NEW YORK (Bloomberg) -- General Motors asked a judge to knock out lawsuits demanding $10 billion for the lost value of millions of cars recalled this year for ignition-switch fixes and other repairs.
The automaker on Wednesday told U.S. Bankruptcy Judge Robert Gerber in Manhattan that he freed it from responsibility for past errors when he signed off on a $49.5 billion government bailout in 2009.
GM in its filing argued against customers’ contention that it forfeited that immunity by hiding a long-known defect and exposing them to accidents and financial losses.
Car owners hadn’t proved that new GM, as the reorganized company is called, owed them money because old GM denied them a chance to put in claims during the bankruptcy, the automaker told Gerber. It also objected to their claim that new GM would have compensated them if they had demanded it at the time.
“Plaintiffs’ opaque hypothesis -- that they somehow could have coerced New GM to assume their alleged pre-petition economic loss claims -- ignores the following material undisputed facts,” according to the filing. New GM refused to assume the claims, whether for property damage or earlier accidents stemming from its predecessor’s actions, it said.
GM’s filing was the first step toward a 2015 decision by Gerber on whether his earlier rulings still apply after an investigator found that GM engineers and lawyers knew about the defect for at least a decade. The report by Anton Valukas, a former federal prosecutor, spurred federal probes, a record fine and more than 150 lawsuits.
GM responded to the recall crisis by starting to settle claims for people who had accidents in older cars with faulty switches. It asked Gerber to bar money-loss claims and penalties, including the two car-price class actions and other economic-loss or accident suits over non-ignition switch defects in vehicles it made before bankruptcy.
The judge has said he faces a “difficult” decision about GM’s liability to owners of older cars. His old orders “may turn out to have exceptions or self-destruct,” he said at one point.
If Gerber scraps or adjusts his rulings, he might let customers fight for billions of dollars in damages and penalties, or at least the lost value of their cars. A Bloomberg News analysis puts the price decline for 2 million cars with faulty switches at $2 billion or more, excluding the punitive damages that customers also want.
If Gerber affirms his past orders, customers might get nothing or be sent to old GM, the corporate remnant the automaker left behind when it reorganized. That company has little money to pay claims after being saddled with the carmaker’s worst assets and liabilities.
About 130 car-price lawsuits against GM have been combined in two class actions in U.S. District Court in Manhattan. GM, which denies that its cars have lost value since the recalls, is asking Gerber to throw out the complaint over older cars bought before the reorganization.
“New GM purchased Old GM’s core assets in good faith,” it said. “New GM had no involvement with either the final decision as to who would receive notice” of the bankruptcy, or what old GM told customers about product defects.
While the company remains responsible for faulty vehicles made after the middle of 2009, it’s fighting the second group suit, which demands $10 billion tied to 27 million recalled vehicles bought from new GM with various defects. Most of the cars described in the suit were made by old GM, so it owes the owners nothing, the automaker contends.
Customers with faulty switches could have come to court in 2009 because old GM published notice of key events in nine newspapers as Gerber told it to, GM said in its filing. The car owners were “unknown creditors” at the time and old GM couldn’t tell all drivers of its 70 million cars in writing that they might have a claim one day, it told the judge, asking him to dismiss both suits entirely if he agreed.
GM denied that it had ever deceived Gerber about its knowledge of the defects, which might be grounds for him to remove its shield against the lawsuits.
Explaining his 2009 rulings, Gerber said in court that the Treasury told GM to keep as few liabilities as possible if it wanted money to help it turn around. Even so, the U.S. lost about $11 billion on its investment in the now-profitable carmaker, according to a government report.