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General Motors' liability conondrum

By Kayvon Ghoreshi
On April 10, 2014

While it's been a great week to be a Husky, it has been an equally terrible week to be a member of General Motors. The company has issued a massive recall on over 2 million vehicles including car models from 2005 to 2011 like the Chevrolet Cobalt, Saturn Ion, Pontiac G5 and others. The reason for the recall was a defect in the ignition switch. While the vehicle was moving, the faulty ignition switch would cause the key to turn, putting the car in accessory mode or even shutting power off all together and effectively disabling key safety features such as airbags. GM has even admitted that this defect has led to the deaths of 13 people, although there may be more cases that simply have not been confirmed yet.
Even more recently the issues have gotten worse for GM. Another issue has been found with the ignition. A defect in the lock cylinder causes keys to be able to be pulled out or fall out of the ignition lock while the car is running. However, GM says that they have not confirmed any fatalities linked to the problem. As a result, the predicted financial toll has only increased, with the most recent estimate at $1.3 billion of first quarter earnings, more than quadruple of the initial estimate of $300 million.
This development is particularly startling because of just how long it took to get to this point of a recall. According to NPR, GM knew about the defect in the Saturn Ion back in 2001 and found the defect again in the Chevrolet Cobalt back in 2004, yet it has taken almost an entire decade for the company to address the problem. They reportedly had a fix on the table back in 2005, but chose to scrap it due to cost and time. In fact, GM's main solution to the problem was telling customers to avoid having too much weight on their key chain so as to decrease the likelihood of it turning. This is astoundingly poor business practice considering the part replacement reportedly would have only cost an additional 57 cents. Instead, it appears that GM put profits ahead of consumer safety.
However, now that the issue has finally been brought to light, GM can receive the reprimanding it deserves; and the families of those who have been affected by the ignition defects can receive compensation. That is, if it weren't for a small technicality. A few years ago GM decided to declare bankruptcy and the government stepped in to keep the company afloat in order to prevent the ripple effects it would have had on an already unstable economy. Under this bankruptcy agreement, GM is not liable for any accidents that occurred prior to the bankruptcy. According to CNN, they emerged from the bankruptcy as technically a "new" company and, in the process, shed over 2,500 lawsuits which were either dropped or settled for significantly less than if GM had not declared bankruptcy. Given that most of the incidents regarding the ignition switch occurred prior to 2009, GM is legally absolved from doing anything about the individuals who were injured or killed as a result of the company's negligence. While GM is still considering providing some compensation for the victims and their families, they are still wary because it could potentially open the door for having to face other cases they were also not liable for.
Even if GM does end up offering compensation, it is absolutely ridiculous that such a loophole exists in the first place. Bankruptcy as an institution should exist for dealing with debt and restructuring a company's assets. It should not be able to be used as a way to skirt around civil duties and effectively act as a "Get Out of Jail Free" card for when incompetence directly leads to human deaths.
When GM became profitable again, many took it as a sign that the company had learned from its mistakes and was going to emerge from its low point of bankruptcy as a smarter, better company. These recent revelations prove the contrary, as a culture of negligence and cover up seems to indicate that GM has forgotten the very kind of practices that sent it spiraling down in the first place. 

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