, last year started criticizing networking-equipment manufacturer Juniper Networks Inc. for spending $7 billion on acquisitions and nearly $8 billion in research and development while its stock price greatly underperformed the Nasdaq Composite Index since the company’s 1999 initial public offering.

Last year, after settling with Elliott to change the board, Juniper cut spending and repurchased $2.3 billion of stock. It plans to buy back almost $2 billion more through 2016.

The company paid its first-ever dividend and borrowed money to fund some of the returns.

“The Juniper share repurchase and cost-cutting efforts are the largest contributor to the stock staying stable,” said Scott Thompson , an analyst with Wedbush Securities.

At the same time, he warned that continued cuts could eventually hamper Juniper’s ability to keep pace with innovation in the industry.

Some efforts haven’t garnered the same praise. In early 2012, New York investment firm Clinton Group Inc. took a stake in teen fashion retailer Wet Seal Inc. and began urging a share buyback. By February 2013, the company disclosed it was cutting jobs and expenses and would repurchase $25 million of stock after appointing four Clinton representatives to its board.

This January, Wet Seal closed two-thirds of its stores and filed for bankruptcy protection.

In court documents, executives cited a broader drag on teen retailers as well as missteps that alienated core customers. People familiar with the bankruptcy say that in hindsight the buyback was a bad decision.

“If we had rewound and said they hadn’t done the buyback, that would have given them substantially more flexibility,” said Jeff Van Sinderen, an analyst at B. Riley & Co. “In those situations, $25 million dollars can go a long way.”

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GM Names Craig Glidden General Counsel, Replacing Michael Millikin

DETROIT – General Motors has named Craig Glidden executive vice president and general counsel, effective March 1, reported MLive.

Glidden, 57, replaces Michael Millikin, 66, who is retiring in July.

Millikin faced harsh criticism from lawmakers on Capitol Hill for his department’s handling of GM’s ignition switch recall crisis, with one senator even wondering aloud why he had not been fired.

GM CEO Mary Barra defended Millikin’s work to lawmakers. Millikin has been with the company for four decades, including five years as legal counsel.

Glidden will now lead GM’s legal team, which is integrated into the company’s regional and functional teams in more than 30 countries.

“Craig Glidden has had a distinguished career managing complex legal issues around the world, and his broad legal and senior management expertise fits perfectly with our strategic priorities and plans for global growth,” Barra said in a release Thursday.

Glidden was most recently executive vice president and chief legal officer for LyondellBasell Industries, a plastics, chemicals and refining company. Before that, he was senior vice president, general counsel and corporate secretary of Chevron Phillips Chemical Co. And prior to that, he had a private law practice.

“I’m enthused to be joining General Motors and its management team to help drive the company forward,” Glidden said in the release. “The company has made significant progress in recent years and I look forward to further advancing the business goals.

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GM Returns to Bankruptcy Court Seeking Legal Protection

The same judge who oversaw General Motors’ 2009 bankruptcy will hear arguments Tuesday over how much of a shield the company still has against lawsuits involving vehicles and crashes from before the automaker exited bankruptcy in July 2009, most notably those vehicles with defective ignition switches, reported Detroit Free Press.

U.S. Bankruptcy Judge Robert Gerber isn’t expected to make a decision for weeks. After he rules, one side almost certainly will appeal to a federal court in New York.

A GM victory would at least limit its cost of recall-related lawsuits to vehicles produced after the bankruptcy. Any wrongful death or personal injury cases tied to the ignition-switch defect, in which the crash occurred after bankruptcy, could proceed. The Tuesday hearing involves cases brought to recoup economic loss and also victims’ lawsuits unresolved by a compensation process independently run for GM by compensation expert Ken Feinberg.

Should the plaintiffs prevail, GM could eventually have to pay a few more billions of dollars to cover mostly the legal fees incurred in pending class action lawsuits.

This slow legal process is unfolding against the backdrop of GM’s potential proxy fight with a group of hedge funds pressuring it to give shareholders $8 billion through a stock buyback.

On one side Tuesday will be attorneys representing thousands of people who own GM vehicles that were recalled last year for dozens of defects and potential malfunctions. They have sued for what they claim is the lost value of their cars and trucks. Some of the cases involved personal injuries or deaths.

Arthur Steinberg, an attorney with the firm of King & Spalding, will present GM’s argument.

GM had to know

First the plaintiffs’ view.

“The gist of our argument is quite simple,” said Steve Berman, a Seattle lawyer representing some of the plaintiffs who claim recalls eroded their vehicles’ value. “GM knew that it had a safety defect as a result of these defective ignition switches. Therefore GM was obligated to give them individual notice that they had a claim in bankruptcy court. The remedy is that the bankruptcy order is not applicable to those folks.”

Now for GM’s case.

The 2009 bankruptcy involved a sale of the automaker’s “good assets” to an entity called General Motors LLC, or “new GM.” The “bad assets” were retained by Motors Liquidation, or “old GM.”

The final sale agreement limited “new GM’s” liability to the unexpired portion of standard glove box warranties on vehicles manufactured before bankruptcy, any state Lemon Law obligations and claims from accidents or fatal incidents that occurred after the bankruptcy exit even if they involved vehicles produced by “old GM.”

Steinberg will argue that the company should be immune from all “lost value” lawsuits tied to vehicles produced before that time, even if the defects weren’t identified until last year.

GM contends those suits should be filed against “old GM,” a legal shell with assets that are far short of what is owed to thousands of other creditors. These plaintiffs would be at the end of a very long line.

Judge Gerber must determine whether GM had sufficient knowledge of any defects such as the defective ignition switches to warrant disclosure to him back in 2009 before old GM was given the shield and allowed to go broke.

The independent report by former federal prosecutor Anton Valukas, released last spring, was highly critical of GM’s delay in issuing a recall. But it found that neither CEO Mary Barra nor General Counsel Mike Millikin learned about the ignition defect until late January 2014.

Some mid-level engineers knew the switches were vulnerable to being bumped from the “on” position as early as 2003. Later higher-ranking engineers and some of Millikin’s legal staff knew how serious the flaw was, but they found out in 2012 or 2013.

Was there disclosure?

If Gerber rules GM intentionally failed before filing bankruptcy to disclose that or other defects that later led to recalls, the “lost economic value” owners have a much stronger case.

“Where it gets tricky is that some of the people who knew about this problem went from old to new GM,” said Claude Bowles Jr., a Louisville bankruptcy attorney with the firm of Bingham Greenebaum Doll. “Bankruptcy sales are final because you want the buyer to use the assets to build a viable enterprise. But you have to balance that against our notions of due process.”

Even the most liberal pro-GM interpretation by Gerber won’t solve all the company’s legal problems from last year’s tidal wave of recalls. The GM Ignition Compensation Fund continues to review remaining claims for deaths and injuries tied to the ignition-switch recall. GM has estimated the settlements reached through that process will cost between $400 million and $600 million.

For example, the family of Brooke Melton, the Georgia nurse who died in March 2010 after her 2005 Chevrolet Cobalt rolled off a highway near her home, have withdrawn their acceptance of a $5-million settlement GM offered before last year’s recall. But their attorney Lance Cooper said the Meltons, who chose not to pursue a claim with the compensation fund, will proceed with their case regardless of Gerber’s decision. Their daughter’s death occurred about a year after GM emerged from bankruptcy.

Berman said some of his clients own recalled vehicles from the 2010 through 2014 model years. Anyone who died or was injured in those vehicles were not eligible to submit claims to the GM Ignition Compensation Fund.

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