Arizona Sues GM For $3B, Claiming Auto Maker Defrauded Consumers

So far this year General Motors has been party to a slew of lawsuits related to its massive ignition switch recall involving millions of vehicles with the potentially deadly defect. The latest case against GM was filed Wednesday by the State of Arizona, which alleges that the carmaker defrauded consumers out of an estimated $3 billion by knowingly selling defective vehicles.

The New York Times reports that the suit [PDF] is the first major legal action by a state against GM over its record number of recalls issued so far in 2014.

In the complaint, Arizona Attorney General Thomas C. Horne suggests that “New GM” (i.e., GM after its 2009 bankruptcy restructuring) intentionally misled consumers through its advertising, website and public statements, and that some of its top leaders were complicit in the alleged misconduct.

Horne contends that post-bankruptcy GM found success in Arizona by selling the story that it had changed its “processes and culture ” and was building “the best vehicles in the world.”

“Sales of all New GM models went up, including in Arizona, and New GM became profitable,” the complaint states. “As far as the public knew, a new General Motors was born, and the GM brand once again stood strong in the eyes of consumers.”

However, that was all an illusion given the company’s failure to disclose ignition switch defects and a plethora of other safety defects in GM-branded vehicles, the complaint claims.

“New GM concealed the existence of many known safety defects plaguing many models and years of GM-branded vehicles, and hid the fact that New GM valued cost-cutting over safety,” the complaint states.

In filing the suit, Horne broke away from a group of 48 state attorneys general that had been pursuing a multistate investigation into the auto manufacturer for its handling of the deadly ignition-switch defect.

“We’re proceeding with our own suit because it’s the best way to protect the citizens of Arizona,” Horne tells the Times. “General Motors represented that it was taking care of the safety of its cars, and in fact there were serious defects that it did not disclose to the public for years.”

An official with GM tells the Times that the company has not had time to review the complaint.

While the suit, which seeks civil penalties rather than consumer restitution, includes the ignition-switch defect that resulted in the largest number of vehicles recalled by the company, it also addresses smaller recalls that included defects with seat belts, brakes lights, airbags, transmission cables and headlights.

The Arizona consumer penalty statute stipulates a charge of $10,000 per violation. With nearly 300,000 of the GM vehicles recalled this year registered in Arizona, GM could face a payout of about $3 billion if the suit is successful.

Like past suits, the complaint contends that consumers lost great value in their vehicles because of the on-going safety defects and issues GM has been involved with this year.

“New GM intentionally enticed Arizona consumers to buy or lease new or used GM-branded vehicles that have now diminished in value as the truth about the New GM brand has come out and a stigma has attached to all GM-branded vehicles,” the complaint states.

Horne estimates that consumers have lost thousands of dollars in vehicle value because of GM’s actions. For example, he says the 2010 and 2011 models of the Chevrolet Camaro lost $2,000 in value, while the 2009 Pontiac Solstice lost about $2,900 in value.

“[GM] manufactured and sold millions of vehicles that were not safe, including hundreds of thousands in Arizona, and it failed to remedy serious defects in millions of older G.M.-branded vehicles,” the complaint states.

The complaint also rejects GM’s claims that some of the longstanding defects that led to recalls this year had been known only to low-level engineers, citing information that GM CEO Mary Barra had been informed about a defect in the electronic power steering of some models.

“Despite 4,800 consumer complaints and more than 30,000 warranty repairs, G.M. waited until 2014 to disclose this defect,” the complaint states.

According to the Times, the complaint cites complaints filed with federal regulators as evidence that the automaker was aware of issues, but failed to act or offer sufficient remedies.

In regards to the ignition-switch defect, the suit suggests that “multiple-in-house attorneys” were aware of the problem, including GM’s general counsel Michael Milliken.

“This quest to keep the ignition-switch defect secret delayed its public disclosure and contributed to increased death and injury as a result of the ignition-switch defect,” the complaint states.

GM currently faces a number of investigations by federal regulators in the Unites states and Canada related to the company’s vehicle safety procedures.

Arizona Sues G.M. for $3 Billion Over Recalls [The New York Times]