New Chrysler Agrees to Accept ‘Old’ Chrysler Product Liability Claims

August 28, 2009

In a letter sent members of Congress, the new Chrysler Group said it will accept product liability claims on vehicles it manufactured before it emerged from bankruptcy on June 10 with government assistance.

The move is a change from its previous position that relegated claims on these older vehicles to the “Old Carco” company left behind in bankruptcy. So claimants with cars made before June 10 would have been treated as unsecured creditors unable to sue the firm and unlikely to recover from the old bankrupt company.

But the new Chrysler, whose bailout was funded by the federal government, has now decided it can handle the old liabilities.

“We know a lot more about the viability of our business today than when we purchased Old Carco’s assets in its bankruptcy proceedings several months ago,” said John Bozzella, senior vice president of external affairs and public policy. “While Chrysler Group still faces challenges, we are confident that the future viability of the company will not be threatened if we accept these claims.”

OldCarco filed for bankruptcy protection on April 30, 2009. The bankruptcy court approved the sale of substantially all of OldCarco’s assets to a newly formed company, Chrysler Group LLC. As part of the bankruptcy court-approved purchase, Chrysler Group had agreed to assume liability only for cars sold by Chrysler Group.

The move is a victory for consumer groups that have been pressuring Chrysler to honor claims from its old vehicles as well as those from new ones.

One consumer group claimed that thousands of drivers would be injured by defective vehicles during the first eyar of bankruptcy.

Chrysler’s new stance is consistent with the position taken by General Motors as part of its bankruptcy and bailout process after a number of attorneys general and consumer advocates insisted.

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