General Motors, which lives on courtesy of a taxpayer bailout totaling $11.2 billion according to a Treasury Department report last month, has not exactly shown its gratitude. It took until last week for it to finally agree to the parameters of a compensation program for the deaths and injuries caused by faulty ignition switches in about 2.6 million of its cars. GM, profitable again after its rescue, can afford to make the extraordinary payments involved, but there is a lawsuit pending that could make a hash of its strategy.
Under the plan outlined by attorney Kenneth Feinberg, who oversaw the September 11, 2001, victims’ compensation fund, surviving victims and their families would receive at least $1 million, and often more based on earning potential and number of dependents. There is no cap on how much GM will have to pay. Thirteen deaths have been attributed to the ignition switches so far, and Mr. Feinberg acknowledged to reporters that there are claims still pending that could increase that total.
Mr. Feinberg has credibility through his work with the 9/11 fund, but his client doesn’t. Those seeking compensation will have to providence evidence that the defective ignition switch caused death or injury, but GM bought up most of the detective cars from owners and families, who were undoubtedly glad to get rid of them. It will be necessary for Mr. Feinberg to help people find the appropriate records, criminal, medical and whatever else is required, without hindrance from GM.
Those who accept the payments must agree not to sue GM, and undoubtedly many families will be inclined to take what they can and afford a painful legal battle, knowing as they do so that no amount of compensation is truly enough when a loved one is lost. Last October, however, the company reached an agreement with the family of 29-year-old Brooke Melton, a nurse from Georgia who died four years ago when her 2005 Cobalt spun out of control. The family can still sue because the settlement was reached outside of the current accord, and if does so, as it apparently will, and succeeds, GM could be facing far larger financial penalties.
The family’s attorney, Lance Cooper, sued General Motors in 2010 and uncovered documents indicating that the ignition switches in Cobalts had been changed after her accident so they would not slip out of the "run" position. (When the ignition switched out of "run," the driver could no longer control the car and the airbags would not operate in the resulting accident. The ignition could slip, for example, when the car hit a bump, particularly when there were other keys weighing down the key chain.) In a deposition, lead switch designer Ray DeGiorgio told Mr. Cooper that he knew nothing about the changes and never authorized the parts maker to make them.
In May of 2013, however, a GM lawyer reported the switch alteration to company lawyers, calling it a "bombshell." Just last month, a newly contrite GM released a report saying the lawyer warned the corporation of a "substantial adverse verdict" if the ignition failures went to trial. The authorized parts maker, Delphi Corporation, has released a GM form from April 2006 showing that Mr. DeGiorgio did indeed authorize the changes in the switches. Mr. Cooper contends that Mr. DeGiorgio lied in the deposition and he would never have urged the Melton family to agree to settle their claim if he had known in 2010 what he found out years later. The family may sue again, this time for substantial punitive damage penalties. GM fired Mr. DeGiorgio three weeks ago.
GM’s shoddy design work is bad enough, but (with a nod to the late Howard Baker) "what did GM know and when did it know it" about its death- and injury-causing ignition switches is an open question with the potential to make GM look far worse. And it cost it dearly. If GM gets punished back into the economic doldrums, the public will not be sympathetic.