GM Issued Less Than $600M in Settlements for Defective Ignition Switch Suits

By David Welch | December 10, 2015

General Motors Co. paid less than $600 million to settle claims by victims of its flawed ignition switches, a slightly smaller sum than what the automaker told investors it expected to pay, after a 20-month-long compensation process led by Kenneth Feinberg.

A final report released by Feinberg on Thursday concluded 124 people died in relation to ignition switches in GM compact cars, and another 275 suffered injuries warranting compensation. The Feinberg-led firm said GM paid out on less than 10 percent of 4,343 claims submitted, for a total of $594 million in settlements.

Chief Executive Officer Mary Barra set up the compensation fund to deal with litigation from the company’s customers, many of whom bought Chevrolet Cobalts and other compact cars before the automaker’s 2009 bankruptcy. Since GM shed product liabilities through its reorganization, the company was shielded from such claims and may not have had to pay victims.

Some plaintiffs tried unsuccessfully to break the bankruptcy shield and sued GM for damages not covered by the Feinberg fund. In addition to the $594 million that Feinberg’s team authorized, GM agreed to pay the Justice Department $900 million to settle its investigation of wrongdoing.

GM recalled 2.59 million cars due to the defect. The ignition switch could be jarred into the “accessory” position, shutting off the engine, disabling power steering and brakes and preventing air bags from deploying. GM engineers and lawyers knew about the defect for years before the recall, according to a 2014 study commissioned by the company. Fifteen GM employees were dismissed after the report.

“We faced the ignition switch issue with integrity, dignity and a clear determination to do the right thing both in the short and long term,” Jim Cain, a GM spokesman said in a statement. “The settlement facility is just one example. It was fair, compassionate, generous and non-adversarial.”

Since the recall, GM has implemented more aggressive systems to identify quality problems and initiate safety recalls before they get out of control. Barra hired Feinberg in April 2014, citing his handling of compensation issues related to the 9/11 terror attacks, BP Plc’s oil spill in the Gulf of Mexico and the Boston Marathon bombing.

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