General Motors (NYSE:GM), the top U.S. automakers, continues to pay heavy price for its negligence in addressing the ignition switch defect in 2.6 million cars. It’s still reeling from the effect of its decade old negligence, which is having a negative bearing on the company’s financial as well as its image. The company has received 284 claims out of which 100 are death claims.
The bad phase
This has been a shocking year for the U.S. automobile industry with record number of recalls from big carmakers including Ford (NYSE:F). General Motors has decided to pay off the victims who suffered due to faulty ignition switches which shut of unexpectedly, disabling the air bags. All claims which have been registered before December 31, 2014 shall be accepted. It will be evaluated and responded within three to four months.
Consultant, Mr. Ken Fienberg has been appointed by General Motors to register complaints and look after the compensation fund set by the carmaker. He has to find out all the details about the complaint. The claimant is required to satisfy him that the accident caused was due to faulty ignition switch and only once he is convinced, the compensation amount will be approved. Ken Fienberg is an experienced consultant who handles high profile cases and has also dealt with the 9/11 case of the U.S.
While General Motors has set aside $400 million to pay the claims, it looks like this won’t be enough with the growing number of claim. The amount is expected to go up to $600 million Fen says. The carmaker is offering $1 million to families who has lost the loved ones and another $300,000 to the family members left behind them.
General Motors has been hit by a wave of lawsuits related to ignition switch and other recalls. The suits seeks recall for the low value of the vehicle as well as the damages caused to it. The Detroit automaker is dealing with these recalls. For victims who were injured due to faulty ignition switch, the compensation amount would be decided considering the extent and type of injury.
The Securities and Exchange Commission of New York, the FBI along with the U.S Attorney office at New York, Congress, and 45 Attorney of the State are investigating about the case. The Orange County, California District Attorney too has sued General Motors for the economic damages caused by the company. The National Highway Traffic Safety Administration has also fined General Motors $35 million for the losses caused. It is estimated that General Motors will have nearly $2.5 billion to settle the issues resolve the claims.
The CEO of the company, Mary Barra has emerged stronger in times of crisis. She has fired 15 employees after an internal survey was done. She has also displayed willingness to buck up General Motors on many fronts. In addition, she also ordered an internal investigation team to investigate into the defects, which led to recalls making it such a grave issue.
The image of General Motors has been at stake ever since the news of faulty ignition switch was leaked. The shares of the company has come down drastically. It even had an effect on the past quarter’s profitability to a great extent. The event should be like a big wake up call for all automakers to be extremely vigilant with the car manufacture and immediately take calls when a glitch is identified.