G.M. Agrees To Remain Responsible For Shoddy Cars After Bankruptcy

General Motors has reached an agreement with the government to let consumers file what are known as product-liability claims after the company escapes from bankruptcy protection. The big win for consumers means that if a manufacturing defect in an old G.M. causes injuries in the future, consumers will still be able to sue G.M. in state court.

The chief concern for G.M. and the government is whether customers who have claims about existing products but have not yet filed lawsuits can sue the company in state courts. Because bankruptcy case law is murky on the matter, G.M. and the auto task force chose to assume the liability instead of risking a delay of the company’s emergence from bankruptcy.

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Courts typically allow companies under bankruptcy protection to leave claims behind in bankruptcy and emerge with a clean slate, a precedent G.M. and the government are relying upon. Chrysler, which completed a government-backed restructuring this month, left both product liability claims and unwanted dealers with its old estate, now known as Old CarCo. Claims left behind in bankruptcy generally have a slim chance of being paid.

G.M. set aside almost $1 billion last year to settle product-liability claims. Anyone with an existing product-liability suit against the company is probably out of luck, as G.M. still plans to shed those claims when it exits bankruptcy.

G.M. to Maintain Legal Liability for Claims [The New York Times]