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Lawsuits Seek to Block GM Bankruptcy Sale

Posted: Jun 22, 2009 11:03 a.m.

General Motors' bankruptcy plan is headed to court...again and again. The Detroit News reports, "The proposed sale of General Motors Corp.'s best assets drew a flurry of objections Friday from attorneys general in 10 states, union retirees and small bondholders, setting up potential speed bumps in the automaker's path out of bankruptcy." Among the most serious challenges to the bankruptcy plan is the objection by ten states, who argue that "the asset sale would deprive consumers the right to pursue product liability claims."

Autoblog explains, "Under the current plans, New GM basically won't be held responsible for existing or future product liability claims related to vehicles sold before the formation of the new company." Consumers who allege that they suffered an injury or property damage caused by a GM product sold before bankruptcy will have no right to sue the company post-bankruptcy. Autoblog notes, however, that this lawsuit "echoes similar objections raised during the Chrysler proceedings." In that case, "When the Supreme Court cleared the way for Chrysler's sale to Fiat, similar claims filed by consumer groups were essentially denied. Fiat-owned ‘New Chrysler' is not responsible for prior liability claims, leaving injured parties with little to no recourse."

Other lawsuits, according to the News, include an objection by retirees who "would be left with a $3 billion unsecured claim against the ‘old GM' and hundreds of millions more for retirement life insurance," and a group of retired engineers and steelworkers who argue that "a sale would leave GM with no money to pay for retiree health care obligations for more than 50,000 retirees and dependents."

The flurry of lawsuits, according to the AP, "Threatens to put the brakes on what has so far been a speedy trip through the Chapter 11 process."

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