GM is going back into bankruptcy court:
A U.S. bankruptcy judge on Friday urged settlement talks in a dispute between General Motors Co and plaintiffs seeking compensation for the lost value of their cars stemming from a massive recall over a faulty ignition switch, though neither side seemed ready to negotiate quite yet.
Judge Robert Gerber, of the U.S. Bankruptcy Court in Manhattan, said he would welcome the prospect of a resolution that avoided a “monstrous battle.”
Gerber is the same judge who in 2009 oversaw GM’s whirlwind Chapter 11 bankruptcy case. Now facing dozens of lawsuits over a faulty ignition switch that has led to the recall of some 2.6 million vehicles, GM is asking Gerber to enforce the so-called bankruptcy shield, in a pre-emptive move aimed at staving off dozens of lawsuits from customers who say they took a financial hit from the recall.
Under the plan approved by Gerber, GM channeled its burdensome liabilities into a shell known as “Old GM,” while selling its profitable assets to “New GM,” a separate corporate entity that took GM out of bankruptcy and now operates as General Motors Co.
Accident victims are not involved in the dispute before Gerber, which concerns only claims for loss of car value.
The law here is quite complicated. As far as I understand, piercing the bankruptcy shield is difficult. However, if the GM (and the government) committed fraud by concealing the ignition switch problem before bankruptcy, this could make new GM liable. And if the judge finds that, this could end up before the Supreme Court.
I suspect this is the first of many deceptions and financial shenanigans that were swept under the rug in GM’s controlled bankruptcy. Do not be surprised if they end up in court again. And do not be surprised if we find out that some shady and illegal stuff goes on with industry and government ride in the same cart.